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Volvo may partner with Ford U.S. on platforms, assembly

Volvo Car Corp. may link product development more closely with Ford Motor Co.'s North American operations, making it possible to build Volvos in Ford's U.S. plants.

Volvo now shares most of its vehicle architectures with Ford of Europe, Jaguar and Land Rover. But that may change, as Jaguar and Land Rover are about to be sold and exchange rate woes undercut Volvo's profitability.

In an interview, Volvo CEO Fredrik Arp said the Swedish company may use more parts from Ford's North American supply base.

"If we are sharing components and platforms, then we don't need a huge site of our own," Arp said. "But if we have our own components and platforms or share with Ford of Europe, then we have to go it alone."

Arp said Ford CEO Alan Mulally's "One Ford" global product development plan creates opportunities for Volvo.

"We have a good relationship with Ford of Europe in sharing engines and transmissions, start/stop engineering and other commodities," Arp said.

"But if One Ford means sharing North American and European platforms, and we had the opportunity, we could move into a North American plant."

Volvo has been hard hit by the weak dollar. In 2002, the exchange rate was 87 cents to the euro. On Friday, Jan. 25, it was $1.47.

BMW and Mercedes have countered currency pressures with U.S. assembly plants. Volkswagen plans to build a U.S. factory. But Volvo still relies on its Swedish and Belgian plants for all models sold in North America.

What's more, Volvo is more dependent on North American sales than all other European brands. North America represents about 30 percent of its volume.

But Volvo does not sell enough of any single model in North America to justify building an assembly plant.

"There are no plans for assembly of Volvos in North America," Ford CFO Don Leclair said last week during an earnings conference call. But he added that Ford is doing a "comprehensive review" of all Volvo operations.

Last year Volvo achieved a 9.8 percent efficiency gain in labor costs in Europe and a $50 million decrease in global warranty costs. But those improvements were wiped out by currency losses, Arp said.

In its fourth-quarter earnings statement, Ford wrote down Volvo's goodwill value by $2.4 billion. Volvo recorded a loss for the year, but Ford declined to say how much.

"We are doing good things," Arp said. "Customers are enjoying our cars. We're just not making any money."

You can reach Mark Rechtin at mrechtin@crain.com

Tags: Ford

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