Ford tells Volvo: Kick it up a notch
AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREPettersson scores another winner, Canucks beat Kings“It’s not a change of direction, it’s just building on what they’ve got,” Booth, chairman of Volvo Cars and president of Ford’s European division, told The Detroit News. “We’re looking to take customers from everybody. We’re not going to achieve it by mimicking our competitors. We’re going to achieve it by being what Volvo is – a strong Swedish brand with the values of that society.” Some executives in Sweden worry that by trying to transform Volvo from a near-premium brand into a full-fledged luxury marque Ford will damage Volvo’s pristine image, according to Ford and Volvo sources. But they also know that Volvo could only survive as part of a larger, global car company like Ford. Volvo CEO Frederick Arp declined to be interviewed for this story. At the same time, there is a growing realization in Dearborn that Ford, poised to sell Jaguar and Land Rover, needs a global luxury brand to truly compete on the world stage. CEO Alan Mulally pushed to sell Volvo to raise much-needed cash for Ford’s North American restructuring and narrow his international management team’s focus to fixing Ford itself. But some advisers urged against unloading what is widely seen as one of the most respected brands in the automobile industry today. Ford has also become increasingly dependent on Volvo’s safety technology and engineering prowess, with Volvo platforms now providing the foundation for flagship vehicles like the new Lincoln MKS sedan. Ford Motor Co., after abandoning plans to sell Volvo Car Corp., now wants to move the brand more upmarket in a bid to boost sales and profits. But it is a risky strategy that is making Volvo executives in Sweden jittery because it could alienate traditional buyers. Last month, the day after Ford said it would keep Volvo – at least for now – the chief of Ford’s European operations flew to Sweden to deliver a tough-love message to the folks in Gothenberg. Inside the ultramodern Volvohallen, some 300 of Volvo’s top managers sat uneasily in blond wooden chairs as Lewis Booth ran through a few slides detailing the company’s third-quarter financial results. Once again, Volvo had failed to turn a profit. His message was simple and direct: Volvo must become competitive on costs and revenues and it must do it by becoming a legitimate premium alternative to rivals like Lexus, BMW and Mercedes-Benz – not by reinventing Volvo, but by intensifying its focus on safety, simplicity and Scandinavian design. Also, Wall Street analysts say the timing for a sale is bad. Credit is tight and private equity interest in megadeals is ebbing, evident in the trouble Ford has had unloading its British luxury brands. And Ford’s new contract with the United Auto Workers has eased financial pressure on the automaker. Near-premium to premium Still, Mulally is not making the sort of long-term commitment to keeping Volvo that he has made to Ford’s Japanese affiliate, Mazda Motor Corp. He has agreed that keeping Volvo makes sense for the foreseeable future – but only if Volvo is willing to evolve. “They were kind of defining themselves as near-premium and they had this great thing about safety,” Mulally said in an interview. “But with what they’ve done – what we’ve done with them on the product strategy and their portfolio – now they are premium.” At a dinner during the Los Angles Auto Show, he added: “They have a premium product. It’s really important that we continue to improve their productivity and reduce their cost structure. We can help with that.” Some in Sweden fear that Ford wants to run Volvo from Dearborn, a concern that surfaced when Ford bought Volvo in 1999 and has been a continuing problem. Ford paid $6.45 billion for the brand and has poured billions more into it since then. Volvo has transformed from a brand known for safe-but-ugly cars into one of the most stylish vehicle manufacturers in the world. Volvos are still among the safest cars on the road, but the boxy, utilitarian designs of the past have been replaced by a distinctive Scandinavian style that puts form on an equal footing with function. Peter Horbury, the British designer responsible for creating Volvo’s new look, says the decision to move it upmarket makes sense. He says Ford has an opportunity with Volvo to create an entirely new type of luxury brand. `Turning Swedish’ “BMWs and Mercedes are often sold by peer pressure,” Horbury said. “Volvo is bought by somebody who is self-confident enough to make their own decision. We can build on that. Volvo can be the luxury brand of the future because, in many ways, the world is turning Swedish.” Care for the family, concern for the environment and a design aesthetic that values simplicity over all else are core characteristics of Swedish culture. These same qualities are becoming increasingly important to consumers all over the world, Horbury said, adding that Volvo already embodies these qualities to varying degrees. Booth says Volvo has to take these traits to the next level. “They’re very strong on the environment and they’re very strong on safety. But a lot of other people are aspiring to be where Volvo is, so we can’t just have Volvo relying on its historical strengths,” he said. For Volvo, luxury will be defined by better fit and finish, the use of more premium materials inside the cockpit, more active safety innovations like collision warning and avoidance system that debuted in the new S80 last year and a renewed commitment to green technologies.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!