Volvo, the Swedish automotive group, has appointed a leading US investment bank to explore a possible sale or merger of its car division, its largest business.
The decision represents the first confirmed sign that Volvo, one of Europe's premium brands, is reconsidering the strategic ownership of its car manufacturing operations.
Ford of the US, Italy's Fiat and Volkswagen of Germany have been identified as possible bidders for the business - valued by industry analysts at around $5 billion.
Such a deal for Volvo would represent a multiple of six times the car division's operating cash flow. It would swell Volvo's cash reserves, enabling the group to contemplate a large acquisition in other areas.
Mr Leif Johansson, Volvo chief executive, has made no secret of his desire to expand Volvo's truck, bus and construction equipment divisions, all higher-margin businesses. However, people close to the company warned that no assurances could be given that a deal involving Volvo Cars would be announced. The bank has received a "sell-side" mandate. Under the terms governing most such mandates, the bank receives only a small fee if it finds no buyer.
Nevertheless, Volvo is said to be "absolutely serious" about selling or merging its automotive division if the right terms can be reached, one official said.
The Wall Street investment bank, which has not been named, is understood to have drawn up a number of options including an outright disposal, partial sale or joint venture for Volvo Cars.
Volvo declined to comment.
Market speculation surrounding Volvo had centred on a merger involving the whole group and has fuelled a near 25 per cent rise in Volvo's shares in the past month. Some analysts believe Volvo might pursue a deal similar to the joint venture at Swedish rival Saab Automobile, in which Investor - the main investment vehicle of Sweden's Wallenberg empire - sold a 50 per cent stake and surrendered management control to General Motors of the US.
The bank is also believed to be scrutinising a possible manufacturing partnership, modelled on Volvo's existing Dutch venture with Mitsubishi Motors of Japan, which produces mid-size cars.
