Volvo Might Build Cars in the U.S.
By Brendan Moore
Volvo’s CEO, Fredrik Arp, said yesterday that the company is considering a production facility in the U.S. He said the weak dollar has hurt Volvo in the recent past, and that producing Volvos in the United States is a real possibility. The company is currently conducting a comprehensive review of it’s business worldwide.
According to a Reuters article, Arp was quoted as saying, “The North American market continues to be difficult for Volvo because of the dollar decline.”
Arp said one way to counter the falling value of the U.S. dollar was to produce vehicles locally.
“It’s an alternative,” Arp said. “We are into analytical phase now. We are studying (the option).”
Ford’s production facilities in North America are available to Volvo, Arp said, adding that he expects the study to conclude in the second quarter. As a result of decling sales, Ford of North America has a great deal of idle production capacity.
Volvo has easily been the most successful member of Ford’s stable of foreign brands. But its profitability has declined in recent years. Overall, Volvo’s global sales jumped up a healthy 7.1 percent in 2007 to an all-time record of 458,323 units. But the company’s projected profits from their volume increases were almost completely wiped out by the plummeting dollar.
Also according to the article in Reuters, Arp said Volvo was “continuously close to break even level.”
Arp said the 40 percent decline in the value of dollar in the last three years had cost the brand $1 billion in earnings over that period.
“We haven’t moved the needle in profitability,” he added.
Arp said the review of Volvo’s business will be completed in the second quarter will also look at the brand’s product lineup, pricing techniques, brand development and other issues. Those issues also cover Volvo’s plan to dramatically reduce its dealer network in the United States.
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