Struggling Ford mulls Volvo sale amid global downturn

Volvo Cars Corp. has been struggling with declining demand and a strong euro that made its products more expensive. (Joe Raedle/Getty Images)

DETROIT - Ford Motor Co. is considering selling Volvo Car Corp. as the US automaker seeks to raise cash and survive tight credit markets and a global automotive sales crisis.

Goteborg, Sweden-based Volvo Cars, which Ford bought in 1999, has been struggling with declining demand and a strong euro that made its products more expensive.

Volvo sales through October are down more than 28 percent, compared with the same period in 2007, according to Autodata Corp.

Ford said yesterday that it expects its strategic review of the Swedish luxury automaker to take several months. The move is one of several actions Ford is taking to strengthen its balance sheet amid what it called "severe economic instability worldwide."

"Given the unprecedented external challenges facing Ford and the entire industry, it is prudent for Ford to evaluate options for Volvo as we implement our One Ford plan," said chief executive Alan Mulally in written statement, referring to a plan to standardize the company globally.

Ford officials would not speculate on how a potential sale would affect the companies. Spinning off Volvo as a separate entity may be a possibility; after an earlier review, Ford started taking steps last year to allow Volvo to operate on a more independent basis.

The Swedish government has said it has been in talks with Volvo and with General Motors Corp.'s Saab unit, following reports that the US parent companies were seeking aid for their Swedish carmakers.

Stefan Lofven, the chairman of Swedish union IF Metall, said it is now extremely important that the Swedish government step in and show its support for Volvo in the sales process.

For the 2009 model year, Ford and Volvo led all brands, with 16 vehicles on the Insurance Institute for Highway Safety's list of the safest cars.

But despite its high safety ratings and strong reputation as a family vehicle brand, Volvo captured 0.5 percent of the market through October, compared with 0.8 percent for the same period last year. That accounts for 3.7 percent of Ford's total sales this year.

Even with tight credit worldwide, Ford could pull off a sale because Volvo would be attractive to automakers in emerging markets such as Tata Motors Ltd. of India, said Kevin Tynan, an analyst with New York's Argus Research Corp.