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New buyer interest to bid in Volvo sale

A further two consortiums are set to compete with China’s Geely, the front runner to purchase Volvo Cars from Ford, and are expected to submit offers in the coming week.

Published: 21 November 2009 13:29 CET

Ford has previously indicated that Geely is the preferred choice to take over the Sweden-based company, which continues to show losses.

According to newspaper Dagens Industri, the US consortium Crown will make an offer in the next seven days with half of its capital coming from Swedish investors.

Crown is led by American Michael Dingman who brings 21 years of experience as a board member of the US-based Ford.

Dingman is joined in the consortium by advisor and former Volvo CEO Roger Holtback.

Whilst the Geely bid is estimated to be valued over $2 billion no details have yet been released of the Crown consortium’s counter offer.

A third party, the Jakob Consortium, dominated by Swedish investors has also pledged an interest in the buy out.

Losses for Volvo Cars continue to shrink. In November, the company posted their best quarter result of the year, losing $135 million compared with the $458 million it reported lost in the same period of 2008.

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Sweden's Volvo regains strength after pandemic puts brakes on earnings

Volvo Group CEO Martin Lundstedt. Photo: Adam Ihse/TT

In 2020, the group saw “dramatic fluctuations in demand” due to the Covid-19 pandemic, chief executive Martin Lundstedt said in a statement.

For 2021, Volvo raised its sales forecasts in its trucks division – its core business – in Europe, North America and Brazil.

However, it said it also expected “production disturbances and increased costs” due to a “strained” supply chain, noting a global shortage of semiconductors across industries.

The truck making sector is particularly sensitive to the global economic situation and is usually hard hit during crises.

In March, as the pandemic took hold around the world, Volvo suspended operations at most of its sites in 18 countries and halted production at Renault Trucks, which it owns, in Belgium and France.

Operations gradually resumed mid-year, but not enough to compensate for the drop in earnings.

With annual sales down 22 percent to 338 billion kronor (33.4 billion euros, $40 billion), the group posted a 46 percent plunge in net profit to 19.3 billion kronor (1.9 billion euros).

Operating margin fell from 11.5 to 8.1 percent.

However, the group did manage to cut costs by 20 percent.

“We have significantly improved our volume and cost flexibility, which were crucial factors behind our earnings resilience in 2020,” the group said.

Volvo's business regained strength in the second half of the year.

“Customer usage of trucks and machines increased when the Covid-19 restrictions were eased during the summer and this development continued during both the third and fourth quarters,” it said.

“Both the transport activity and the construction business are back at levels on par with the prior year in most markets.”

For the fourth quarter alone, the company reported a 38-percent rise in net profit from a year earlier.

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