Filed under: Hirings/Firings/Layoffs, Volvo
Report: Volvo to cut dealer network, U.S. corporate operations
Things at Volvo haven't been going well for some time and the higher-ups at the brand are finally beginning to recognize that sacrifices have to be made. Sales of the Swedish marque have steadily declined since 2004, with an average of 400 new vehicles being sold at each of the 350 Volvo franchises, and Anne Belec, CEO of Volvo's North American sales operations, expects another serious decline – around 10- to 15-percent – in 2008. That means cuts are on the horizon, for both dealers and Volvo's U.S. corporate operations alike.The first move will be to pair down Volvo's Stateside dealer network in an effort to match demand with the sales infrastructure. Volvo intends to make it a voluntary effort, but if dealers don't step up for themselves, Volvo has a "plan in place" to "craft a way out." Read into that whatever you choose.
On the product side of the equation, Volvo will begin to shy away from smaller vehicles, like the S40, V50 and S60 and focus more on its larger lineup, including the S80, XC60 and V70. There was no mention of Volvo's newest entrant into the hatch segment, the C30, but if scaling back compact vehicles is in the cards, that might leave future iterations – including a four-door variant – on the drawing board.
Despite all of this, the one thing that seems to be plaguing Volvo is a lack of brand identity. The Automotive News interview with Belec categorizes Volvo as a "luxury brand," something that Ford has been trying to hype in recent years. "Luxury" is a far cry from Volvo's original identity of manufacturing the world's safest vehicles, and with far more competitive offerings coming from Audi, BMW, Lexus and Mercedes-Benz, it's no wonder the Volvo is floundering considering its lack of focus on what it does best.
[Source: Automotive News – Sub. Req.]
Reader Comments (Page 1 of 2)
Avinash machado 8:08AM (12/24/2007)
Volvo should think about launching a bigger car to compete with established luxury brands. An S-Class or BMW 7-Series sized car could give credentials in the luxury car market.
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geo.stewart 8:18AM (12/24/2007)
everything I've read is that the S40 and S60 were too close in size and that the next gen would replace both.
The S80 needs to move to 7-series size, or does it? how many could they sell against the 7series and S-class. I think it might be a phaeton-like effort.
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BLS 8:24AM (12/24/2007)
I nominate Motorcars Volvo of Bedford, OH. They had 4 volvos on their lot and 3 inside. The salesmen were nice enough but had no information about European Delivery. The real problem is that the C30 I was looking at was not nearly as good as I had hoped. The XC70 my wife was looking at got more of my attention.
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Mondo 8:47AM (12/24/2007)
Volvo really does need to redefine their brand. The problem with the safety idea is that people are realizing that most if not all cars sold today are pretty safe. People also know exactly what to look for when looking for safety. Volvo just doesn't have a significant tech lead in safety anymore and can't differentiate on that.
Trying to compete in the luxury end, especially with other luxo-barges is going tough as well. I don't see a clear niche for Volvo. Maybe pull a Saab and go with quirkiness? A combination of safety, luxury and Swedish quirkiness at a reasonable price (a la Ikea) with a very clear brand message might work.
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Random Task 8:48AM (12/24/2007)
They need to branch out from the soccer mom / effete Northeast liberal set. Will be tough. C30 might be a step in the right direction.
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Paul P. 9:00AM (12/24/2007)
If Ford has a plan, I really don't see it. It seems like they want two luxury brands (Lincoln and Volvo) and Ford/Mercury are to be basically the same thing. Mazda is supposed to be their "fun to drive" brand, but nothing Mazda is turning out right now is really super amazing. After they get rid of LR/Jag that will be all they've got.
I'm a long time Ford fan, but even I'm left scratching my head here. It seems like they're trying to force five brands to be three brands.
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Jt 9:05AM (12/24/2007)
It's a shame because the only Volvos I am interested in right now are the smaller ones. I think the C30, S40 and V50 are perfect, a good replacement for my 5th gen. Accord. Many of my friends who have the S40 or V50 love their cars, and I am particularly fond of their design. The newer Volvos have much more emphasis on luxury than I particularly care for, I just want something simple, Scandinavian, and affordable.
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stang fan 9:05AM (12/24/2007)
Volvo reminds me of the brand Subaru. Subaru gets by in this country with only two models. Volvo wants to be percieved as a luxury brand, but isn't quite there yet, so why dump the smaller models, especially when the market SHOULD be going to smaller vehicles? My take on Volvo's problem(s)? The cars look a lot alike. I mean, for example the XC70 and XC90, and the S60 and S80. When any of these cars passes you on the road, can you really tell which one it was without looking at the trunklid? If Volvo does decide to become the Swedish equivalent of BMW or M-B, their top model should have it's own identity (both styling-wise and powertrain-wise).
Also, if Volvo offered their diesel powered models here in the 'states, they would have something no one else offers and it would give folks a reason to consider the brand....besides the wagons.
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AC 9:09AM (12/24/2007)
I think this problem is unique to Volvo in North America. In Europe i think they have a strong brand and identity, and their cars are much more popular and common here, especially in the home market of Sweden.
