Volvo's goal: Conquest more luxury-vehicle buyers
AUTOMOTIVE NEWS: What does Volvo want to be?
JOHN MALONEY: For a period of time there was a question: Is Volvo going to play in the top luxury level? Is it going to be a premium brand? We have made that decision globally that our mission is to play at the top level over time, by the end of the decade in 2020.
John Maloney, 50, was Volvo's top U.S. marketing executive before being named CEO of Volvo Cars of North America in January. He takes the helm as Volvo adapts to its new Chinese owner, Zhejiang Geely Holding Group, and prepares to move further upscale.
The first vehicle designed under Geely's stewardship is the replacement for the XC90 crossover due in late 2014. Until then, Volvo is focusing on the mid-sized S60 sedan and XC60 crossover.
Maloney said the captive finance arm that Volvo Cars of North America is launching is "the biggest and most important thing we will do this year besides hitting our sales numbers."
He spoke to Staff Reporter Diana T. Kurylko in April at Volvo's U.S. headquarters in Rockleigh, N.J.
Q: How will Volvo do in the United States in 2012?
A: We will sell 73,000 cars this year, up a little less than 10 percent over last year.
When will you break 100,000 again?
After 2015. That is the year that we will add the new XC90. It goes into production in late 2014, but really the first full market year that it will impact will be 2015. It is a critical third player for us.
The S60 and the XC60 are the volume vehicles for us. XC90 is still the third vehicle that performs quite well. But with the new product, we would expect a fairly significant leap.
Do you expect more competition from Japanese companies this year?
Yes, we expect a better inventory supply from the luxury Japanese that we compete against. We're competing quite well; we are not going to make any changes.
If the Japanese companies boost incentives, will Volvo?
I do not foresee us stepping it up in the incentive game. Today we are the low spender in the luxury-car business, spending less than $2,000 a unit. We will manage our business the best way we can. We are not going to react to others' incentive spending.
Volvo Car Corp. CEO Stefan Jacoby has mentioned the possibility of a U.S. plant. How would that help you?
The most important thing for us globally is to have the right manufacturing footprint. That will be decided out of Sweden. It is a clear discussion point. Would North American production benefit us from a currency standpoint? Absolutely, most of the other luxuries are either in North American or considering it. It is the same issues that face every brand.
How has Geely's ownership changed Volvo?
We went through a period of uncertainly in 2009 and part of 2010 -- who would we be with and who would our owner be? Ford had its own problems.
On Aug. 1, 2010, we had some certainty and it has given the company stability. We changed our global leadership. You have a team of executives at Volvo Car Corp. around the world that are looking forward and saying what steps you have to take by 2020.
Do the Chinese understand the U.S. market?
Yes, but our direction comes from Sweden. I am not sure the luxury market here and in China are that different.
You added a captive finance arm?
This goes to Volvo having stability and knowing where we want to be in the long haul. Part of that is a very important foundational issue for any car company and dealer body -- having a very efficient captive finance company. We did not have that since we departed from Ford.
We had a great bank relationship with U.S. Bank but our ambition was always, if we could, to get back in the captive finance business. There are only three ways a car company makes income: selling cars, selling parts and finance.
It is important from a profit standpoint and it is equally important from managing your customer through their life cycle by controlling that data and that information stream. No matter how good these bank relationships are, you do not have full control of the customer data or the off-lease process.
It also offers us the opportunity to add some financial products. Bank of America will be our partner but everything the customer sees will be Volvo Cars Financial Services.
When does this begin?
There are two pieces. The commercial piece is floorplan and real estate -- late second quarter, 2012. The consumer piece, the leasing and the APR, is Dec. 1 of this year.
It is the biggest and most important thing we will do this year besides hitting our sales numbers. We announced it at NADA and the dealers jumped up and applauded.
How are S60 sedan sales? Do you have the high conquest rate you expected?
S60 is doing great. It is meeting our expectations and actually exceeding them in some ways. For the first three months of this year, we are up 40 percent vs. the first three months of last year.
The month of March was the single best month for the new car -- we did 2,599. We are doing quite well and that is without one piece of the product offer that will be coming a little later this year.
We will pick up an all-wheel-drive version of our S60 T5 -- that is the entry-level car -- and vehicles start to arrive in June.
We expect quite a good back half of the year for S60. The car has been critically acclaimed, the car books like it and we have done well in some recent magazine tests even against the toughest competitors in the business. We are quite proud of the car. We have been very single-minded in the U.S. on how we have marketed it.
What about U.S.-specific marketing?
From the beginning we said, "We belong and we are going to compete head-to-head with the Germans and the Japanese in the segment."
It is a strong conquest car -- 54 percent of the business is conquest. It skews about 57 percent male. If I look at the top five it gets cross-shopped against in rank order, it is the Audi A4, BMW 3 series, Acura TL, BMW 5 series and the Infiniti G. Our job is to get the car on the shopping list and we'll win our fair share of sales.
Are you getting enough of the cars this year?
We have a good supply of the S60. That is one of the things I faced last year with a couple of car lines. This year we are in a pretty good inventory position.
You've phased out station wagons, Volvo's signature vehicles in the 1970s and 1980s, and you're focused on the S60 sedan and XC60 crossover. What is Volvo today?
We are on the move. We are very focused not only on the short term but the longer term that says what Volvo is going to be five to eight years from now. We did not give up what we were.
We still stand for all of the things you would expect -- world-class safety, reliability and durability. We are adding attributes like great design. And you see great design and fun to drive or performance.
Volvo executives say the company's Scandinavian design and sensibility are different from the German varieties. How does that apply to a vehicle?
As you start to see our cars evolve, let's say the next generation of cars you would expect to be able to get into the car and use the controls with little or no instruction. I would expect a quantum leap in the next generation of cars.
It may be an overused analogy, but if you think of the Mac products like the iPad and the iPhone, most people pick them up, don't read the manual and can just sort of figure it out pretty easily. That is the direction we would like to go in terms of designed around how people use cars.
What segments do you need to strengthen?
We are going to continue to drive the business of the two 60s, the S60 and XC60. The 90 had a minor refresh this year, mainly cosmetic. We have gained share on that product. We did 10,600 XC90s last year, and this year we will sell 12,000. It is a little bit mature. We were up 12 percent for the first quarter on that product.
What is Volvo's objective?
We want to be a top-tier luxury brand by 2020. We are well on our road to it and the cars that are driving that change are the two 60s and, as I say to our retailers and our team here, "Those are no-excuses cars." Those are cars that can go against the best in this business. Those cars are changing our profile.
XC60 is 68 percent conquest. The cars we are cross-shopped against are five luxury cars. The [Audi] Q5 is a direct cross-shop, the Lexus RS, which sits between XC60 and XC90, [BMW] X3, and the two Acuras, the RDX and the MDX. It is on the list with the right cars, the right luxury competitors.
You can reach Diana T. Kurylko at firstname.lastname@example.org. -- Follow Diana on