DETROIT -- Four months into his new job, Volvo North America CEO Anders Gustafsson has already butted heads with dealers.
The executive took over from Lex Kerssemakers in September, as Volvo rolled out its strategy to survive a changing industry, with plans for an electrified lineup and a subscription ownership model. In his first week, he was tasked with communicating these changes and easing dealer concerns -- a process Gustafsson said requires the automaker to rebuild its relationship with its retailers.
"We need to give love to the dealers we have today," Gustafsson said during a speech Wednesday at the Automotive News World Congress. "They've been waiting many, many years."
Gustafsson, who spoke in place of Volvo CEO Hakan Samuelsson after he missed his flight to Detroit, said the first meeting was "extremely painful" and he "lost 3 kilos" after facing U.S. dealers who were angry over the automaker's future plans. The executive spent a week explaining the need for change as digital technologies reshape the industry, and the benefits that new services will bring to retailers.
Under the ownership of Chinese company Zhejiang Geely Holding Group, Volvo has experienced a major sales turnaround in the last three years, selling 571,577 vehicles worldwide in 2017, a 7 percent increase from 2016. Despite that success, Gustafsson said, the company is looking ahead to solve the coming problems of digital sales and emissions regulations.
"We cannot fix every problem with pushing metal," Gustafsson said.
In July, Volvo said it would electrify every vehicle introduced in 2019 and beyond. When it unveiled the XC40 compact crossover in September, the automaker also introduced its Care by Volvo subscription service, which allows customers to sign on for a two-year flexible ownership model that includes insurance and concierge services.
Volvo's EV plans immediately created dealer pushback, Gusafsson said.
"You have some parts of this country that aren't so much into electrification," he said.
The subscription service also rankled retailers who saw it as undermining the traditional franchise model. However, since dealers see most profits in financing, used cars and service, Care by Volvo allows the dealership to capture more of that business by ensuring the customer uses the retailer as their primary point of communication throughout the subscription lifetime, Gustafsson said.
"In the current model, we have just a few minutes to take care of our customers," he said. "With the subscription structure, the revenue stays in the family."
In order for Care by Volvo to be successful, the executive added, products will need to have strong residual values and have a reputation of premium quality among consumers. Both are targets Gustafsson said the automaker will have to hit hand-in-hand with its retailers, while it continues to take their feedback, good or bad.
"I like their honesty," he said. "They play with their own money and I play with the owner's money. So of course they want to plan their business, and we understand that."