Volvo's profitablity waning
In Ford's Premier Auto Group (PAG) one manufacturer has stood alone, sustaining a high degree of prosperity in the past. However, in the last two years, Volvo has seen a decline in its new vehicle sales and judging by figures from the first half of 2006, those numbers seem to be dwindling even more.
As far as dollars and cents are concerned, PAG condenses all of its manufacturers' earnings into one lump, so the ability to parse out who is losing what is a task reserved for only the geekiest of accounting wizards. What we do know is that PAG, as a whole, had broken even last year, while the second quarter of 2006 shows a loss of $162 million. Not massive, but worrisome.
Analysts are pointing to a number of factors leading to Volvo's decline and at the forefront of those issues is an aging product line. Thankfully, Volvo is addressing this issue head-on, granting the S80 with a thoughtful redesign, as well as bringing the new C70 into the marketplace. The entrance of the C30 hatchback, which fills a niche previously untouched by the Swedish manufacturer, may give Volvo the added boost it needs, especially if it is well received here in the States in 2008.
[Source: Automotive News - sub required]
Reader Comments (Page 1 of 2)
James 5:14PM (7/31/2006)
The biggest problem with the Volvo lineup is going to be the weak dollar, coupled with the fact that they are built in Sweden, driving up the price and not having the name recognition of BMW or Mercedes in the Luxury market.
It's not like they can cut out any of the expensive "real-world" safety features and still call themselevs a Volvo either.
Also not having an S40R is just dumb.
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G 5:36PM (7/31/2006)
That Swedish hatchback will have little traction Stateside. The new S80 looks a bit too much like the old S80 for anyone but the Volvo-isti to know the difference. The V50 has suffered due to quality problems and the V70 looks like an ugly boat. Frankly, the only attractive Volvo is the S40 and C70.
http://www.automobilesdeluxe.blogspot.com
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WRC05 5:56PM (7/31/2006)
cut loose from Ford
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s 6:40PM (7/31/2006)
The problem with Volvo is not a weak dollar it's their line-up!
S80, S60 are out dated. They need more than a tweak. Their becoming like Saab. Two Swedish who need more than a facelift. Hmmm could it be that their parents haven't any money???
Volvo C70 will only help them gain very marginal in sales. It's a coupe!!! Coupes do not sell like hot cakes. Especially ones that start off around 38K and climb into the 40's!
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Bill 6:50PM (7/31/2006)
Maybe Volvo should go retro and bring back the 240 series?
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naggs 6:57PM (7/31/2006)
"However, in the last two years, Volvo has seen a decline in its new vehicle sales "
the drop is sales seem to perfectly coincide with the lack of new product over the last 2 or 3 years. they have another wave of models over the next few months, i would expect things to pick up.
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donald douglas 7:42PM (7/31/2006)
well since there part of the ford family they have no clue as to why sales are declining, well let me tell ya volvo its cause your whole product line is identical, not similar but identical !!!!!!!
from 150 feet away i cannot tell the difference between the 80 60 40 front or rear.... and now we wait 6 years for a new s80 and guess what its freaking identical to the one that came out years ago ! get a clue !!!! the s-40 looked old when it came out cause it looked identical to the 4 year old s-80, and gee the s-60 is so different from the s-80 (not) !!! it actually looked identical to the 2 year old s80 when the s60 came out ! how about some inovation, style, substance, creativity ???
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John 8:33PM (7/31/2006)
I don't like the face of Volvo cars. Period.
I have nothing else against them, except the trademark front and rear styling of Volvo cars.
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shreddin 9:48PM (7/31/2006)
I think on top of being stuck with Ford and having a boring and old car lineup, Volvo has also lost another big selling point. In the past Volvo has played the "safety" card, claiming to make the safest cars on the road. I don't know if thats the case anymore; it sure doesn't seem to me that Volvo is way ahead of the competition in safety. Almost every luxury brand seems to make midsize and large sedans with 5 star / Good ratings front, side and rear these days. DCS/ASC has also become standard - I don't see where the Volvo safety is better than BMW for example. If anything one might claim that BMWs sporty nature gives it better active safety.
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emulous1974 11:06PM (7/31/2006)
I agree, that what Volvo needs to do to keep the interest of the next generation of Volvo buyers is not just the C30 but as mentioned an S40R/V50R. With the engine of the t-5 S40/V50 in the Euro Focus ST, how is driving a Volvo t-5 anything great when you can get it in a Ford. Yes I know it's a C-1 platform car, but Mazda didn't slap the t-5 in the Mazdaspeed3. Volvo already has the majority of the development and production work done with the S60R/V70R, so why not just lay it all in the S40/V50. I considered the V50 when looking for an awd manual tranny wagon, but the t-5 power just didn't impress, if it was 300HP from the S60R/V70R in there, I would of been happy to pay 35-37K for that, instead I got a much better bang for the buck in an '05 Legacy GT Wagon. (too bad Subaru doesn't offer a manual tranny in it anymore).
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yedkar 12:41AM (8/01/2006)
#7: "how about some inovation, style, substance, creativity ???"
How about pulling your head out of the sand for a change? Can you tell me when Volvo has been known for its innovation, style, substance or creativity? Theve built cars with better 90 degree angles than T squares. Uninspiring boxes, to say the least.
With that historical perspective in mind, I find that Volvo's current lineup is actually half decent. True, Volvo's may not demand as much attention as Cadillacs or BMWs, but thats how the Volvo clientele likes it. Rappers dont buy Volvos. Simple, upwardly mobile individuals who like simple, elegant vehicles buy Volvo's. Thats just how its customer base is. Within these parameters, Volvo has done a great job with the S40/60/80. And while I may not entirely agree with parts of Volvo's design language (the extensively raked rear on the C30 or the shoulders on the sedans) they are nonetheless a marked improvement over previous Volvos.
