Volvo Is Going Back To The Future. Back To New Jersey.

Posted by: David Kiley on March 10, 2008

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Ford Motor Co. has announced that it is moving its Volvo Cars North America out of its Irvine, CA Premier Auto Group offices where it has shared digs with Jaguar, Land Rover and Aston Martin. At one time, even Ford’s Lincoln brand was located in Irvine.

Locating Ford’s luxury brands in Irvine was a move instigated by Wolfgang Reitzle when he was head of PAG under Ford CEO Jac Nasser. Lincoln long ago moved back to Dearborn, MI. Aston Martin was sold last year. Land Rover and Jaguar are about to be sold to Indian automaker TaTa. That left Volvo somewhat orphaned. So, Ford is moving the U.S. unit back to Northern, N.J. where it was long located prior to Ford’s purchase. It is, in fact, moving back to the same campus where it has one remaining building used for field sales and finance operations and the like.

There are some 90 people in Irvine dedicated to Volvo. But it isn’t likely that even 80 will move to N.J. because Ford is not offering as generous a relocation package as it did for people moving from New Jersey to California.

As part of the shift, Volvo chief Anne Belec is moving back to Dearborn to work for Ford’s global chief marketer Jim Farley. She is replaced by her number-two, Doug Speck.

Volvo sales have been soft despite overall strength in the premium auto segments. That is leading Ford to reduce the number of Volvo dealers, especially in metro urban markets, to make dealers more profitable. It is also concentrating its marketing and future product development on higher-margin products (like the XC90 SUV pictured above), according to an internal Ford document. For now, all Volvos are built in Europe, which makes the weak dollar a huge factor in profitability of sales in the U.S. That, plus a refocus of Volvo’s safety engineering message executed with greater creativity than has been the case in recent past, is the recipe for making Volvo a solid contributor to Ford’s overall comeback, according to Ford executives.

Ford floated Volvo for sale last year, as well. But none of the interest that surfaced was going to bring in enough cash to justify the sale. Ford and Volvo have intertwined several aspects of engineering and product development, and unwinding them would be somewhat difficult.

The move to NJ solves at least one problem for Volvo execs in the U.S.—the awkward time difference between the west coast and Sweden.

In the end, I suspect that Ford will be glad it did not sell Volvo. Having Lincoln as its only premium/luxury option makes a lot of Fordies nervous. And for good reason.

There is a recipe for making Volvo more profitable and successful.

1. Focus the marketing on a fusion of extraordinary safety technology and prestige. And stick to it.
2. Start building vehicles in the U.S. so you aren’t victim to the weak dollar, and can compete more aggressively on price. Let the Swedish government know that if Ford doesn’t get some relief on the ability to cut some jobs, the automaker is going to just up and leave one of these days, or sell it to the Chinese.
3. Give Volvo a two-mode hybrid vehicle and a clean diesel for the U.S., and start pushing the brand as a premium green, and safe, buy.

Reader Comments

Noz

March 10, 2008 2:30 PM

Needless to say the cost of living is higher here on the Left Coast than back in Joizy, but then having to live in such a place, Joizy, that is, reeks of some kind of punishment. And besides, they talk funny.

So Volvo sales are slipping as its former reputation for safety beyond what others offered fades into reality. Ouch. Kind of a hoax all along, but it was good for sales of some very stogy mediocre cult cars. Once again, the Liberals were sucked in by dubious claims. Just a part of being 'progressive'.

Volvo has build quality issues to deal with, and shifting production to the US is hardly the answer if the fading reps of the Failing Three are taken seriously. Not unless the plants are located far from the Rust Belt where 'working for a living' is not a nasty thought. This meaning that the bad scenes replayed year after year by MB are not the fault of the assembly guys, but of arrogant and incompetent German engineers.

Scott Furtado

March 11, 2008 9:48 AM

I think number 3 will determine if Ford is able to complete their major turnaround.

Scott
www.advancedtrendanalysis.com

David

March 11, 2008 9:58 AM

It is that lack of a diesel that has prevented me from buying a C30. Why can't we have that 52 mpg diesel that they have in Sweden?

Non-Us observer

March 11, 2008 10:03 AM

"Let the Swedish government know that if Ford doesn’t get some relief on the ability to cut some jobs, the automaker is going to just up and leave one of these days or sell it to the Chinese."

