There were lots of things at Ford
With the announcement earlier this week that Volvo would be sold to China's Geely Automotive Holdings, the dismantlement of PAG that began with the sale of Aston Martin in 2007 is effectively complete.
Put another way, Ford is now officially out of the imported-luxury-car business. And Geely has acquired instant global visibility, stepping into a leading position ahead of the muddled pack of emerging Chinese automakers.
So is this deal one of Ford's famous better ideas? Or, having already dumped the worst of PAG's money-burning businesses, should Ford have held on to the quirky Swedish marque?
A money-losing win for Ford
Ford is getting $1.8 billion for Volvo -- a steep discount from the $6.45 billion it paid for the Swedish automaker back in 1999. A casual observer might think that's a lowball price for a storied brand -- and thus a bad deal for Ford -- but I disagree, and for a few reasons.
First, Volvo's not the brand it used to be. Its key value propositions -- safety, durability, and a certain counter-cultural quirkiness -- have kind of gone by the board. It's not that Volvos are necessarily any less safe or durable than they used to be -- it's just that those aren't standout advantages in an era where nearly all cars come loaded with safety features and "quality" is a constant focus. And from Ford's perspective, any safety-related technological advantages that Volvo might have had pre-purchase have long since been absorbed into the larger company's portfolio.
And that countercultural quirkiness? One could argue that Toyota
Ford didn't need a Swedish Buick
Buick and Acura aren't the only brands competing on the turf that Volvo hoped to claim -- Ford's own Lincoln is another. Having two brands competing for the same space is never a recipe for efficiency, and in this case, the choice of which brand to keep ... wasn't really a choice. Lincoln has been part of the Ford portfolio since 1922. Its design language, model lineup, and dealer network are fully integrated into Ford's core business operations in North America, and have been for decades.
More to the point, while Lincoln has never had huge sales numbers, those numbers are solidly higher than Volvo's nowadays, and -- like Ford's other businesses -- solidly growing. And while it's possible to have low sales totals and still make money, Volvo wasn't doing it. Volvo lost $32 million on $3.9 billion in revenue in the fourth quarter of 2009, a quarter in which nearly every other corner of Ford was generating solid profits.
That's not the way to convince Alan Mulally to keep you around.
The right thing to do
Long story short: Volvo wasn't the albatross of the PAG -- that was the money-torching Jaguar, sold to Tata Motors
Read more about the ongoing global automotive shakeout:
Fool contributor John Rosevear owns shares of Ford. You can follow his Foolish twittering at @jrosevear as he continues to sort through the ongoing global auto shakeout. Ford Motor is a Motley Fool Stock Advisor choice. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.