Monday, March 29, 2010

National vehicle of the People's Republic of Cambridge

The Volvo. The height of Cambridge coolness, a muddy 240 Volvo wagon, with about ten Cambridge parking permits in the rear window. In 1999 Ford bought Volvo for $6.4 billion. Today Ford announced the sale of Volvo to the Chinese for $1.8 billion.
Credit Ford's new CEO, Mulally, for having the smarts to recognize a loser and dump it. Taking a $4.6 billion dollar loss, was better than taking the day-to-day losses of operating Volvo.
And boos to previous Ford management for wasting so much money on a doomed acquisition. Volvo was loosing money when Ford bought them. They didn't have enough volume to get the cost of production down far enough to make money. The only way to lower Volvo's production cost is/was to use a lot of high volume Ford parts or, simply put the Volvo badge on a Ford.
Doing this kills the sales. Volvo buyers buy the car 'cause it isn't Detroit iron. They want to own something different. Once they find the Volvo is just a Ford with a new grill and a Volvo badge, they leave the showroom, in droves. Volvo was asking BMW money. Nobody is going pay BMW money for a gussied up Ford, they will buy a real BMW instead. This was obvious to everybody in the car business in 1999, but the old Ford management went right ahead and wasted $6.4 billion buying Volvo.
They had company. GM bought up a number of European loser mobiles and they still haven't sold any of them.

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