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View Full Version : Ford takes risk going upscale with Volvo



jmeljr
12-03-2007, 04:00 PM
This was on http://detroitnews.com/apps/pbcs.dll/frontpage
today. I am not sure if I should be happy or sad. Living in Detroit, I guess I am happy the are keeping Volvo but using common Ford parts even where we can not see them makes me a bit nervous.

This is a segment of the story, hit the link up top for the full article.

Plan for profitability

Product experts like Jim Hall of 2953 Analytics in Birmingham say Ford's strategy for Volvo makes sense.

"You can't sell on safety alone anymore," he said. "By using that hook of Scandinavian design, they can do luxury in a way that no one else does. But they have to be Volvo -- very luxurious Volvos, not luxury cars with a Volvo badge."

By pushing Volvo upmarket, Ford hopes to raise the average transaction price on Volvo vehicles and widen its margins to generate more revenue. It also hopes to attract new customers to a brand that has never broken the 500,000-unit-a-year barrier.

At the same time, Ford wants to help Volvo reduce its costs by more closely integrating Volvo's product development and procurement operations with Ford's.

Future Volvos will rely more heavily on components from Ford's global parts bin, but only in areas the customer cannot see or feel. That will allow Volvo to reduce costs by taking advantage of Ford's own economies of scale.

Parts that directly affect the customer experience will be enhanced to make them even more distinctive. Booth said Ford wants to allow the Swedes to put their own stamp on every product.

The challenge in all of this, Booth acknowledges, is to bring new customers to Volvo without alienating its core constituency.

Forkster
12-03-2007, 11:36 PM
Hmm... I was under the impression Ford was getting rid of Volvo. Why would they want to help make more money by putting sheit Ford parts in a Volvo?

Seeing how Ford's are notorious for being unreliable POS, with weak trannies, more front-end alignment issues than a oil tanker in a north easter gale, and questionable reliability for all their makes and models, why are they tampering with the quality parts put into our cars NOW, and not when they first purchased Volvo a couple years ago?

Time will tell how this will help or hinder Volvo. The article comments are contradictory - how can you justify charging more for a car when you're putting cheaper parts into it? Ford equation on costs: widening margins = widening quality problems.

RobC
12-04-2007, 07:04 AM
Forkster,
Just from my experience, I do not agree with your statements about Ford's quality. My V70 XC needed a new transmission, ETM upgrade, and various suspension components replaced before I reached 60K miles. I owned 2 Fords in my day: a Thunderbird, which I drove during college (couldn't kill this car) and a Mustang GT. Neither car was afforded the luxury of the Volvo, however, I didn't pay nowhere's near the price. In regards to dependability, both Fords ran circles around my Volvo! Additionally, they were much cheaper to repair! My main emphasis is: when buying a vehicle as expensive as a Volvo, you expect more for your money! I loved my Volvo(s) (I had 2 V70 XCs), however, they became too expensive and frustrating to own. :(

budrichard
12-04-2007, 09:18 AM
I certainly am not privy to what really goes on at Ford and Volvo but having been in the corporate environment as an Engineer and later Senior Manager of a number of company divisions, you don't have to be told what is actually happening. One can see the results.
1. Ford which can't make a decent vehicle along with Chrysler and GM, is taking thier corporate culture to Sweden. The Big Three have deluded themselves that they produce good vehicles and have been convinced for so long that styling and advertising sell vehicles. Make a cheap product and the 'marketeers' will sell it. Swedes want products to be safe, reliable and last. That's not what Ford wants. Unfortuneately the Swedes have made a pact with the devil and he will take his due. Volvo will turn into Ford junk.
2. I'm again not privy to any information but it appears to me that Ford parts are already going into Volvo's. Look at the interior. The exterior certainly shows Detroit influence.
3. If I pay MB, BMW prices, I buy an MB, BMW, not a Ford Volvo. Ford had a bunch of cash and squandered it in purchasing Volvo, LR and Aston Martin. That certainly gives one confidence in Ford management.
4. The 08XC is a perfect example of Ford at work. Supply an engine that gives even worse gas mileage to save a few bucks. Don't import the Diesel. Why i haven't figured that out yet but it is profit driven. When I went to purchase a Porshe C4 a few years ago, even though the vehicle was still manufactured, I couldn't get one in North America because Porshe wanted to insure Cayenne sales. Now that the C4 is again offered for sale in North America, does anyone think i will purchase a product from Porshe? NO!
5. Its sad but Volvo of today and of the future will not resemble the Volvo of yesterday.
EOT for me.
I'm looking for anything other than a Volvo!