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CH 3:34PM (12/24/2007)
AC, you're on the right track.
Sales are down in the USA, but are up significantly globally, because Volvo is racking up double-digit sales increases outside the USA. Volvo's sales growth in Europe (10%) is much bigger than BMW's (4%), Audi's (3%) and Mercedes' (1%).
Volvo Nov YTD Sales
Region 2007 2006 Change in %
Total world 417,710 389,936 + 7.1
Europe 241,732 219,895 + 9.9
USA 96,785 107,288 - 9.8
Other 79,193 62,753 +26.2
Non-USA 320,925 282,648 +13.5
The main issue is that unit margins are very low or negative in the USA because of the weak dollar. So Volvo's focus has been on higher margin sales in other markets. They have also been emphasizing the bigger higher-margin cars in the USA for the same reason. The dollar is expected to drop further, so the above strategy is going into higher gear.
And, Damon, Volvo isn't dropping smaller cars from it's global line-up. The C30, S40 and V50 combined account for nearly 40% of global sales.
Damon Lavrinc 3:38PM (12/24/2007)
AC - I think it would be a bone-headed move as well, but the information presented in the post is what Automotive News is reporting, and that's where that ridiculous notion came from.
Guenther 9:15AM (12/24/2007)
Random Task- if only they could sell a car to every 20th NE Liberal, their problems would be over.
Volvo, just as much as Saab, Subaru and Suzuki have always been niche cars. Aside from being regarded as very safe vehicles (alongside their Swedish brethren) Volvos we regarded by those in the know as mechanically bulletproof, very practical cars. If I want a Luxury car, I'm not going to look at Volvo- sorry. The best thing they could do to get back to having real brand identity, is to embrace the old "they're boxy, but they're good" descriptor. Some nice low pressure turbo 4's and I6's and a good diesel, in something that's styled to resemble the old 240 Wagon. Transition the bigger models to RWD, but only if you can figure out how to keep the car under 2 tons.
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Cornholio 11:08AM (12/24/2007)
My experience with Volvo counters the "mechanically bulletproof" comment. Lots of electrical issues, and WAY too many squeaks and rattles for a high-end car.
The interior design is nice, but they look much better than they drive, IMO.
stealth 2:32PM (12/24/2007)
@ cornholio
how old is your Volvo and what squeaks and rattles?
i've got a 2001 S60 and it feels really solid
minus the fact that my sub woofers rattle everything.
Perry 9:27AM (12/24/2007)
How about bringing the price down?
They are way too expensive for what they offer. The S40 is a great car but I would not spend $40K to get a car the size of a Mazda 3 when I can get a CTS or a SAAB 93 for less.
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AlfaMike 9:26PM (1/01/2008)
Yes I agree completely.
Perhaps they'd sell more cars if they hadn't raised the average selling price 50% over the last five years, greedy scoundrels.
jim 9:38AM (12/24/2007)
One of Volvo's biggest problem is that they are facing erosion in their largest market segments, the aforementioned Yankee liberals and soccer moms. The Yankees being the thrifty (cheap) souls that we are want a vehicle that has a reasonable upfront cost, will be inexpensive to operate and will last a long time. Also being practical the Yankee wants a vehicle that deals with lots of snow.
For the Yank the a Volvo is the 60/70, have you priced one lately? Hardly reasonable. Have you looked at the EPA mileage estimates? They won't be cheap to operate. The Yankee has slipped off to Subaru and he did so long before the 40/50 came to market. If the Yank now goes back to look at 40/50 he finds a smaller car than the Legacy or the Saab 93 and the Volvo is more expensive.
Soccer Moms want safety, well everybody does safety today, plus mini vans and CUVs/SUVs are more practical.
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Throwback 9:50AM (12/24/2007)
As some have mentioned, price is the biggest problem facing Volvo. They have to be positioned as a luxury brand because their cars cost too much. Their bread and butter wagons can now coast as much as 40K. They are straying from their core values, of safety and affordability. On a positive front their interiors are exceptionally well done, rather unique for their segments. I would suggest they make efficiency (diesel, hyrbid, etc) one of their goals.
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MosquitoControl 10:36AM (12/24/2007)
I can't even think of what a single current Volvo looks like.
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AZMike 11:07AM (12/24/2007)
it's hard to imagine that a company with only 350 dealers wants to cut that number, yet increase sales. most of the dealers are concentrated in large metropolitan areas (especially in the northeast), with few in many other parts of the country. which ones will be cut? I'm banking on the ones not in the northeast, so the dealer network will be stretched even thinner.
I got remotely excited about the C30, until I priced one out on the Volvo web site. so much for the $23K bargain; add a few (and I do mean few) of the overpriced options, and it's quickly $26K...and did you want the gray or black interior with that?
it's interesting that the domestics are adding more standard content every year, and the Eurpoean imports are going in the opposite direction.
good examples of this are the C30, BMW 1 series, Audi A3, and the Mercedes-Benz C-class.
low, "teaser" MSRPs, and expensive option packages...the next thing you know, you could have bought the next larger model for less money.
AZMike
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