LOS ANGELES — Ford Motor Co. CEO Alan Mulally's recent pronouncement of increased autonomy for Volvo Car Corp. is not the first step toward prepping the automaker for future sale.
Rather, Volvo executives say, it gives them a chance to make product and marketing decisions free from Ford's oversight. Meanwhile, Volvo can maintain valuable r&d and engineering connections with Ford, they say.
Mulally's statements — made in connection with Ford's third-quarter earnings — included several mentions of reducing Volvo's cost structure.
Much of that has to do with overcoming the tough currency exchange climate forced by the weak dollar. High raw material costs weigh in as well. Volvo has laid off 1,500 workers in the past two years, despite being on track for record global sales in 2007.
Volvo's cost situation could go so far as to trigger opening an assembly plant in North America, said Steven Armstrong, COO of Volvo Car Corp. But Mulally rejected the idea in comments at the auto show here.
Armstrong said no plan for a plant is in the works yet. But he said Volvo is studying several options, such as building a dedicated greenfield site, sharing an underused Ford plant and even engaging in a joint venture with another European automaker.
"We have a good industrial structure, with two plants (in Sweden and Belgium) running three shifts," Armstrong said in an interview at the show. "We don't need a third plant from a capacity standpoint, but perhaps for our footprint from a cost and currency standpoint."
Meanwhile, Volvo will continue to collaborate with Ford in areas such as sharing the EUCD and C1 platforms. But because Ford is taking a hands-off approach as it focuses on its U.S. domestic brands, Volvo will have "more autonomy to deliver something a little different," Armstrong said.
The flipside is that Volvo's ability to deliver the goods will be open to inspection. Whereas Ford previously didn't disclose the financial performance of individual Premier Automotive Group brands, Volvo's books will be opened starting in 2008.
Mulally wants Volvo to move further upscale into prestige-brand territory. But Volvo will not kill off the slow-selling, compact S40 sedan and V50 wagon in America, said Anne Belec, president of Volvo Cars of North America.
In fact, the arrival of the BMW 1 series could provide the S40 and V50 with a sales boost by lifting the entire segment of small premium cars.
"There will be an emphasis on our larger cars," Belec said, "but we need to have the small cars to bring people into the franchise."