Betting On Volvo

JACQUES NASSER HAS A reputation for doing many things well, but vacationing isn't one of them. The hard-driving president of Ford Motor Co. is at his desk before 6 most mornings; rather than relax on American holidays like Thanksgiving, he often visits foreign operations where he can put in a full day at the office. But early last month, amid rumors of an imminent merger between Ford and Volvo, Nasser dismissed reports that he'd spent the holidays hammering out a deal. Not true, he said: he'd been relaxing on a beach with his family. Even if the smoke screen was legit--aides insist he really did take a rare break--it didn't convince veteran observers that Nasser wasn't wooing the Swedish carmaker. ""[Ford's] walking around with $23 billion in its pockets,'' says dealer Martin (Hoot) McInerny. ""In the auto industry, when they're walking around with that kind of money, they buy things.''

They finally pulled out the checkbook last week. For $6.5 billion, Ford will take control of Volvo's car business. Though rivals claim Ford overpaid, Wall Street declared the companies a good fit, dealers look forward to peddling Volvos alongside Fords and Lincolns, and even patriotic Swedes say it's the right move. Ford-Volvo follows DaimlerChrysler as the second in an expected string of megadeals. ""You're going to see the greatest [consolidation] in this industry since the period when we had 150 car companies in the U.S., down to where we had a half dozen,'' says DaimlerChrysler chairman Robert Eaton. Driving the trend: flat sales, cutthroat pricing, global overcapacity and bosses' growing desire to own the perfect bundle of brands. Pundits now talk of a ""Global Six'' that includes General Motors, Ford, DaimlerChrysler, Toyota, Honda and Volkswagen. Together they're expected to chew up most smaller rivals in a quest for size. Next on the menu: Nissan, whose president has publicly invited bids.

Despite Volvo's reputation for building the world's safest cars, it's long been clear that the carmaker wouldn't find a seat at this shrinking table. Drive through Yuppie New England suburbs and you'd think Volvo was a dominant carmaker, but the Chardonnay-and-chevre set bought just 400,000 of its vehicles worldwide last year. Chief executive Leif Johansson concluded its puny sales wouldn't generate enough cash to develop new models. After reportedly talking with VW and Fiat, Johansson focused on Ford. ""If there was any event that pushed the negotiations into fast-forward [in recent weeks], it was the sense that they wanted us,'' says Ford chairman William Clay Ford Jr.

The acquisition is a coup for Nasser and Ford, who just assumed their posts on Jan. 1. There's also irony in this deal. Ford's great-grandfather, company founder Henry, famously ignored the importance of brands, and watched GM race ahead by selling cars called Pontiacs, Buicks and Chevrolet. As his great-grandson ascends to power, brands are the industry's buzzword--especially at Ford, where executives were willing to dig deep to win one as strongly positioned as Volvo's. The Big Three's nameplates were muddied badly in the '80s; at GM, for instance, Buicks looked identical to Oldsmobiles. Although Mercury is still a mess and Mazda--in which Ford holds a 33 percent stake--has a way to go, Ford's stable looks increasingly strong and well differentiated. Led by Nasser, design chief J Mays and brand guru Jim Schroer, staffers have assigned themes to each brand: Mazda is ""stylish, spirited and insightful,'' while Ford is ""genuine, progressive and smart.'' Adjectives go only so far, but the products are looking more distinct, too. Adding the Navigator sport utility burnished Lincoln's image; last year's Cougar showed that Mercurys needn't mirror Ford models. As a European make that's more affordable than Jaguar and has lots of female buyers, Volvo fits in at Ford nicely, Schroer says. Outsiders agree. ""A Volvo is really a life-stage purchase,'' says consultant George Peterson of AutoPacific. ""It lets somebody who doesn't want a Windstar or an Explorer have a reasonable place to go.''

That could change if Volvo's image gets sullied by the merger. ""If Ford starts turning out Tauruses with Volvo [nameplates], they're dead,'' says Burnham Securities' analyst David Healy. But Ford has avoided that misstep in the past. It overpaid for Jaguar in 1989, but by linking Jaguar with Ford suppliers and spending to refurbish plants, improve quality and fund new designs, Ford has finally put Jaguar into overdrive. The turnaround at Mazda is less complete. Since Ford took control in 1996, it's brought discipline to a company once ruled by engineers. Ford's buying power also wins Mazda better prices on everything from car parts to employee airline tickets. While Mazda still can't touch Toyota or Honda, Ford hasn't started second-guessing. ""I'm allowed to run my own business,'' says Richard Beattie, Mazda's North American president. ""Ford gives me a very long piece of string, but if I need help I pick up the phone.''

Volvo expects similar hands-off treatment. Spirits were high last week inside Volvo's U.S. headquarters in New Jersey, and even the brand's loyalists are resigned to the deal. Gregory Miller, secretary of the Volvo Club of America, says he'd kick the tires if, as expected, Ford's muscle helps Volvo build a sport utility vehicle. ""If it's anything like the V70 Cross Country station wagon, without a doubt I'd buy it,'' he says. Nasser and Ford won't say whether they're laying those plans yet--or how soon Volvos might show up in Ford dealerships. Expect slow tinkering, not big changes. ""[We won't] go in there guns ablazing . . . and start fixing things that aren't broken,'' Ford says. For now, there's other work to do. With their deal sealed, Nasser and Volvo chief Johansson slipped out to a Goteborg hotel to sip Aquavit and toast the merger. Perhaps, as it often does when car guys gather these days, their talk turned to what other brands might fit in their garage. ""We're eager to look at any other opportunity that makes sense,'' Nasser says. ""Do you have any suggestions?'' As his competitors hunt for their own deals, this may be quite a year for tire-kicking.