Volvo: There’s fight left in this big Swede. Don’t count ’em out

February 14, 2009/Steve Tackett


Do car buyers beg for the most in safety, great design, honest comfort and excellent handling? Sure they do. Volvos have these qualities.
So explain why are Volvo sales so bad? Volvo had only 73,000 sales in the U.S. last year compared to 106,000 in 2007 and 116,000 in 2006. Sure, everybody is hurting, but Volvo is hurting more than others. In January, Volvo recorded only 2,910 sales, down 64 percent from 8,036 the year before.
Volvo’s has problems: One is currency. Volvos are made mostly in Sweden, and its executives say the company can’t make a profit if the Swedish Kroner is worth less than 7.5 Kroner to the U.S. dollar. Understand, that when the Swedish money climbs in value, the cars would cost more outside Sweden. It’s a lose-lose situation.
“Currency drove business decisions that were focused on margin more than volume,” says Doug Speck, president and CEO of Volvo North America. “When currency shifted in our favor in the third quarter and margins improved, just then the industry went away.”
It’s too bad Volvo didn’t do what other companies like BMW and Mercedes have done and that is build cars in the United States in order to balance currency problems. It might have been possible, since Ford (which owns Volvo) is using a Volvo platform to build the Taurus cars in Chicago, to assemble Volvos at the same plant.
“Performance is never about one thing, adds Speck. “I will also say that resources are precious commodities right now and we struggle to compete for those resources.” What that means is the Volvo has a great line-up of vehicles but does not spend to promote them. Think of it like this: If you decide to have a party and don’t send invitations no one will know to come.
Speck notes a third problem: When gas prices climbed hitting $4.40 a gallon, the entire SUV segment suffered. But in Volvo’s case the XC90 SUV was a significant percentage of their business.
When it rains, it pours. Ford then announced that Volvo is on the block. The rumors swirl about potential buyers — Renault, which tried to buy Volvo years ago, and the Chinese.
A Swedish newspaper reports Ford plans to meet with investment banks in London to discuss the possible sale of Volvo. The paper says there’s interest from a European alliance and an unidentified consortium that might join with Chinese automakers Chang’an and Dongfeng to buy Volvo for $3-$4 billion.
“Anyone who says that the decision by Ford to put us under review has no effect on business is naive,” admits Speck.
But the Volvo chief in the U.S. has to get up every morning and keep trying. “The review is out of our control and I’m a big believer in reality. So we invest our energy in things that we have control over.
“Our objective for 2009 is to increase retail volume over 2008. We have stronger currency and margin to go with and the best competitive product since the XC90. Volvo has inherent value and a singular image in the global marketplace. We challenge ourselves each day to stay focused on business as usual, presenting our products as attractive value, selling more automobiles and building the brand and the right product. And we’re investing a lot of time working on our product programs for the future.”
I drove Volvo’s new XC60 crossover — the most elegant Volvo to date. This small crossover radiates substance and refinement. Its interior and exterior design has been pushed hard from its usual understated pragmatism into a much more emotional and elegant presence. The base price is $37,200 (not including destination of $825). That price includes standard features such as City Safety, a collision mitigation system.
To test City Safety we drove straight for somebody’s Porsche Carrera ahead of us at a stoplight. At about 10 mph, the XC60 braked forcefully, inches from the Carrera bumper. “The system stops your vehicle from rear ending the car in front of you at 19 mph or below,” explains Thomas Broberg, senior technical advisor safety.
A further development that recognizes and automatically brakes when a vehicle is in danger of hitting a pedestrian will be on the new S60 due out in the middle of 2010. I’ll buy that.
The Swedish government may be ready and willing to put some money behind Volvo to keep it going. But Volvo needs to get the word out about Volvo. Volvo has always been a brand with clear, uncluttered attributes. Volvo deserves to live.

Copyright, Motor Matters, 2009