Ford probes option of selling Volvo to Renault

Ford has also had talks with China's third-largest automaker, Dongfeng Motor Group, as a potential partner for Volvo, one of the sources said.

Ford spokesman Mark Truby declined to comment directly but said: “We announced earlier this year that Volvo is not for sale and that we are focused on improving Volvo's business results.”

A senior Dongfeng executive said the matter had not been discussed by his company's senior management. But he said he could not rule out the possibility that informal initial talks may have taken place with Dongfeng's subsidiaries.

Even though Ford has said it has no plans to sell Volvo, the automaker has been having informal talks with interested parties, the sources said.

Analysts have said that Ford, which lost more than $15 billion in the past two years and has abandoned a long-standing goal of returning to profitability in 2009, could do with the extra cash.

The Dearborn, Michigan-based automaker is in the middle of a restructuring that includes closing 16 North American plants and slashing tens of thousands of jobs. It also mortgaged its assets in 2006 to secure about $23 billion in financing to help fund its turnaround.

The automaker has already sold Aston Martin, Jaguar and Land Rover, disbanding the Premier Automotive Group, whose only remaining brand is Volvo.

Volvo, a Swedish brand Ford bought for $6.45 billion in 1999, lost $151 million in the first quarter of this year.

Ford did not break out results for Volvo until this year, but has now begun doing that as part of a plan to help Volvo operate on “a more stand-alone basis.”

Ford has said the unit lost money in 2007 and it wrote down the value of Volvo by $2.4 billion following a review of the brand's prospects in January.

Dongfeng already has a joint venture with Nissan Motor Co, in which Renault owns a 44% stake. The joint venture makes cars for the Chinese market. Separately, Dongfeng also has a joint venture in the works with Volvo AB, which makes heavy trucks and operates independently of Ford.

The Chinese automaker has been making a push to expand its passenger car and light truck line-up. The Hubei-based company has its roots in building trucks and commercial buses.

Billionaire investor Kirk Kerkorian, who earlier this month increased his stake in Ford to 6.5 percent and said he could step in to propose business strategies for Ford, could also be a bridge to more serious talks with Renault.

Kerkorian, a long-time activist investor in the auto industry, had built up a stake in General Motors Corp three years ago and suggested an alliance with Renault-Nissan, which GM rejected.

Following GM's rejection, Kerkorian sold his nearly 10% stake and pulled his aide, Jerry York, off the GM board.

Kerkorian's stake in Ford has led many to believe he could emerge as an activist investor yet again, driving Ford toward a faster sale of Volvo or a closure of its Mercury line.

York earlier this year suggested Ford could dispose of both the brands, but later apologized for what he called “off-the-cuff” remarks.

In an interview with Reuters last week, York declined to comment on Ford. (Reuters)