Ford crisis: thoughts of selling Volvo

Ford Motor announced today that it was evaluating its options for its Volvo subsidiary, including the "possible sale" of its loss-making Swedish premium brand. In fact, according to the Wall Street Journal , Ford is intentioned to concentrate and focalize on their main brand, after having already disposed Jaguar and Land Rover. Volvo was acquired by the American Group in 1999 from Swedish Ab Volvo. 

Experiencing a continuous decrease in market share and sales, the disposal of the Swedish brand seemed the most probable solution. It must be noted, though, that already the previous year this option was taken into consideration, but shortly left aside as Ford's CEO, Alan Mulally, said that it had plans to relaunch the brand. Nevertheless Volvo's sales in the United States continuously plunged, decreasing 52% in October and 28% during the firs ten months of 2008. 

Due to this reason, Mulally declared that considering today's financial context together with Ford's external problems, it is vital evaluating any possible solution for the future of Volvo, strong worldwide player, which is experiencing a difficult period.

Ford must thus pay extreme attention in analyzing every possible outcome and effectively evaluate whether the disposal of Volvo really incorporates part of an effective strategy in order to come out of this negative situation.

Oil price sinks again

A strong fall was registered by the WTI this morning during the first moments of opening at the New York Stock Exchange. The instant drop came short after the announcement by the Opec countries of the postponement to mid December to cut the general oil aupply and production. WTI contracts expiring in January lost only this morning 6.7%, where as the Brent's price, always expiring in January, plunged 6.39% at a price of $50.07 per barrel.

The oil cartel, which controls 40% of the world's production, said oil demand was weakwning fast, but agreed to wait until a meetin in Oran, Algeria, on December 17 to reduce further its output.

Further, Abdallah el-Badri, Opec's segretary-general, said that the reunion in Cairo was put into place as the Oil price reached its lowest levels in four years. As a consequence, most of the Opec countries believed that previously made cuts of 1.5 milliions of barrels were insufficient in order to "calm-down" price fluctuations.

Ryanair's bid on Aer Lingus

During these times of financial turmoil, there are companies searching for extra funds in order to survive where as other companies think that the merger solution in the only way out.
Today, Ryanair, one of the most successful airlines during the last 10 years, placed a fresh bid on rival Aer Lingus for €750m, or just half of what it offered two years ago in an approach thwarted by European regulators.

Today's bid, though, represents part of the recent spate of airline mergers, which means that there is greater probability of success. Ryanair, who already owns 29.82% of Aer Lingus, proposed a all-cash offer at €1.40 per share, representing a 28% premium over the avergae price fo Aer Lingus shaeres during the last month.

Since the announcement, Aer Lingus shares were trading 14.3% higher, where as Ryanair's shares were just 2% lower, trading at €2.87. Ryanair's CEO, Michael O'Leary, said that the economic and regulatory scenarion had changed completely since the Ryanair's last move on the Dublin based airline.

As it was precised in the offer document, Ryanair's intentions over the next five years are to double the size of the company creating as a consequence more than 1000 new jobs. Apart cost savings and increased efficiency, Ryanair's detailed intentions represent one of the major issues why the two companies should merger. At this point, the remaining unknown factor is whether financial regulators and shareholder will accept this offer or not.