Posted by: David Kiley on March 10, 2008
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.