BTW RobC, my experience with my three Volvo's is exactly opposite of yours but I haven't owned a Ford product since my 1966 Ford Mustang V8 4 barrel!-Dick

jmeljr
12-05-2007, 04:01 PM
I think the article did say some things that were contradictory in that they were going to enhance certain elements on one hand and go to the global parts bin on the other hand.

I think Ford did a lot to help the quality in the Jaguar brand and I have also owned Ford vehicles that have gone forever so I am not sure if they will screw up Volvo. It does make me think a bit though, with the track record of the big three my money would not be on them succeed and improving quality, safety, performance and profitability if I did not have the ability to experience a lot of their products on a regular basis.

My family owns a Lincoln Mercury dealership and my neighbor is fairly high up at GM, he brings home new cars all the time. That being said, I get the opportunity to drive almost any car that I would want to drive from both companies and I will say that every aspect of the cars they are building are improving. Quality, performance, styling, safety and my desire to give them another chance. I bought my Volvo but typically lease Lincolns or GM vehicles. My wife still takes over my neighbors lease after a year so we get a new car every year and I am more and more impressed with what they are doing there.

It took me a long time to buy a Volvo because everybody in Michigan gives you a hard time if you buy a foreign car, that is just the way it is. When Ford bought Volvo I was happy because it allowed me to buy it guilt free. I truly believe that the quality at Volvo is as good as it is at BMW and with a better price. My brother was going to buy a used BMW wagon and I talked him into test driving a used Volvo XC 70 first. He gave the guy a deposit after the drive and asked me if we should cancel the test drive of the used BMW 3 series and I said heck no. Lets drive it so you know you made a good decision. The Beemer felt like a tin can and we both thought it was a no brainer.

That was 2003, 3 years before I bought a year old XC70 and his 2001 is still going strong. My 2005 is treating me well after 46,000 miles and I believe that if Ford does it right and does not cut costs in the wrong places we will be OK. A business needs to make money and that is what they want to achieve. I think that they will be able to succeed because I think what Ford has done so far is borrow more technology from Volvo to improve Fords, than pushing Ford influence on Volvo. I believe that is why they are keeping Volvo and why they want to increase awareness about the brand, to bring in more market share for Volvo. In the end I think they are smart enough to know that they have a premium brand and if Volvo purists, like the people in this forum, do not like what they do they will be totally screwed. If they lose their base, they certainly wont be converting people from MB and BMW.

RobC
12-06-2007, 06:49 AM
Jmeljr,
Well said, I totally agree with you![thumbup]


Rob C

tgwillard
12-06-2007, 07:24 AM
Ford knows they have only a limited time before they run out of money. They must have checked to see what selling Volvo would bring to the corporate coffers and made the decision that they could earn more by keeping Volvo. I hope they are smart enough to allow Volvo to remain what it is. Who knows what Volvo's fate would have been had Ford put them up for sale?

budrichard
12-07-2007, 12:21 PM
" Who knows what Volvo's fate would have been had Ford put them up for sale?"

I was fairly certain of Volvo's fate when acquired by Ford. The 2008 XC and the Ford statements have just made me even more certain. Volvo/Ford has decided not to retain thier customer base, now whether their financial predictions made them change marketing or Ford's desire to milk more money out of the Volvo brand, I don't know, but I will leave you to make your own conclusions.-Dick

Forkster
12-07-2007, 02:49 PM
Since Toyota and Honda, and now Hyundai have tromped on the big 3's traditional earning grounds by making reliable vehicles (and soon to be done in too by KIA), they are all in big trouble. Ford in particular does not have any product the differentiates them from the competition, especially for the bread&butter entries - compacts, family sedans, and pick-up trucks.