With this in mind, Volvo should attempt to diversify is lineup by including more, sporty vehicles to try to change its image as being a staid and dull car maker, a la Lincoln. Bringing in the S40R would be a good step forward.
And a quick question:
Will Volvo North America offer the C30 with the 2.5L 5 cylinder in the S40 T5 (same mill offered in the Ford Focus ST)? That would both, satiate Focus ST buyers, and bring a level of sportiness to the Volvo lineup?
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Steven T. 1:05AM (8/01/2006)
Volvo's underlying problem isn't a lack of fresh product -- it's that the brand no longer stands for much. I disagree that diversification will help. To the contrary.
Why on earth did Ford go on a buying spree if its new brands are going to compete with each other? Volvo needs to stay out of Jaguar's and Mazda's territory. Like it or not, that means offering products that are a bit more "staid."
Heck, there's a market for that -- as long as Volvo delivers superior engineering, quality of manufacture, and reliability. If it can't do that, then it will have to fall back on the crack cocaine of rapid restylings.
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justme 1:13AM (8/01/2006)
Another great marque destroyed by Ford's cynical and short-sighted marketing machine.
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Jeff R. 2:18AM (8/01/2006)
#5-
An interesting idea for sure- the 240 series wasn't one of my favorite cars, but nonetheless it had a certain charm and was instantly recognizable as a Volvo. I personally liked the 700/800/900-series models, they were boxy but still had a very attractive design and again were instantly recognizable as Volvos. I think Volvo's problem is that since the Ford takeover, Ford made Volvos look very insignificant and much like Fords...
#12-
I agree with you also, Ford did destroy Volvo- but due to more than just short-sighted marketing. Ford also removed Volvo's identity, uniqueness, and special designs that were like no one else's. That's why today's Volvos look much like generic Ford models, and that obviously ruins the prestige of the brand. It's really a shame that Ford would like such a great make of vehicle languish like this.
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Cameron Ing 4:56AM (8/01/2006)
Given how bland and boring Volvo's current range is, I'm not surprised. They're bland to look at and even more bland to drive. They need to make their cars look as though they're entertaining to drive and then back that up with lithe, agile dynamics. Mazda and BMW are prime examples of manufacturers that are currently doing this, and are reaping the sales benefits.
If anyone can make Volvos involving and dynamic though, it's Ford. Should this be the case, making perception catch up to reality will be yet another challenge entirely.
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G. Snyder 12:41PM (8/01/2006)
"Can you tell me when Volvo has been known for its innovation, style, substance or creativity? Theve built cars with better 90 degree angles than T squares. Uninspiring boxes, to say the least."
THis is an idiot statement. Yest, they were not known for styling, but they were for a very long time known as innovators particularly in the area of safety. Do you know who patented the 3 point safety belt for auto use? The Volvo 240 was used as the benchmark for the NHTSA for many many years - well into its lifespan. Side impact bags? Yep - Volvo was one of the first to use those in the early 90s in the 850. Heck, Volvo was using disc brakes on all four corners standard starting in the early 70's. Volvo was one of the early masters of turbo-charging (along with its swedish counterpart SAAB).
I guess styling is what is all important.
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Marvin Truebenbach 2:39PM (8/01/2006)
My wife has a 2006 Volvo S40 AWD and we both love it. I will buy the new S80 for myself but want the diesel model which Volvo has not yet committed to USA market.Does anyone know if Volvo will offer the diesel in 2007?
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James 4:15PM (8/03/2006)
I am also very disappointed in Ford for destroying Volvo.
While I hear demand for the new C70 is high, Volvo really doesn't have anything else going for it. The popular XC90's replacement won't be out for several more years, and the new S80 is a total disappointment and far too late as far as I'm concerned.
While I think the new C30 is nothing short of beautiful, especially with the 4 bucket seats, I really don't see it being a big hit stateside.
Back to the drawing board, Volvo! Sad.
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Carsten Nielsen 5:04PM (8/04/2006)
First c30 will not be produced in Sweden but Belgium, like S40/V50. I don´t agree that Ford has destroyed Volvo. I believe they make their own designs. I also believe that they even today are known for high safety. I like the new C30 I will possible buy one
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CH 11:07PM (8/05/2006)
All this doom-and-gloom because Volvo had their first ever quarterly loss since being acquired by Ford in 1999???
Here's the full Automotive News article via AutoWeek:
http://autoweek.com/apps/pbcs.dll/article?AID=/20060801/FREE/60731003/1041/PROMOBLOG01
Some key points:
- Volvo has consistently produced $750 million to $1 billion operating profits each year since being acquired by Ford.
- Volvo is still in the black for 2006 due to a strong first quarter.
- The downturn in sales and profits is just a bump in the road due to the weak dollar and the transistion from an aging line-up to new models. It comes in the wake of record sales in 2003 and 2004. Since then, all of Volvo's major competitors have released new models.
- Sales of the new S80 have just started in Europe, and the C70 is still ramping up after essentially a year's absence. The C30 is just a few months away.
- The new C70, S80 and C30 will be followed shortly by two additional new models. Plus there is at least one more in the pipeline.
- The C30 is designed primarily for Europe, and its success doesn't hinge on the US market.
The Ford/Volvo marriage is one of the best in the automotive industry. Volvo has received much needed investment and economies of scale from Ford and returned profits and technology, while retaining its distinctive brand identity. The notion that Ford has destroyed Volvo is ludicrous.
Short-term setbacks are part of the normal business cycle. For example, Acura sales are down 8% following a record year in 2005.
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