Ford takes over Volvo for $6.45bn

Unlike last year's $35 billion (€30.71 billion) merger of Daimler-Benz and Chrysler, which stunned the world auto industry, yesterday's announcement of the Ford takeover of Volvo for $6.45 billion (€5.56 billion) was not a total surprise.

The Swedish manufacturer hired JP Morgan earlier this month to present its car business to potential suitors and both Ford and Fiat publicly acknowledged that they were talking with the Swedish management.

The Detroit International Auto Show three weeks ago was dominated as much by talk of mergers as it was by the show's 21st century cars. Ford's new worldwide chief executive, Mr Jacques Nasser, was at the centre of much of the merger speculation, principally because Ford has a cash reserve of $23 billion and it was hungry for acquisitions. It was initially thought a mega-deal was forthcoming when Mr Nasser called a news conference at the show. But it was only to announce that Ford was bringing the Three Tenors to Detroit this summer.

Ford's other automotive possessions include Jaguar and Aston Martin and, even though it does not have majority equity, it also effectively controls Mazda. Volvo sells fewer than 400,000 cars a year compared with Ford's massive annual output of 6.8 million vehicles.

Both Ford and Volvo spokesmen were emphasising yesterday that Volvo would retain its separate identity just as Jaguar has done. But there will, of course, be much cost saving through sharing engineering resources and common platform and manufacturing synergies.

Both Ford and Volvo insiders insist there is no real conflict in their model line-ups. The Ford badge represents high volume mass market sectors while Volvo has an upmarket prestige range that is sustained by a reputation for safety and environmental responsibility. Volvo is now seen as occupying the ground between Ford itself and Jaguar.

This is not the first time Volvo has been involved in a merger - although its last potential link-up did not come off. It was closely co-operating with Renault but, just before the tie-up was due to be announced, the Volvo shareholders rebelled. They are not expected to object this time.

The takeover of Volvo by the number two car manufacturer in the world comes nine years after General Motors, the world's biggest, acquired Sweden's other prestige car manufacturer, Saab. Saab cars now incorporate platforms and components from high volume Opel models.