A very uninformed comment in my opinion. Swedish interests (e.g. Investor or Volvo Trucks) will most probably buy Volvo when the troubled American company Ford experiences cash flow problems next time. This will only be good for the brand and profitability of the Volvo company.

China, on the other hand, will most probably pass the US in terms of size and global economic power, even if both super powers have gigantic problems with subprime and/or inflation issues.

Dick

March 11, 2008 10:36 AM

What happened to the Volvo "Recharge" proto? That one looked like the real deal.

TPM

March 11, 2008 3:56 PM

Noz...
Aren't you one of those 'tan' empty heads who still think that NJ is an awful place to live?
When was the last time that you 'tan' your brain?

Kris

March 12, 2008 6:27 AM

I'm really suprised that Ford hasn't looked at it's European division to spice up there vehicle line in the US. It's sad to see them only rely on the F150 to keep them afloat, if you want to even call it that. Some of the vehicle introduced in the Geneva show, could really help them in the US. Regardless the euro to US dollar difference, the company is in dire needs of something.

SNoz

March 12, 2008 6:38 AM

David Kiley thinks it's great idea that Ford keeps Volvo for itself. That's like saying it's a great idea for the defunk American Motor Corporation to keep making the Gremlin. Ford Ex-CEO, or commonly known as Egyptian madman Nasar went on a crazy buying spree about ten years ago buying Aston, Jaguar, Landrover, and Volvo thinking Ford can benefit from the cache of luxury-legacy brands. His head-over-heel infatuation with luxury brands resulted in several mis-match marriages that are today's expensive divorces. American car lovers looked under the veils and found brides of questionable integrity. Without fanfare, Americans looked no further and concluded they were all just re-badged Fords. Ignoring the core problems at Ford, which were quality,durability,reliability issues, Nasar thought he could increase Ford profit margin with higher price prestige cars. But let's be slightly fair to Nasar. Nasar's affinity for cars that exude status is primarily due to his cultural background rooted to the middle-east where public display of material possession pegs a person's social strata. While being flashy is expected norm in middle-east,Americans as consumers are more reserved and practical. These "designer label" cars commanded less cache in USA than Nasar would like to admit. Unable to turn a profit, all of these 'designer label" cars hung on Ford's neck like a lead ballon. Nasar never saw or understood the basic business principle that a successful business must establish its core business on sound footing before attempting variants. Translation: Ford products were rotten to the core and no matter what perfume you import people will smell the odor. Contrast that with Toyota which built the Lexus brand on top of the Toyota Corolla/Corona/Camry reputation for quality,durability,reliability. Try Honda anyone? As an extra kick in the gluteus, Ford failed to maintain or develop its historic luxury brand, the Lincoln-Mercury division. Remember the luxury liner, the Linclon Continental? Why is it not among the Mercedes, BMW, Bentley, and Lexus? Because the Lincoln is with the Cadillac, suffering from the same rotten core disease. Mulaney recognized the disease: he ordered the selling off of these albatross after losing billions. For all you idiot institutional investors who saw Ford stock sank from $25/share to $5.90/share and believed David Kiley has great insight, you got it coming for not voting out Nasar earlier. And for you who believed all the nonsense PR business jive coming out of corporate America, you deserve to pay thru the nose. Why? Capitalism is fair because it punishes all the stupid equally. Long live capitalism!

dennis squitieri

March 12, 2008 8:10 PM

Mr. Spec will turn it around. he did a great job with PAG and Jaguar...my money is on him

Peter Foran

March 16, 2008 2:27 PM

I have filled out numerous surveys begging for a diesel. I have a 2002 S60 and am happy with it. But will probably buy a diesel as my next car -- regret it can't be a Volvo. Have a lovely little diesel in my sail boat, which hooked me on the longevity and thriftiness of the technology.

mlhm5

March 25, 2008 3:08 PM

Ford cannot sell Volvo's here in the US because of the weak dollar. Not many people (Ford cannot sell Volvo's here in the US because of the weak dollar. Not many people (

Volvo competes against MB and BMW which have cars made in the USA taking advantage of the cheap dollar.

I'd say Volvo is in a no win situation, especially since Europeans do not see Volvo in the same class as MB and BMW.

On the other hand, does Mulally really have the energy and focus to remake the brand a luxury brand with everything else he promised to do?

Volvo is worth $2.5 billion plus/minus and Mulally is a short timer at Ford after he collects his $100MM for making Ford profitable in 2009.

The answer is the Volvo will be sold as soon as Ford can get a price it can live with.

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