No, Volvo's not going to the dogs

These are uncertain times, in the auto industry. And nowhere is that more obvious than at Volvo. The Swedish automaker could soon go on the auction block, a victim of the financial crunch facing its American parent, Ford Motor Co.

Even if Ford opts to keep Volvo in the corporate family, the smaller maker is in the midst of some major changes. Its headquarters operation is moving from California to New Jersey, barely eight years after it left the East Coast to begin with. On the more positive side, Volvo Cars North America is getting ready to launch the most significant new product it has offered in several years, the XC60 crossover.

What else is in store? TheDetroitBureau.com spent time with Doug Speck, the 26-year Ford veteran who was named VCNA’s new CEO, barely a year ago, and pressed him on a variety of topics ranging from the possible sale to safety to the possibility of setting up an assembly operation in the U.S.

Q: You’ve got a pretty important product in the new XC60.

A: This is a product we’ll make no apology for. It will compete with any brand, any product in this segment in the market. In my view, it’s the most competitive product we’ve introduced into the market since XC90.

Q: Where does this fit into the market?

A: This will take over from XC90 as our volume car and will hold that position, probably, until the all-new S60 hits the marketplace in 2010. Then, those two cars will be the core of the Volvo line in North America.

Q: When you’re talking sales, can you give us some volume estimates?

A: It’ll go on sale in March, so we’ll have about 9-1/2 months of volume available this calendar year. We’ll sell in the neighborhood of 10,000 to 15,000 cars, this year and ongoing, we’d expect to be in the range of 15,000 to 20,000.

Q: And if we look at the industry, overall?

A: This is a game of Kings, at the moment, trying to figure out what the industry will look like. In recent months, we’ve been tracking in the 10-million to 10.5 million annual but we expect it’ll go up each quarter and for the entire year, you’ll see an 11.5 million to 12 million average. But there’s a lot of variables that’ll affect that. It’s hard to say how quickly the economic stimulus package will affect consumer confidence. That’s the key. As for Volvo itself, we sold 72,000 and change in 2008. We expect to sell 70,000 to 71,000 this year. But we will sell less fleet this year – because there will be less fleet demand. Retail sales will go up 5 to 6 percent because of XC60.

Q: It hasn’t been easy for Volvo to deal with exchange rates, which really favored the Swedish kroner, for much of the last year.

A: Yes, that was absolutely true until about July of 2008. It was 6 SEK to the dollar, where the norm was 8 to 9. That’s a 30 percent devaluation, which meant a pretty big hit to margins and made it difficult to compete in the marketplace. Since then, we’ve seen a dramatic decline in the kroner and it’s gone from 6 to 8, which has helped our margin and given us the ability to compete for volume. We’re back in the market competing for leasing on small cars.

Q: How has the problems your parent company has had with credit affected you?

A: Ford has consciously said it doesn’t need to borrow money from the federal government to get through the bad times, though if the good times don’t come until the back half of next year, Ford could find itself in need of cash. Now, as to how that translated for Volvo, we really look at every cent and ask ourselves if it’s critical to spend money. It’s affected everything in our structure: the number of employees we have, the number of facilities we have, all to protect the resources that drive revenue. But this, too will end, and we will emerge, so we can’t sacrifice what is the foundation of our business.

Q: Ford recently appointed Steve Odell to run Volvo globally. When I spoke to him, a few months back, he said he wasn’t there to sell it – but hasn’t that changes since then?

A: When Steve was appointed CEO, that was slightly prior to the collapse of the financial markets and there’s been huge changes, since then, in everyone’s decision-making process. Ford has had to evaluate its resources and see if it has enough resources to do each of the four primary brands very well. If we make the decision that we can’t do things well, then we’ll go out and seek a buyer for Volvo. They haven’t finished that review. We’ll know in the next 30 to 60 days.

Q: What would a sale mean?

A: That dance takes time because there are a lot of details involved, like how intertwined Ford is in Volvo’s business. (You) have to look at all those questions, if you’re a suitor and see if you’re actually interested and what you’d be willing to pay. That process takes three to six months of time and energy before they would decide to move forward.

Q: Lets turn to an issue of fundamental importance to Volvo: safety. These days, every carmaker likes to say it stands for safety, so how that affect Volvo?

A: There are a lot of companies that say they stand for safety, but only one does. And however you ask any independent third party, Volvo always comes out on top. Volvo is a brand people trust with their family. Safety is a component, but it’s much more. With XC60, we’re adding the element of design. Take the badge off and ask any customer which design do you like and we’re going to be the one people like. That’s something that will surprise some people.

Q: Clearly, boasting safety alone isn’t enough.

A: The world is so competitive, these days, you have to have technology, safety, design, you have to have to be fun to drive, and you have to deliver value.

Q: There’s been a running discussion about building Volvos in North America. Is the possibility of selling the company affecting that decision?

A: Right now, it’s on hold until the review is done and we determine the relationship between Ford and Volvo. But long-term, we have to be globally competitive, and that means you have to source in a variety of currencies. We’ve been overly dependent on U.S. dollars. When the dollar weakens, your business gets weaker. Over time, we have to diversify our costs in various currencies.

Come back tomorrow for TheDetroitBureau’s First Drive of the new Volvo XC60 crossover.