Volvo may add models to aid struggling dealers

GENEVA -- Volvo says it will come to the aid of struggling U.S. dealers by bolstering its lineup, increasing margins and spending more on marketing.

The company will decide in the next quarter whether to reverse a decision not to sell the V60 station wagon in the United States, Doug Speck, global head of marketing, sales and customer service, said at the Geneva auto show.

If that happens, the V60 that went on sale in Europe two years ago could arrive in the United States within a year. Volvo Cars of North America had decided not to take the V60, which replaced the V50, because of declining U.S. wagon sales.

But after Volvo whacked five models and left dealers with only four in the United States, the retailers now say they need the V60.

Volvo also is working with Zhejiang Geely Holding, its Chinese parent company, on a small-car platform, said Speck. The car, which would compete with entry-level models from Mercedes-Benz and BMW, isn't likely to be on the market for several years.

With nothing new expected for at least two years, Volvo is sprucing up the four 2014 models that will be sold in the United States. At the auto show, Volvo unveiled refreshed exteriors and interiors for the S60 compact sedan, XC60 crossover, S80 sedan and XC70 wagon. The vehicles go on sale in June.

Speck says more than 4,000 changes were made to the four models.

The facelifts are part of an effort to get Volvo back on track in the United States. Sales fell short of expectations last year, rising only 1 percent to 68,117 in a market that grew 13 percent. Volvo executives are targeting a 5 percent increase this year.

Matthew Haiken, owner of Prestige Volvo in East Hanover, N.J., said he's encouraged by the facelifts.

"They are substantial," he said. "They are not Botox. Normally, there is just a bit of nip and tuck."

The bigger product problem is that Volvo has axed five vehicles in the past three years and not replaced them, which "makes it a little rough," said Chip Ott, owner of Fort Washington Volvo in Fort Washington, Pa. Ott is chairman of the Volvo dealer council.

"They have to have a new product offensive," Ott said. "We need to get into the volume business."

The models purged by Volvo were developed on Ford platforms. The S40 compact sedan and the V50 station wagon were discontinued two years ago. U.S. dealers also stopped selling the V70 station wagon because of slow sales in 2011.

The slow-selling C30 compact hatchback was axed at the end of last year. Production of the C70 convertible will end this year, but the date hasn't yet been disclosed.

The first new vehicle developed under Zhejiang Geely, which acquired Volvo from Ford in 2010, is the redesigned XC90 that goes on sale in the United States in early 2015. The crossover will use a new flexible platform called SPA for scalable platform architecture. SPA will be the basis of the redesigned S80, S60 and XC60 in coming years. The XC90 engineered under Ford ownership is 10 years old.

To keep dealers profitable in the United States until new models arrive, Volvo Cars of North America is rolling out a new margin program that kicks in with the 2014 model year.

The margin will be boosted from 14 percent to 16 percent for the S80 and XC90 and from 14 percent to 17 percent for the S60 sedan and XC60 crossover.

To earn the higher margins, dealers will also have to meet new sales and customer and service satisfaction targets, said John Maloney, CEO of Volvo Cars of North America.

"We are trying to have a platform for the growth of this brand going forward, and we are trying to improve retailer profitability," Maloney said.

Volvo executives say they do not recall the last time Volvo tied part of the margin to satisfaction targets. Improvements will be measured by internal criteria, but Volvo also hopes to boost its low scores in independent surveys, Maloney said.

Among luxury brands, Volvo was second from the bottom in the 2012 J.D. Power and Associates customer service index and finished dead last in Power's sales satisfaction survey in 2012.

To improve its visibility -- another dealer complaint -- Volvo has also promised to spend 30 percent more on marketing in 2013.

"We are a needy franchise and we need more marketing," said Ott. "We have an awareness problem. We have been down in advertising for a long time."

Maloney said the extra marketing dollars "allow us with no exceptions at least to be on national television two weeks a month all year long -- mainly cable and some prime time."