Ford deal will allow Volvo to focus on trucks

GOTHENBURG, Sweden (Jan. 28) — Ford Motor Co. announced plans to buy the passenger car division of Volvo AB for $6.45 billion US, allowing the Swedish company to focus more on heavy trucks and buses, as well as interests such as construction equipment, marine engines, and aerospace equipment.

Volvo CEO Leif Johansson said the deal will allow Volvo to strengthen its profitable commercial vehicles business through further acquisitions. Volvo bought 13% of Swedish truckmaker Scania AB earlier this month and hopes to buy the rest.

Meanwhile, being part of a “very large automotive company” would allow greater investment in development and distribution of Volvo Cars, Johansson said. Volvo builds about 400,000 cars a year compared with 6.5 million built by Ford, the world’s No. 2 automaker. Cars account for about half Volvo sales.

“Volvo Cars is a premium automotive brand and has both a strong product program and above industry-average profitability,” Johansson said. “However, over the longer term and within the context of its current position as a relatively small niche player, Volvo Cars would benefit from the economies of scale” Ford can provide.

Ford will assume ownership of Volvo Cars assembly plants in Europe and the passenger-vehicle product development centre in Gothenburg, Sweden. Management of Volvo Cars is expected to remain in Gothenburg.

The Volvo brand name will be jointly owned with the right for Ford to use it for passenger cars, minivans, sport utility vehicles and light trucks. Volvo will use the brand name for commercial and other products.

Ford president and CEO Jacques Nasser called Volvo “a perfect complement” to the Ford family of brands worldwide, which include Mazda, Jaguar, Mercury, and Aston-Martin.

He promised not to change the “personality” of Volvo cars, which have a reputation for safety.

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