The second-largest U.S. automaker Ford Motor Co. (NYSE: F) said on Monday that it is mulling the sale of its European brand Volvo. It attributed the decision to "significant decline" in the auto industry in recent
months and a part of its efforts to "strengthen its balance sheet."

Alan Mulally, chief executive officer said in a statement "given the unprecedented external challenges facing Ford and the entire industry, it is prudent for Ford to evaluate options for Volvo as we implement our ONE Ford plan." 

The struggling automaker said that the strategic review will take "several months." In the meantime, plans to allow Volvo to operate on a more stand-alone basis will continue to be put in place. Ford spokesman Mark Truby said "our relationship with Volvo during this time remains unchanged, and we will continue to work together. What's most important is that we make the right decision."

The "Big Three" of Detroit- General Motors (NYSE: GM), Ford Motor Co. and Chrysler LLC are to present plans to Congress tomorrow demonstrating why they should get U.S. financial aid and how they intend to use the fund.

Of late the company has been shedding its European brands. Earlier in June, Dearborn, Michigan based company sold its Jaguar and Land Rover brands to India's Tata Motors Ltd. It had acquired the two luxury brands in 1989 and 2000 respectively. In November, Ford said it will sell about two-thirds of its 33.4% stake in Japanese automaker Mazda Motor Corp for around $538 million. The company sold Aston Martin in May 2007.

Surging fuel prices in the first half of the year and turmoil in the credit market has taken a heavy toll on auto sales. Massive layoffs and subsequent drop in consumer prices has only compounded problems for a company like Ford.

The automaker burned through $7.7 billion of cash in the third quarter. Volvo’s third-quarter pretax loss widened to $458 million from $167 million in the same quarter in 2007. Sales dipped 24% to $2.9 billion due to a stronger dollar.

The Sweden based company is also in talks with Sweden’s government about possible financial support and intends to cut 6,000 jobs.

Shares of Ford soared over 6% in afternoon trade. Ford hit an intraday high of $3.01, up 32 cents or 11.9%. 
 
Disclosure: Author does not own any of the stocks discussed here.