Ford To Buy Division Of Volvo
Ford Motor Company put an end to weeks of takeover speculation by confirming Thursday that it will buy Sweden's Volvo car division for $6.5 billion.
The purchase is part of a big consolidation under way in the international auto industry, which has been hampered by overcapacity and stiff competition.
The pressure assumed fresh intensity last year when DaimlerChrysler (DCX) was born from Daimler's $36 billion takeover of the U.S. car maker Chrysler.
The purchase will boost Ford's (F) European market share to 11 percent from 10 percent. That makes it the region's second biggest carmaker after Volkswagen AG, and puts it ahead of General Motors Corp. (GM)
Shares of Ford (F) advanced 2 3/16 to close at 61 1/2 Thursday.
The deal will also give Ford a new - and some say much needed - luxury brand for its U.S. market.
Ford's chairman William Clay Ford, Jr. said the purchase is part of the company's "21st century vision to become the world's leading consumer company that provides automotive products and services."
The U.S. car company, the world's second largest automaker, said the purchase will boost its annual earnings by expanding its range of products, volume growth, global economies of scale in engineering resources and purchasing, and platform and manufacturing 'synergies'.
It's unclear, meanwhile, what Volvo plans to do with its new-found wealth of $6.5 billion - whether for instance it's planning a big acquisition of its own. But the Swedish company is bound to be pleased with the price it fetched, as it's some $500 million better than analysts had expected.
In the meantime, the company plans to spend its time beefing up its trucking business. "Within the context of a consolidating automotive industry, Volvo has completed a strategic review of its businesses," Volvo said in a statement.
"Volvo has concluded that a sale of Volvo Cars to Ford is in the best interests of both Volvo Cars and Volvo's shareholders," the company added.
Volvo plans to build up its trucking business. The Swedish car maker has already said it's interested in a merger or in other combinations with Scania.
Written By Suzanne Miller, CBS MarketWatch London bureau chief