North America Remains Challenge for Volvo

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New York Int’l Auto Show

NEW YORK – Volvo Car Corp. is coming off a record year in 2007 that saw global sales hit 458,000 units.

The one black spot was North America, where the auto maker’s sales declined for the third straight year. Volvo sold about 106,000 units in the U.S. in 2007, and sales this year appear destined to dip below 100,000 units.

Volvo is looking to the XC60 cross/utility vehicle, displayed at the auto show here, to help prop-up North American sales, CEO Frederik Arp says.

Early last year, Volvo changed its strategy for the market.

“We went for a more high-end mix with more content in cars,” Arp says. Volvo also reduced its support for the entry-level C30 here due to the dollar’s weakness.

That’s in sharp contrast to Europe, where the C30 – especially the diesel version – is a strong and profitable model.

“In North America, our focus is on larger cars,” says Gerry Keaney, senior vice president-of marketing, sales and service, adding that is the reason the C30 isn’t strongly marketed here.

But he says U.S. dealers wanted the small model because it extends Volvo’s brand reach and generates additional showroom traffic.

Arp forecasts North American volume will further decline up to 12% this year.

Volvo, which has not been profitable in North America in recent years, will begin reporting its quarterly financial results at the end of April, opening up its balance sheet to closer scrutiny.

Additionally, Volvo must present parent Ford Motor Co. with a complete plan for improving operations and profitability in the year’s second quarter, Arp says.

Meanwhile, Volvo’s sales in Russia and China were up last year 97% and 35%, respectively, Arp says.

“We’ve been very focused on building up our resources with our dealers in Russia,” he says. “We intend to keep it that way.”

The auto maker will install 20 new dealers in Russia this year in all seven times zones of the vast country, bringing the total number to 45, compared with 54 Volvo dealers in China.

European deliveries increased 10% in 2007 – the highest growth rate of any premium car maker, Arp says, while Spain and France saw significant sales increases. Holland and Belgium also had a growth spurt, he notes.