Volvo will not move its U.S. headquarters to South Carolina, a high-ranking executive says.
That executive added Volvo will hold down its costs for its $500 million S.C. plant — expected eventually to employ 4,000 — by omitting an expensive metal-stamping operation from the Berkeley County facility.
Instead, Volvo will assemble parts, made overseas, for a vehicle to be built on a new platform, which will accommodate several different models. The S.C. vehicle could be a sports-utility vehicle.
Contrary to speculation since the plant announcement earlier this month, Volvo has no plans to move its U.S. headquarters to South Carolina, said Lex Kerssemakers, senior vice president of Volvo Americas. In fact, he added, Volvo Cars of North America is “upgrading our (headquarters) facilities” in Rockleigh, N.J.
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The key reason behind the Volvo’s daring Lowcountry gambit is the company’s desire to revive its place in the U.S. car market, said Kerssemakers.
“There were rumors about a year and a half ago that Volvo would actually leave the U.S. market,” Kerssemakers acknowledged. “That was never true. But I understood the rumors.”
In part that was because Volvo’s U.S. sales were flagging. Those sales dropped by 8 percent last year from 2013, to just 56,000 vehicles, before the decline leveled off early this year.
“We decided that we will focus on the United States or we are not a global company,” the executive said. “It’s time to go back.”
Volvo considered a site in Mexico, Kerssemakers said. But, he added, “We wanted to make a statement to the United States” by putting the plant on American soil, demonstrating the company is “totally committed to the U.S.”
Announcement of the S.C. plant, expected to build 100,000 vehicles a year starting in 2018, is “a very clear signal to the U.S. market,” Kerssemakers said.
“We have been in the U.S. for 60 years,” he said. “We wanted to show a commitment that we’re going to stay here for another 60 years. And that’s normally the commitment that you make with a factory ... about 60 years.”
Revival based on new products
Volvo’s U.S. brand presence and sales faded in the United States after the Great Recession.
After Ford sold Volvo to Zhejiang Geely Holdings, a Chinese company, in 2010, for example, Volvo still was using Ford mechanical platforms and model-specific “top hats,” Kerssemakers noted. “So, for the last five years, we've had to work very hard to develop new platforms and a new engine family.”
With little in the way of jazzy new products to sell, Volvo’s marketing and brand presence in America simply faded from view.
It’s not that Volvo can’t create excitement.
The performance version of its 2015 S60 Polestar sport-utility vehicle — in a radiant blue color and with a 345-horsepower engine — is a $60,000 statement that has been turning the heads of some U.S. reviewers, for instance. Meanwhile, Volvo announced earlier this year that it planned to ship 1,500 to 2,000 Chinese-made S60s to the United States this year.
But Volvo largely has lacked frequent, consistent “product news” for years.
“Now, we are entering the next phase where we need to start leveraging the products we created the last five years,” Kerssemakers said.
That “leveraging” will start with the launch later this year of an all-new XC-90 mid-sized SUV, aimed directly at a sweet spot in the U.S. market. The vehicle will be the first to stem from the company’s new “modular” vehicle platform called Scalable Product Architecture (SPA), intended to give Volvo flexibility to introduce new models from essentially a single basic design.
The as-yet-unannounced model that Volvo will begin building in South Carolina will be a SPA design, as will all new vehicles that the automaker plans to introduce over the next few years as it tries to regain traction in the United States. The specific first model rolling off the line in Berkeley County “will be the one that will be in highest demand” and could be a sport-utility vehicle, Kerssemakers said.
“Every revival in the auto industry is based on a product lineup,” the executive said. “We are prepared to launch 14 new nameplates in the next four to five years ... We have invested $11 billion in our product portfolio, our factories in China and so on over the last five years. And now with the XC-90 and other products coming, it’s time for us to leverage.”
Unionization a ‘non-issue’
Kerssemakers also said:
▪ The $500 million construction price for Volvo’s planned Berkeley plant is feasible because the automaker won’t build a metal-stamping facility on the site. Instead, it will import fenders and other such parts from Europe. Foreign automakers entering the U.S. typically include stamping capability in their new facilities, helping push the price tag to $1 billion and more.
▪ Potential unionization of employees at a plant in South Carolina, one of America’s most anti-union outposts, is “a non-issue. We have great experience with unions where we come from. But it hasn’t been a parameter in our decision process.”
▪ Volvo’s plan for its S.C. plant “is a signal to our dealers.” The brand’s core of about 300 U.S. dealers, whose numbers have remained pretty stable for a few years, “haven't been willing to invest an amount of money in their (dealerships) that would be good for us because they are business people, after all, and they don't see the sales volumes, so they haven’t invested. Now, they see we are together on this journey, and they will start to invest more in their premises.”
Volvo still is working through much of its strategy for reviving its U.S. brand.
The obstacles include the difficulty of persuading U.S. consumers that a brand, once out of sight and out of mind, can mount a return engagement. Fiat Chrysler, for instance, is having trouble regaining a U.S. niche for its Alfa Romeo brand after decades of absence.
It also faces tougher competitors.
While Volvo has regrouped, nearly every one of its competitors in the U.S. market is better off today than it was a few years ago in terms of product lineup and brand vibrancy, including Audi, Acura and Lincoln. Meanwhile, new competitors, including Hyundai, have sneaked into the near-luxury space.