Thursday, January 28, 1999 Published at 19:44 GMT
Business: The Company File
Ford buys Volvo cars
It's a Ford, but Volvo cars will keep their badge
Sweden's Volvo has sold its car business to the Ford Motor Company.
It is the latest deal to emerge in a rapidly consolidating car industry, as the largest companies seek to expand their empires.
Ford plans to create a new luxury car division, putting Volvo alongside its existing makes such as Jaguar.
Volvo will keep its commercial truck, marine and other industrial operations. When announcing the deal, the company said it would now concentrate fully on producing commercial vehicles.
Volvo's Chairman, Håkan Frisinger said: "This is a solution which strongly enhances both the prospects for Volvo Cars, its employees and for the Volvo Group as a whole."
Ford's new Chairman, William Clay Ford Jr, hailed the deal as a big step to achieve the company's "21st century vision" of becoming "the world's leading consumer company that provides automotive products and services".
The car industry worldwide is in the process of consolidation. Too many manufacturers are producing too many cars, and smaller players have trouble defending their market share.
As a result big companies are snapping up smaller ones, while even some of the big names see fit to combine forces.
Ford will have no problems paying for the Swedish car company. The US manufacturer sits on a $24bn cash pile, while Fiat, for example, would have had to raise most of the money on the financial markets.
Swedish television reported that Fiat had bid more than Ford, but wanted to include Volvo's heavy truck division in the deal.
Joe Phillippi, analyst with Lehmann Brothers, said: "It makes a lot of sense for Ford, as long as they don't overpay for it."
Volvo and Ford could be a perfect match. Volvo's near-luxury cars fit in between Ford's range of cheaper automobiles and the luxury cars produced by Jaguar, which Ford bought in 1989.
Ford currently has a 10% share of the European car market.
Volvo sold almost 400,000 cars last year and more than a quarter of them in the United States.
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