Ford aims for the top with $6.5bn Volvo cars takeover

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FORD YESTERDAY set its sights on becoming the world's leading manufacturer of luxury cars after announcing the $6.5bn (pounds 4bn) takeover of the car division of Volvo.

The deal with the Swedish manufacturer, the latest in a series of mega- mergers in the motor industry, will increase Ford's world market share to 14 per cent and is likely to prompt a further wave of consolidation.

Jacques Nasser, Ford chief executive, said it intended to produce 700,000 luxury vehicles next year, with the ultimate aim of reaching 1 million units a year. He said Volvo, together with Ford's other luxury marques, Lincoln and Jaguar, gave it "a wonderful footprint" in the upmarket car sector.

Mr Nasser also hinted that Ford, the world's second-biggest car maker behind General Motors, was still on the acquisition trail. "It is a good time to be expanding the business," he said. "We never say never, and we are always eager to look at any opportunity that makes sense for us."

Ford is rumoured to have been in takeover talks with Nissan of Japan and BMW, which owns Rover and the Rolls-Royce marque.

Fiat of Italy said it had been in discussions to buy the entire Volvo group, including its commercial vehicles arm, but had not been interested in a deal involving only the car division.

Compared with Ford, which made 6.8 million cars last year, Volvo is a minnow with total sales of just 400,000. Leif Johannson, the chief executive of Volvo, said that with volumes as small as that it could not fund the development of future models, invest adequately in new technology or support its dealer network.

Analysts said Ford may have overpaid for Volvo. The car division has revenues of about $11bn a year and is reckoned to be worth about $5bn.

But Bill Ford, chairman of Ford, said the deal would pay its way from day one. He said there would be increased sales and economies of scale in purchasing, engineering, platform development and distribution. Ford declined to put a value on the expected savings, but it indicated there would be no plant closures.

Volvo said it would use the $6.5bn of cash to "aggressively expand" its commercial vehicles division, which makes trucks and buses and construction equipment. Volvo has already bought a 13 per cent stake in rival Scandinavian truck maker Scania and proposed a full merger, creating the biggest truck maker in Europe with 30 per cent of the market.

Ford and Volvo will jointly own the Volvo marque, applying it to their respective range of vehicles. Mr Nasser said there was "huge potential" to expand Volvo's product range and geographic presence: 60 per cent of its sales are in Europe and there is virtually no overlap between Ford's models and the Volvo range, which runs from S40/S70 small and medium-sized cars to the S80.

Mr Johannson said Volvo examined many options before deciding to sell out to Ford. The US investment bank JP Morgan conducted the auction.

Mr Nasser pledged Volvo would continue to be managed from Gothenburg and retain a strong research and development presence in Sweden. He said Ford would respect and build on the traditional strengths of the Volvo brand - safety, care for the environment and family-oriented design.

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