Volvo Won’t Vanish in Ford’s Shadow, Arp Promises

Volvo’s destiny under the Blue Oval was sealed when Ford CEO Alan Mulally confirmed the Swedish brand will not be sold along with its Premier Automotive Group stablemates, Jaguar and Land Rover.

LOS ANGELES – Volvo Cars CEO Frederik Arp says the Sweden-based auto maker has staked out its territory within the “one Ford” business model championed by parent Ford Motor Co.

“We’ll continue to extract synergies in component sharing and commodity sharing and continue to seek scale of economies in technology selection and development of new technologies,” Arp tells Ward’s.

“But when it comes to something that is really linked to the DNA of Volvo and going more premium, that is something we will do on our own.”

Volvo’s destiny under the Blue Oval was sealed earlier this month when Ford CEO Alan Mulally, on a mission to leverage global assets, confirmed the Swedish brand will not be sold off like its Premier Automotive Group stablemates, Jaguar and Land Rover.

In fact, Mulally wants Volvo to move up-market. How far?

“We think we will be, and already are, a good premium manufacturer and brand, but don’t aspire to be luxury in the sense we will be up there competing with the Bentleys,” Arp says. “Our key competitors are BMW, Audi, Mercedes-Benz and Lexus (brands).”

He points to the new ’08 V70 as an example of Volvo’s upscale progress, describing the sports wagon as a “significant step forward in terms of luxury our premium-ness.”

While optimistic, Arp admits Volvo faces headwinds – not the least of which include the ongoing weak U.S. dollar, which drastically has reduced the profit margin on vehicles the auto maker sells in North America. But he is not discouraged, noting pricing pressure works in the customer’s favor.

“In this country right now, cars are under-priced vs. the rest of the world,” he says. “The dollar has basically declined by 30%-70% the last two years, and (there has) been no adjustment in pricing for that.”

Building Volvos in the U.S. is being considered, Arp says, but currently there are no plans to do so.

Despite reporting a third-quarter loss, he says Volvo is on track to record an 8% gain in global sales this year.

As with most other auto makers, Volvo wants to raise its profile in emerging markets such as China and Russia. There are “many opportunities for us, and we continue to explore them bit by bit,” Arp says.

“It takes time to get into (new) markets. In China, for instance, we had virtually nothing five years ago. In Russia, we had very little five years ago. Today, Russia is a market of more than 20,000 (sales) annually and China (is) around 15,000.”

Volvo is watching India, but Arp says growth in the premium sector there has been sluggish.

When Jaguar and Land Rover are jettisoned – a deal expected early next year – Volvo will make agreements with the new owners to determine how the three auto makers will maintain the level of component sharing they now enjoy.

Arp says Volvo will negotiate “create necessary agreements.”

Meanwhile, Volvo is intent on maintaining its leadership role in automotive safety, even as more auto makers are cranking up efforts to make their vehicles safer.

“We work very hard to ensure that for every new nameplate we launch, or revised product we launch, we have a world first or something that is really important to our customers in terms of safety,” Arp says. “(Safety) continues to be the leading edge for our company.”

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