Volvo To Retain Ties With Land Rover, Jaguar
By Byron Pope WardsAuto.com, Jan 18, 2008 9:15 AM

DETROIT – Volvo Cars will maintain an “arm’s length” relationship with Premier Automotive Group stablemates Jaguar Cars and Land Rover after the sale of the two iconic British marques, the Swedish auto maker’s top executive says.

The post-sale relationship between the three brands has been “solved conceptually,” President and CEO Fredrik Arp tells Ward’s at the North American International Auto Show here.

The “buying and selling and sharing of certain development work and certain components will continue (with Jaguar and Land Rover),” he says. “But more at an arm’s length contractual level.”

Ford Motor Co. is expected to sell Jaguar and Land Rover by the end of the first quarter. The auto maker has been in focused negotiations with India’s Tata Motors Ltd. to sell the brands, which will mark the dissolution of the Premier Automotive Group, a stable of luxury marques Ford assembled – largely through acquisitions – in 2000.

At the time, PAG consisted of Jaguar, Land Rover, Volvo, Aston Martin Lagonda Ltd. and Lincoln.

Arp says the demise of PAG and a recent decree for Volvo to act more as a standalone company will benefit the Swedish auto maker.

Ford and Volvo “will continue to develop our own top hats,” Arp says, as well as their own “engineering requirements when it comes to everything linked to premium-ness and the uniqueness of making a Volvo a Volvo.”

Volvo CEO Fredrik Arp aims to reduce number of U.S. dealers.

The two auto makers will continue to share expensive technologies and leverage economies of scale for purchasing.

Volvo will focus on increasing its profitability in the U.S., its largest market, Arp says, adding the auto maker has been hurt by the decline in the U.S. dollar.

“We are rolling out a program to reduce our dealer base,” he says, noting the goal is to reduce Volvo’s approximately 350 U.S. dealers by 20%.

“I think (our dealers) have a good understanding and respect that it’s difficult for Volvo to be responsible for the (U.S.) dollar decline,” he says. “But as a consequence of that, we have to make some adjustments in order to make money.”

Volvo would consider relocating its manufacturing operations to the U.S. if the weakness of the dollar continues, Arp says, noting a likely scenario would see the brand utilizing some of Ford’s excess domestic capacity.

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While keeping a close eye on the U.S., Volvo also will be turning its attention to key emerging markets this year, including China, where the brand has seen growth of 50%-100% on a year-over-year basis.

Other flourishing markets for the auto maker include Eastern Europe and South America – Brazil, in particular.

“But China and Russia are our main emerging markets,” Arp says.

Meanwhile, Volvo plans to introduce diesel engines in the U.S., although Arp declines to reveal a timeframe.

bpope@wardsauto.com