Volvo Plans Large Cuts in U.S. Dealer Network
By Brendan Moore
The company plans to contact their unprofitable and/or marginal dealers in the coming months in order to discuss the surrender of their Volvo franchise rights. They also plan to lay off employees at Volvo Cars North America.
Volvo is getting squeezed in the U.S. market by the falling dollar (all Volvos are built in Europe using euro costs), a model lineup in need of refreshing, and last, but certainly not least, the declining new-vehicle market in the U.S. overall. None of these negative factors are expected to diminish in 2008; in fact, all are predicted to increase. Volvo sales are expected to keep falling in this type of scenario.
Volvo sold a peak of 139,037 cars in 2004 and should end up with around 106,000 units over the curb in 2007. Sales in 2008 will probably fall below the 100,000 mark and may conceivably drop below 90,000 if the dollar keeps falling and the overall new vehicle market plummets to 14.5 million because of a nationwide recession.
Regarding the planned dealer cuts, Automotive News, an auto industry publication, quoted Anne Belec, CEO of the U.S. sales arm of Volvo, as saying, “We have dealers losing money this year, last year and the year before. If they couldn’t make money two or three years ago, then they are going to really struggle going ahead. We want to talk with them.”
More from the same Automotive News article:
Belec expects 2008 sales to fall 10 to 15 percent from this year’s estimated 106,000 units. Volvo’s sales peaked at 139,067 in 2004 when the small S40 and V50 wagon arrived and the XC90 hit its stride. But they’ve been declining ever since. The small cars have been seen as overpriced, and the S60 sedan grew old. Even though an XC70 and V70 have debuted, Volvo expects sales to slip next year because it is basically walking away from the smaller cars.
In 2004, Volvo’s 350 franchise holders sold about 400 new vehicles each. If 2008 volume falls to the level Belec forecasts, sales per store would be about 260.
“Some retailers are not going to make it at these volume levels,” said Belec, a 45-year-old French-Canadian who began her career at Ford of Canada and was once general marketing manager at Lincoln Mercury division. “We have to help them craft a way out. This is a voluntary approach, but we have to have a plan in place.”
Belec said funds have been allocated for the program but declined to say how much or how they would be used. Neither would she say how many stores are targeted for closing but made clear that it is more than a handful.
Personally, I can’t see things looking up for Volvo anytime soon. The overall vehicle market will continue to be tough in the U.S., they’re not in a lot of the hot developing-nation markets, they don’t have any product stunners under wraps ready to spring on an adoring public and the dollar is going to be weak against the euro for quite sometime into the future. Which, by the way, is why all the European vehicle manufacturers are considering putting up production facilities in the U.S. now, but I don’t think Ford has any plans to move any Volvo production to the States anytime soon. So, a tough market environment for Volvo just seems as if it’s going to get tougher and tougher.
What to do, what to do if you’re Volvo? Well, nothing, really, except spend as little as possible until things like product, the foreign exchange rate and the overall market improve. The next few years might be a little hard on Volvo and its dealers but I don’t see any alternative at this point.
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