Volvo Prepares for Launch of New Product, Platform, Engines

PARIS – Volvo still is on product run-out from its days of ownership by Ford, with two new versions of the V40 being shown at the auto show here. The base model was launched in March at the Geneva auto show.

The V40 Cross Country is a beefy wagon with an impeccable interior, and the V40 R-Design is meant to appeal to fans of performance. As with the V40, neither model will be exported to the U.S.

“For one thing, there is no market for a 5-door premium car in the segment,” says Doug Speck, vice president-marketing. For another, the exchange rate between the dollar and the Swedish kroner does not encourage exports in that price range. The V40 Cross Country will sell for €27,200 ($35,000) in France.

The end of 2014 will see the arrival of the first car conceived and engineered under Chinese auto maker ZhejiangGeely’s ownership, the replacement for the XC90 cross/utility vehicle on Volvo’s new SPA platform.

The architecture will be used for all vehicles in the V60 and V90 families, Chief Financial Officer Jan Gurander says. Ultimately, it will account for about 75% of the 800,000 vehicles the brand expects to be making once its China factories are running at full capacity along with those in Sweden and Ghent, Belgium.

“We are a small company, so we have to be clever” to achieve higher volumes of components, says Gurander.

In addition to the SPA platform, Volvo next year will introduce a 2.0L 4-cyl. engine that will be available in both gasoline and diesel versions. Some 30% of parts are common, with the mills sharing the same stroke and bore.

Gurander says Volvo is pursuing two financial strategies to prepare for the arrival of the SPA platform. On the revenue side, it’s trying to move the brand upscale so that it is ready at the end of 2014 for the new architecture. On the cost side, the auto maker is pressing suppliers for a 20% price reduction over four years.

Volvo is paying more than German premium car makers for the same parts, he says.

After Ford sold Volvo to Geely two years ago, the Swedish auto maker had to develop many functions in-house to handle payroll, legal, tax expertise and banking relationships that under Ford were part of the corporate function. It took a year just to separate the information-technology functions, Gurander says.

“We have a unique position in the auto industry,” says Speck. “We are an independent European subsidiary of a Chinese company.

“It’s a big cultural change” from Ford, he adds, where many of the U.S. auto maker’s systems were used across all activities and subsidiaries, creating some bureaucracy. Decision-making is faster now.

Volvo is investing a total of $11 billion in its new products and factories, says Gurander, with some of the money coming from cash flow, some from banks and some, especially in China, from the stockholder Geely.

The auto maker launched its sales network in China two years ago and in 2011 sold 50,000 vehicles there. The first Volvo factory will start production next year.

Gurander says Volvo is on track with the plan laid out two years ago with Geely, financially and otherwise.

U.S. customers will see the results of some of Volvo’s rebuilding efforts next year, when a massive refresh of most products takes place, including the arrival of the new 2.0L engine.

The gasoline version will be tuned with technology to make from 150 hp to 300 hp, while the range on the diesel will be somewhat less.

Volvo in Europe has started promoting its plug-in diesel hybrid XC90, but the U.S. won’t see the equivalent until the auto maker develops a gasoline hybrid, Speck says.