Dec. 1 (Bloomberg) -- Ford Motor Co. said it may sell its Volvo unit, the company’s sole remaining European brand, a day before the second-largest U.S. automaker is scheduled to present a survival plan to federal lawmakers.

The review of options for Volvo was spurred by the worldwide auto decline and probably will take several months, Ford said today in a statement. Volvo, acquired in 1999 for $6.4 billion, was retained after a similar evaluation last year.

Shedding the Swedish unit would complete the unwinding of a two-decade strategy of diversifying by buying European luxury brands. Today’s move also helps Dearborn, Michigan-based Ford show Congress it’s taking action to reshape operations while making a case with General Motors Corp. and Chrysler LLC for $25 billion in U.S. financial aid.

“All of these businesses are being forced to reveal their hand,” said Maryann Keller, an independent auto analyst and consultant in Greenwich, Connecticut, in an interview. “Ford can put Volvo up for sale, but there aren’t going to be any buyers. It may come down to the Swedish government taking it.”

Sweden’s government said today it won’t provide direct aid to Volvo or GM-owned Saab because European Union rules ban such action. Seven out of 10 Swedes back a temporary government takeover of Gothenburg-based Volvo if Ford can’t secure the unit’s future, the newspaper Dagens Industri reported last week.

Limited Interest

“None of the European manufacturers would have a need or a likely interest in Volvo,” said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. “The only thing I could see is an Indian company or perhaps a Chinese company.”

Ford “is almost guaranteed to take a loss on the sale,” said Aaron Bragman, a Troy, Michigan-based analyst at IHS Global Insight Inc. “It is obvious this is not the time to do this. It’s a last-ditch move they didn’t really want to make.”

The U.S. company said it decided to reevaluate Volvo “in response to the significant decline in the global auto industry, particularly in the past three months, and the severe economic instability worldwide.”

Ford fell 14 cents, or 5.2 percent, to $2.55 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 62 percent this year.

The automaker has said it isn’t immediately seeking U.S. aid, while wanting to be able to draw upon such assistance if it runs out of cash. Detroit-based GM, the biggest in the U.S., has said it may run short of funds for its operations this year.

Selling Overseas Units

Volvo was once central to a failed strategy by Ford to reap a third of its profits from luxury autos in 2006. The U.S. company began buying European automakers in 1987, when it purchased a controlling interest in U.K.-based Aston Martin. Ford acquired Jaguar in 1989 and Land Rover in 2000. Ford sold Aston Martin for $931 million in May 2007, and Jaguar and Land Rover in June of this year for $2.4 billion.

India’s Tata Motors Ltd. bought Jaguar and Land Rover for less than the $2.5 billion Ford paid in 1989 for Jaguar alone. The price also didn’t cover investments Ford made in the U.K. brands, including $2.1 billion in 2005 for a revamping of Jaguar.

The Jaguar-Land Rover sale occurred before the worst of the credit crunch, said Bragman, the IHS Global Insight analyst. For Volvo, “anybody who has the cash is keeping it close to the heart,” he said.

Tata Motors said today it will borrow from the public for the first time in 13 years because reduced availability of credit limits its ability to refinance loans used to acquire Jaguar and Land Rover. The company plans to pay as much as 11 percent annual interest on three-year deposits.

Ford last month sold 20 percent of Mazda Motor Corp. to raise about $540 million. The U.S. automaker retained 13 percent while yielding operational control over its Japanese affiliate.

Mulally’s Plan

The automaker has been shedding European brands under Chief Executive Officer Alan Mulally, recruited from Boeing Co. in 2006. Mulally is integrating regional units and focusing on marketing the company’s namesake brand, under his One Ford plan.

Ford has lost $24 billion since 2005, the last year it had an annual profit. This year’s credit crisis and recession spurred Ford to retreat from a target of returning to profit next year.

“Given the unprecedented external challenges facing Ford and the entire industry, it is prudent for Ford to evaluate options for Volvo,” Mulally said in today’s statement.

Volvo’s third-quarter pretax loss widened to $458 million from $167 million a year earlier, as its sales declined 24 percent to $2.9 billion. The unit tripled its planned job cuts to 6,000 in October and said Nov. 8 that it was in talks with Sweden’s government about potential financial support.

In September, Ford named Stephen Odell as Volvo’s CEO, the first non-Swede to head the carmaker.

Declining Sales

Volvos are more expensive to sell in the U.S. because the dollar has weakened against the Swedish krona since 2002. That helped trigger a 24 percent slide in demand from 2004 through 2007, and U.S. sales fell an additional 28 percent this year through October.

Volvo sales in the U.S. peaked at 139,384 cars and sport- utility vehicles in 2004. Last year, they slid to 106,213, more than 10,000 below the total for 1999, when former Ford CEO Jacques Nasser acquired Volvo’s auto business from truckmaker Volvo AB. The U.S. accounts for 23 percent of Volvo sales.

Volvo has fared better outside the U.S. Global sales totaled 458,323 last year, 14 percent more than 1999. In 2007, Volvo recorded gains in developing markets such as Russia and China and also in nations such as France and the Netherlands.

To contact the reporter on this story: Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net; Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net

Last Updated: December 1, 2008 16:16 EST