Volvo under pressure to boost Ford group

The pressure's on Volvo Car.

As the volume leader among the luxury marques that make up Ford's Premier Automotive Group (PAG), much of the onus is on Volvo to carry the ball if the automaker's ultimate annual worldwide sales target of 1 million Lincolns, Volvos, Jaguars, Aston Martins and Land Rovers is to be met.

"Since we are the biggest brand within PAG, the success of PAG is very much dependent on the success of Volvo," says Volvo Car Chief Executive Hans-Olov Olsson.

And because Ford currently is struggling through its recent management shakeup, ongoing quality problems and rising red ink, Ford's future very well may be riding on how close PAG comes to hitting Wall Street estimates it will add a pre-tax $2.5 billion annually to Ford's bottom line by 2005.

Proof of Volvo's pivotal role at Ford: Olsson says Ford's recently announced restructuring plan in North America -- involving as many as 8,000 white collar job cuts and possibly including plant closings -- won't put a crimp in Volvo's new product program spending.

"With our ambition to develop Volvo into a premium brand, we cannot compromise in product development," he says. "Ford understands what's needed."

Volvo's strategy calls for broadening the lineup at both the top and bottom ends, in part by counterattacking the sport/utility market with a widening portfolio of crossover vehicles along the lines of Volvo's current Cross Country model. The goal is to take sales from about 420,000 cars annually today to 600,000 in five years or so.

Included in that will be the successor to the top-of-the-line S80, with which Volvo will try to carve out new territory in the premium car market with innovative styling, utility and features, Olsson hints. "We are trying to do something different," he says of the next S80, still a few years away.

Coming sooner is a production version of the 300-hp, all-wheel-drive Performance Concept Car II, unveiled at the Frankfurt auto show in September, that's expected to be called the V90 when it bows next year.

And although Olsson doesn't confirm reports Volvo will develop a car smaller than its existing S40/V40 line, he does reveal there are plans to broaden its coverage at the entry-level end of the market. A new-generation of the S40/V40 that will share a platform with the Ford Focus and Mazda 323 is due in 2003. A crossover dubbed the V30, also drawn from the Focus platform, is possible for around 2004. There's also significant investment in plants and tooling planned, in all about $500 million earmarked to get the new products launched.

It cost Ford $6 billion to acquire Volvo and the payoff appears years off, if it comes at all. But analysts say PAG is Ford's key to the future, and Volvo the volume lynchpin for PAG. And that means the pressure to perform is definitely on in Sweden.

"The only thing (Ford asks) us to do is deliver," says Olsson. "So far we are."