If Volvo's plan for a $500 million U.S. factory that can build 100,000 vehicles a year sounds ambitious, that is exactly the point.
Volvo sold 56,366 vehicles in the United States last year -- just more than half of its proposed new American factory capacity. But Volvo executives say that, five years after being sold to Chinese investors by Ford Motor Co., Volvo Car Corp. is rolling out its comeback plan.
That includes a radical new powertrain and vehicle architecture strategy and the South Carolina plant Volvo announced last week. Volvo believes that a big investment in U.S. manufacturing will ignite growth.
"We have reinvented ourselves," declares Lex Kerssemakers, CEO of Volvo Cars of North America, "and we believe it now makes sense to go on the attack again in the United States."
Volvo's comeback plan might sound like a stretch to industry skeptics. But building an oversized U.S. factory in anticipation of future sales growth -- as well as exports -- is a strategy that worked brilliantly for BMW and Mercedes-Benz two decades ago. Both European luxury competitors transformed themselves from low-volume importers to new levels by investing in U.S. manufacturing in the 1990s.
Kerssemakers, the former head of product development who was named to North America's top spot in January, assures the world that he and his U.S. dealers will soon need the extra muscle to handle a stream of new models and technologies that will drive the brand for the coming decade.
"I want to get to 100,000 sales as quickly as possible," he said last week from Newport, R.I., where Volvo executives attended the posh Volvo Ocean Race.
"In the past five years, we have invested $11 billion in new products and infrastructure," he said. "My former job was head of product, so I know exactly what's coming. We will have 14 new nameplates in the next four years. And they are tailor-made for the U.S. market."
This month, the company is rolling out its redesigned full-size XC90 crossover, the first model of a new global design approach it calls Scalable Product Architecture. Volvo will use shared component systems and chassis platforms to develop vehicles faster and less expensively.
Volvo also has launched a new global engine strategy dubbed Drive-E that will replace eight engine families of four-, six- and eight-cylinder engines with a single platform of turbocharged, high-output four-cylinder engines for all models on the new architecture.
Among future products: an executive-class S90 sedan to compete against the Mercedes-Benz E class and a V90 wagon to go with it. A replacement for the compact V40 also is coming with a three-cylinder engine that is now in development for other as-yet unidentified small cars. Volvo says all its models will be available in a hybrid option.
Kerssemakers says the automaker has not decided which of the new products will be built in South Carolina, but there will be more than one. The plant will begin output in late 2018.
Volvo's strategy is familiar. BMW sold fewer than 66,000 cars in the U.S. in 1992, when it surprised the industry by saying it would build a South Carolina plant capable of turning out 78,000 vehicles a year. Last year, BMW sold 339,738 vehicles here, and its modest plant has been expanded several times to become the biggest in BMW's manufacturing arsenal.
Mercedes took a similar tack with an oversized factory in Vance, Ala., and then watched its U.S. sales soar from fewer than 62,000 in 1993 to 356,136 last year.