Volvo plans $500 million U.S. assembly plant

3 states in talks; site expected to be chosen within 2 months

UPDATED: 3/30/15 10:35 am ET - adds timing details

Volvo will spend about $500 million to build its first assembly plant in the United States as part of an ambitious plan to jump-start lagging sales.

Production will start in 2018 with targeted annual capacity of 100,000 to 120,000 vehicles that will use underpinnings of the company’s new XC90 SUV, Lars Wrebo, head of manufacturing and purchasing, said in a phone interview. The Sweden-based automaker is in talks with three U.S. states on a possible location.

The site will be chosen “within the next two months,” and local government collaboration on workforce training will a key factor in the decision, Wrebo said.

In a statement, Volvo CEO Hakan Samuelsson said: “Volvo Cars cannot claim to be a true global car maker without an industrial presence in the U.S. Today, we became that.”

Volvo said the new factory will help meet and eventually exceed its volume targets in the U.S., where it has a medium-term goal to sell 100,000 light vehicles a year.

The company’s U.S. sales totaled just 56,366 in 2014 and last topped the 100,000 mark in 2007, when deliveries hit 106,213.

“The U.S. is an absolutely crucial part of our global transformation and today’s announcement makes it perfectly clear that Volvo is in the U.S. to stay,” Samuelsson said.

Volvo said it will use the planned factory to accelerate the introduction of build-to-order sales, as well as exports.

The U.S. factory is part of an ambitious overhaul at Volvo that will see the Swedish automaker retool its entire product range over the next four years with the introduction of new modular vehicle technology.

Volvo executives have been hinting about a U.S. factory for the past two years.

At the Detroit auto show in January, Samuelsson said in an interview with Automotive News that “long term, I would not rule that out.”

“Right now we are focusing on growing the business and to come back to volumes above 100,000.”

The first vehicle developed under Volvo's Chinese owner Geely, the redesigned XC90, goes on sale in the U.S. this spring. Volvo is touting the crossover as the rebirth of the brand.

In four years, the redesigned XC90 will be the oldest vehicle in a Volvo showroom.

Volvo executives say seven new vehicles -- replacements for the current range and some new variants -- will be launched by 2019. There will also be a plug-in hybrid in nearly each vehicle lineup.

Diana T. Kurylko and Bloomberg contributed to this report.

You can reach David Phillips at dphillips@crain.com

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