German Car Zone

Volvo left struggling under its own safety-glass ceiling

ARRIVING on top of speculation about Ford selling Jaguar, Volvo's second-quarter figures do not look too good either. Ford may have found its Jaguar brand glamorous but unworthy. As sales falter and profits plummet, Volvo may turn out to be worthy but unglamorous.

The Swedish flagship has been bolstering Ford's hopes for Premier Automotive Group (PAG), but with its American sales down 10%, Volvo no longer looks like the premium asset bought for $6.45bn in 1999. It showed an operating loss in the second quarter of the year, and there is no guarantee that things will improve in the third quarter, according to Swedish business publication Dagens Industri.

Hopes for keeping the full year performance in the black rest on the company's sound showing in the first quarter. The influence of new models on the balance sheet will be longer-term.

Volvo's woes stem from a model range that is ageing and the weakness of the dollar. Five years ago a dollar's worth of Volvo sold in America provided Sweden with 10.6 kroner or 1.1 euros. Now it brings in only 7.3 kroner or 0.8 euros. The authoritative Automotive News Europe says Volvo has produced a consistent operating profit between $750m and £1bn most years, but although Ford is secretive about the performance of individual members of its Premier Automotive Group, those days may be over.

This is Volvo's first fall from grace in seven years under Ford, although last autumn it took pre-emptive action by getting rid of 1,500 employees. It now looks as though it will make a further 1,000 voluntary redundancies before the end of this year. Volvo employs 27,500, of whom 19,000 are in Sweden.

Volvo is stumbling in Europe too. In the first half of 2006 it sold 130,922, a drop of 6,524, which means that Volvo production is still flat-lining at around 450,000, while rivals such as Mercedes-Benz, BMW, and Audi have risen to between 900,000 and 1,200,000. For years Volvo has been straining to break half a million; successive managements have been targeting 600,000. But while its German competitors have been enjoying the best expansion of the premium sector for a generation, and Toyota has established a strong presence in Europe with Lexus, Volvo's progress has been scant.

It may have the motor industry's best safety research centre in Gothenburg, yet Volvo's failure to project a more attractive image means it may never penetrate profitable showy suburbia. The premium car market relies heavily, for better or worse, on keeping up appearances and that means Mercedes-Benz, BMW, Audi, Lexus and Jaguar or a classy 4x4. Buying a Volvo, Honda, Seat or Skoda sends neighbours the wrong message. For the same reason high-priced VWs like the Phaeton, or posh Renaults, Peugeots, and Citroëns do not work either.

Volvo is pinning its hopes on the recently launched C70, and the C30 hatchback due later this year. Its redesigned S80 comes with a heavy media campaign to disperse the clouds. Bill Ford, CEO Ford Motor Company, told earnings analysts this month that he expected PAG would soon start to get its act together. "While I'm not happy about what's happened in the second quarter with PAG, I do think it's a product issue. There are a lot of new products coming, particularly at Volvo."

So if Ford really has to dispose of anything, it might be easier to sell Volvo than Jaguar. First, Jaguar would not generate as much cash. It is loss-making and it is so heavily integrated with Land Rover that it would remain dependent on Ford-built engines and joint plants for years to come. Volvo on the other hand has a strong record, up till now at any rate, of profitability and would command a higher price.

Volvo is less integrated into PAG, although its engineering is so well regarded that Jaguar and Land Rover might buy into its new 3.2 litre engine. Yet it could still be sold as a virtually stand-alone operation, and unlike Jaguar some of its new models, although premium-priced, are high-volume. Jaguar and Land Rover pin hopes on relatively low volumes and relatively high prices - what former managing director Joe Greenwell once described to me as using Porsche as a role model, selling on impeccable quality and high-class engineering. Jaguar has made huge strides in both, according to JD Power, but remains burdened by the legacy of a 1990s model policy.

Jaguar management then was nostalgic for the 1960s, believed it should keep its traditional market, making Jaguars that it thought looked like Jaguars. Its conservatives won the day but neglected newer, younger buyers who wanted cars that looked forward not back. Jaguar has radicals in the design office now but they may have arrived too late.

Volvo had its conservatives too; its safety experts who have left their imprint on every Volvo since the Amazon of the 1960s. Nils Ivar Bohlin's invention of the three-point seat belt and Volvo's adoption of it in 1959 has saved hundreds of thousands of lives. But it is a legacy that has left Volvo trailing in the glamour stakes, and while some of its cars can match BMWs for ride and handling, Audis for whatever the Swedish is for Vorsprung durch Technik, and Mercedes-Benz for luxury and style, there is a safety-glass ceiling through which it seems unable to break.

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I would like to know what car that Volvo makes can match...

Well, the XC90 for one. It's a great (albeit ugly) car, and a car that obviously influenced the E70 X5 heavily.

The XC90 can't even match an E53 facelift, let alone the E70

That's the whole point. They're years behind in refinement and tech.

XC90>>>e70 X5

And that is the truth wheter you like it or not.

New models could/should return them to profitability and growth.

Yes, that's true, ... in another dimesion witch might or might not exist.

That would be the same dimension where I would have gender-reassignment surgery.

I assume you test drove both the XC90 and the E70 to say that, right?


Not a chance, my aunt has a XC90 and my dad has an X5... I've driven both and for looks, size, comfort and features they are comparable (more of less), but for driving dynamic and handling it's not even close!

theyre both SUV's right?

Well the X5 cant do what SUV's are meant to do, whilst the xc90 can. Therefore the new X5 is basically a 5er on stilts thats less economical in everyway, isnt as fun to drive, but has got 7 seats and that wanker image.

So yes as a SUV the xc90 is much better. As a car the X5 is better.