Volvo has ambitious goals for U.S. comeback plan

Article by Christian Andrei, on May 20, 2015

Volvo is making a huge investment -- $500 million to be exact -- in the U.S. to kick off its highly ambitious comeback. The plant that the automaker will construct has an annual capacity of 100,000 vehicles – quite higher than its sales last year of 56,366 vehicles in the U.S. Five years ago, Volvo was acquired from Ford Motor by Chinese investors.

It’s about time that Volvo launches its comeback plan, which includes the plant in South Carolina, and a radical new powertrain and vehicle architecture strategy. CEO of Volvo Cars of North America, Lex Kerssemakers, said that the brand has reinvented itself and so it makes sense now to “go on the attack” once more in the U.S.

There would always be skeptics to lofty plans such as this but 20 years ago, this strategy of constructing a huge U.S. plant to meet future sales growth has worked so well for Mercedes-Benz and BMW. In the 1990s, these two luxury automakers invested in U.S. production and grew from being low-volume importers.

Kerssemakers, who started overseeing North American operations in January, gave assurances that Volvo’s U.S. dealerships will soon require a bigger workforce to manage the arrival of new models and technologies that will drive the brand for the next decade. At last week’s Volvo Ocean Race, Kerssemakers said that he hopes to achieve 100,000 units of sales “as quickly as possible.”

He admitted that Volvo has invested a total of $11 billion in new products and infrastructure in the last five years. He said that he knows exactly what will come next because he used to be the head of product. He shared for the upcoming four years, Volvo will reveal 14 new nameplates that are all “tailor-made” for the U.S. market.

Later this month, the automaker will roll out its redesigned full-size XC90 crossover -- the first model of a new global design approach that Volvo refers to as Scalable Product Architecture. In this approach, component systems and chassis platforms will be shared to cut costs and so that the development of vehicles will be faster.

In addition, the automaker has launched “Drive-E” – a new global engine strategy that will replace eight engine families of four-, six- and eight-cylinder engines with one platform of turbocharged, high-output four-cylinder engines for the lineup of models on the new architecture. One of the future products is an executive-class S90 sedan that rivals the Mercedes-Benz E class.

There’s also a V90 wagon to go with it. In development now is a three-cylinder engine for small cars to replace the compact V40. All of Volvo’s models will have a hybrid option. Kerssemakers said that no decision has been made yet on which new products will be made in South Carolina. However, he assures that more than one model will be built in the new plant.

The plant will start production in the later part of 2018. It can be recalled in 1992, BMW reported U.S. sales of lower than 66,000 cars but its new plant in South Carolina had the capacity of rolling out 78,000 units annually. In 2014, BMW posted sales of 339,738 vehicles in the U.S. The plant has since gone through many expansions just to accommodate the demand.

In fact, it’s now the largest plant owned by BMW. Mercedes-Benz used the same strategy. It built an oversized factory in Vance, Ala. From selling lower than 62,000 units in 1993 in the U.S., the brand has sold 356,136 units last year.

For a time, Volvo was at the top of U.S. sales among other European premium brands. In recent years, Lexus, Acura, Infiniti and Audi have all built assembly lines in North America. BMW and Mercedes are now even working to add more plants in the country. Amid all the buzz in the industry, Volvo’s officials are optimistic that it will be the brand’s turn now to succeed.

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