Volvo Plans Large Cuts in U.S. Dealer Network

By Brendan Moore

12.25.2007

Volvo has announced plans to considerably reduce its current dealer network of 355 retail stores.

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:
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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.

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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.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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5 Comments

  1. If Saab offers AWD on all of it models in the next few years as planned, that will also take sales from Volvo. There’s only so much market for Swedish-car buyers in the U.S., and if Saab improves, then Volvo will suffer a little.

  2. And this is the one they wanted to keep? Ford should have cut Volvo loose with Jaguar and kept the strong dog, Land Rover.

  3. Klingershood,

    I don’t think Saab customers and Volvo are anything alike. Maybe 20 years ago there were some similarities, but not any time recently. Volvo is mainstream and Saab is for an ever-shrinking customer base of flaky college professors and architects and women that don’t shave their legs, euro-style.

    If you think Saab sells cars to the same people that buy Volvos, you are nuts.

  4. I had no idea that Saabs are driven by women that don’t shave their legs. Since both my sister and I drive Saabs, I guess we didn’t get the memo about not shaving our legs, and now that we know, it will quite a time-saver in the future. By the way, neither one of us is a professor (flaky or otherwise) or a an architect.

  5. Volvo might do better now that Belec got kicked up. Under her “leadership” the sales in USA dropped due to weak dollar and in Canada due to strong dollar.
    Volvo USA is too arrogant to even consider taking special orders. The marketing is wimpy and without any feel for expanding sales into currently “virgin” terrirories. I’ll give you an example: Make the C70 an AWD (same drivetrain that works great in V50) and market it really hard in Maine, New Hampshire, Vermont, Canada,any place with lots of snow as ‘the convertible you can ennjoy all year long”.
    Nah, makes to much sense, and might lead to increased sales against the prediction of “Inafallible Ann”
    Julius

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