Financial Collapse RSS

Dec 1, 2008

Ford may sell Volvo as car sales worsen

Ford may sell its luxury Swedish marque Volvo as part of a strategic review of the business. The struggling carmaker made the announcement yesterday as the fragile state of the global motor industry was underlined by plummeting sales figures for November.

Today, Ford and its fellow US carmakers, General Motors and Chrysler, will submit business plans to Congress in an effort to win backing for a $25bn (£17bn) emergency aid package. Ford's initiative came amid more bad news from the ailing industry as economic gloom and a dearth of consumer credit continue to hammer sales. Latest figures show sharp falls in car sales in Belgium, Italy, Sweden and France last month.

The worst hit was Spain, where sales have fallen by almost half - the most dire data since 1993. The government is already budgeting for an €800m (£680m) package to help the automotive industry amid fears it could shed 50,000 jobs. Car sales fell 18% in Japan and were down 8.6% in South Korea.

In the UK, where sales fell by more than 20% in September and October - the November figures are due this week - Aston Martin said it was seeking cuts because of falling demand. The carmaker said it could cut staff by 300 and reduce the number of temporary workers by a similar amount because of the downturn.

The company, which has already extended the Christmas holiday shutdown by two weeks, employs 1,850, mainly in the West Midlands.

Ulrich Bez, Aston Martin's chief executive, said: "Like other premium car brands, Aston Martin has been forced to take action to respond to the unprecedented downturn in the global economy. These are regrettable but necessary measures in the extraordinary market conditions we all now face."

The poor sales figures in continental Europe will make grim reading for British carmakers as the bulk of cars made in the UK are exported and a number of factories are already taking extended Christmas breaks. "The financial crisis and the weaker economy is now hitting the auto market full force," said one European automotive industry executive yesterday.

Share prices tumbled in Europe and the US yesterday as fears about recession and job cuts took hold. In London the FTSE 100 share index fell more than 5% to 4065.9 and there were also falls of more than 5% in the main indices in Frankfurt and Paris. In the US the Dow Jones industrial average was 4.8% lower at 8,405 in the early afternoon.

Ford's decision to launch another strategic review at Volvo - only 12 months after the last one - appears to be aimed at helping to win Congressional approval for the emergency aid. The big three US carmakers were warned by Democrat leaders last month that a bail-out would not be forthcoming unless they came up with credible restructuring plans.

Yesterday Ford said the review at Volvo was "in line with a broad range of actions Ford is taking to strengthen its balance sheet and ensure it has the resources to implement its product-led transformation plan".

Volvo, which was part of Ford's stable of marques under its luxury division, the Premier Automotive Group, has been looking increasingly isolated since the sale of other PAG brands - first Aston Martin and then Jaguar and Land Rover. Its sale would also help to reassure Congress that any funds would not be used to support overseas subsidiaries.

Other Ford asset sales include an agreement to sell part of its stake in the Japanese carmaker Mazda. The US carmakers are not the only ones seeking aid from governments. Volvo and Saab, which is owned by GM, are reported to have approached the Swedish government for financial help.

The European commission has pledged to help the car industry as part of a €200bn stimulus package and the UK's pre-budget report included measures to boost sales, although the industry would also like to see carmakers' finance arms have access to the funding being provided to banks.

Source : Guardian
[tags : ]


Related Posts with Thumbnails