Ford Motor Co may seek to sell Volvo for as much as $6 billion, close to what it paid for the Swedish carmaker 10 years ago, and is using JPMorgan Chase & Co as an adviser, people with knowledge of the plan said.
Ford, which bought Volvo for $6.4 billion in 1999, is counting on the strength of the brand to draw bidders, said one of the people, who declined to be identified because the target price isn’t public. Gothenburg-based Volvo ranked Number 1 for safety in an independent US Consumers Union survey in January.
Under pressure to secure a $9 billion backstop from the US government, Ford may not meet its price target, said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Gelsenkirchen in Germany. Bidders may also be limited to Chinese carmakers, buyout firms or a group arranged by the Swedish government. Renault SA of France isn’t interested, said a spokeswoman, Frederique Le Greves.
“Anything other than a heavily discounted sale seems unrealistic,” said Dudenhoeffer. “For a buyer it’s the best time that one could wish for. But it’s not ideal for Ford.”
Ford said on December 1 it may sell Volvo as it seeks to show Congress it’s taking action to cut expenses and return to profit. Ford, General Motors Corp and Chrysler LLC are asking the US for $34 billion in aid as the recession and credit crisis erode sales. Dearborn, Michigan-based Ford has lost $24 billion since 2005, and Chief Executive Officer Alan Mulally in May abandoned a target of earning money next year.
Ford’s Caa1 rating on $26 billion of debt, seven levels below investment grade, was reaffirmed by Moody’s Investors Service yesterday. Both GM and Chrysler’s ratings were cut two levels to Ca from Caa2. Ford shares traded in Germany were up 3 per cent to the equivalent of $2.94 as of 9:52 am local time.
Mulally, in an interview on December 2, declined to say how much Volvo may fetch or whether Ford had retained JPMorgan to sell the unit. He called the firm one of the automaker’s bankers and a “key partner.”
Among buyout firms, Fort Worth, Texas-based TPG Inc may be interested in Volvo, according to a person familiar with the situation. TPG, which has more than $50 billion of capital under management, was among four private-equity companies to make preliminary approaches for Jaguar and Land Rover last year before Ford sold the businesses to Tata Motors Ltd of India.
