(F) Ford Motor Saddled with Volvo

September 17th, 2009

Ford Motor (F) is trying hard to offload its unprofitable Volvo car unit by the end of the year. Finance Chief Lewis Booth recently said that the company had no plans of retaining the unit. Ford only wants to concentrate and strengthen its own in-house brand.

In 1999, Ford acquired Volvo Car Corp. from Sweden-based Volvo Group for $6.45 billion. However, the company put up the unit for sale last December in an effort to cut costs and raise cash amidst plunging industry wide auto sales.

Ford negotiated the sale with many automakers Incorporatedluding Renault SA and China’s third-largest automaker, Dongfeng Motor Group. So far, China’s Geely Automotive was reportedly the only company to submit a concrete bid, valuing the unit at about $2 billion. However, Geely later denied such reports.

In the first half of 2008, Ford sold its UK-based Jaguar and Land Rover to Indian auto giant Tata Motors (TTM) for $2.3 billion, about half the price it had paid to BMW for buying the units in 2000.

In the latter half of 2008, Ford also shrugged off a 20% stake in Mazda Motor for $540.3 million. The company reduced its stake to 13.4% in the Japanese automaker, which it had rescued from bankruptcy in 1979.

We continue to recommend the shares of Ford as Neutral with a target price of $8.

Zacks Investment Research

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(F) Ford Motor Saddled with Volvo

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