NEW YORK – With sales jumping 11% over prior year’s first quarter, Volvo Cars of North America LLC is an exception to the nose dive other European importers are experiencing here so far this year.

Victor H. Doolan, president of VCNA, says the auto maker scored all-time sales records in all three markets he heads – the U.S., Canada and Mexico.

XC90 AWD sales penetration is 75%.

"The rate of improvement for the rest of the year won't be as high as the first quarter in a very competitive market," Doolan reveals in an interview here. "Every model has incentives, and competitors are ratcheting up incentives, including the Japanese."

Volvo's 2004 incentives remain on a par with last year's. "While there is excess capacity, there will be a need for incentives in the U.S.," he says.

A down note for VCNA is the strength of the Swedish kronor. "It's not been helpful. But you can't manage a business to a currency," Doolan says, adding that Volvo needs to maintain its brand distinction in this kind of market.

"People think Volvo is not an exciting car," he says. However, he promises that future Volvo models will have better performance at every price point than the BMW brand in North America.

Two additions to the Volvo portfolio Doolan is counting on to further emphasize performance and buzz are the V-8 slated for the hot-selling XC90 SUV early next year and an all-new convertible that will appear in late 2005.

The convertible will be called the C70, despite the fact it will be built on the Ford Focus architecture now used for the S40 and V50.

Doolan, who headed BMW of North America LLC during its skyrocketing volume climb, says all-wheel drive is part of the formula for giving Volvos better performance. The XC90 AWD penetration is 75%, the S60 is 35% and the S80 AWD take rate is in the teens.

He forecasts that 25% of the recently released S40 and V50 models will be sold with AWD. Some 8,000-10,000 of those entry-level models will be incremental to Volvo, despite expectations S60 sales will plummet by 20,000-24,000 units this year.

That will happen because Volvo intends to move S60 models upwards. "The overall result will be higher profits," he says.

Meanwhile, the auto maker is studying the introduction of a new, smaller car. Doolan says Volvo is an elastic brand that can be extended without diluting it, and that the small car would not be a reaction to higher fuel prices.

"Fuel efficiency is not apparent in a market that is distorted by incentives," he says. However, he promises that even the V-8 that Volvo will source from Yamaha Motor Co. Ltd. for the XC90 next year will be fuel-efficient. (See related story: Volvo to Source V-8 From Yamaha)

Hybrids and diesel models also are an option that Volvo actively will pursue. Says Doolan: "We need to look at a fuel strategy of hybrids where diesels are barred and (use) diesels elsewhere."