Volvo Might Build Cars in the U.S.

By Brendan Moore

01.15.2008

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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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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3 Comments

  1. With the current value of the US dollar compared to the Euro, I guess they have no other alternatives. (and the Canadian dollar is also high as well actually, I would have wished to see a Volvo plant back in Canada since they closed the former plant in Darmouth near Halifax in Nova Scotia in the early 1990s).

    Also with Ford plans to made a new global RWD platform, it could be interesting to give one to Volvo as a modern incarnation of the formers 240 and 740/760 models.

  2. It doesn’t seem like Volvo could get their production numbers up high enough to justify a U.S. site. Unlees, they’re going to make all the VOlvos here, and I can’t see that happening.

  3. I think there would be a lot of logic in building certain Volvos side by side in whatever plant Ford builds the 500/Taurus/Sable.

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