Volvo's sales are off by almost 10% this year, with the XC90 dropping 20%, but the S80 up by nearly as much 120% - I'm guessing that fuel costs are a big factor in people moving into cars vs SUV's. Our own beloved XC70 is down 9%. Source: http://ca.autos.yahoo.com/s/03122007/31/link-finance-news-volvo-cars-sales-report-november-north-america.html?p=6

Ford is hoping that by making the Volvo line more profitable, and perhaps focusing on their value chain activities (supplies, materials, outsourced parts and components), they can improve the profitability.

But they're missing the ball. Atari once said that they could sheit in a box and sell it - Ford's been selling that for years and now they still don't get it. Without quality and reliability, regardless of how you pretty it up with flashy advertising and discounts, the consumer is informed and educated on the safety and long term reliability of all vehicles.

I'm expecting some issues with my XC70 - no vehicle is perfect. But if Toyota can make a Camry and Honda an Accord that drives almost flawless for 350-600'000 miles, why can't Volvo? And better yet, why can't Ford? What are they scared of?

Reverse
12-11-2007, 11:06 AM
At the same time, Ford wants to help Volvo reduce its costs by more closely integrating Volvo's product development and procurement operations with Ford's.

Future Volvos will rely more heavily on components from Ford's global parts bin, but only in areas the customer cannot see or feel. That will allow Volvo to reduce costs by taking advantage of Ford's own economies of scale.

Parts that directly affect the customer experience will be enhanced to make them even more distinctive. Booth said Ford wants to allow the Swedes to put their own stamp on every product.

The challenge in all of this, Booth acknowledges, is to bring new customers to Volvo without alienating its core constituency.

I'm another person who works in design engineering in the automotive sector. The comment "will allow Volvo to reduce costs by taking advantage of Ford's own economies of scale" doesn't automatically mean cheapen Volvo.
There's many components that cost less when purchased in huge quantities, from standard parts such as fasteners, O'rings, bearings etc which increase profit margins with no effect on quality.

Forkster
12-11-2007, 01:34 PM
That is true Reverse - well said.

My issue is that Ford is still missing the quality/reliability matrix that Honda, Toyota, and Hyundai have figured out. They're thinking that building a sheit product and because it says Ford people will buy it because they like the image and how it looks.

People used to buy cars like that 30 years ago but the new Gen-X/Y buyers are informed and make smart purchases. With all the b-boomers retiring soon (and so will their purchasing habits), unless Ford/GM/Dodge up their quality/reliability control and stop building crap-vehicles, pretty soon the only cars you can buy will be a Toyota, Honda, Hyundai, Kia, and the merged company from the old-Detroit three called Fordged Motors. :)

So how does this apply to Volvo? What can Volvo do to ensure they make safe and reliable vehicles?

bwik
12-15-2007, 07:08 PM
Ford knows that Volvo customers often are very wealthy people.

A lot of XC buyers or V70 buyers are happy to pay $38,000 for a Volvo, but if it cost $58,000, they would probably still buy it. They do not care.

Volvo is the best car in the world for many people. They do not desire BMW or Mercedes, or Lexus. They want only Volvo.

So, for those people, Volvo would be wise to hit the $50k-$70k market a bit more.

We can already see that the new S80 is quite more luxurious than before.

Me, I am hoping the attractive new V70 gets a diesel powertrain option. 24 mpg is not good enough anymore.

JRL
12-15-2007, 09:08 PM
Ford knows that Volvo customers often are very wealthy people.

A lot of XC buyers or V70 buyers are happy to pay $38,000 for a Volvo, but if it cost $58,000, they would probably still buy it. They do not care.

.
God, you are so wrong on both:confused:

Forkster
12-15-2007, 10:24 PM
I'm with JRL - I'm not happy to pay $38'000 which is why I bought it for $23000 and 3 years old.

Volvo no longer can say 'safety' as their selling point - a lot of other companies make safe cars now. So, what makes Volvo such a special vehicle for Ford to justify their customers spending 20-50% more? Gonna be a hard sell - sales are already 10% lower than this time last year. :(

budrichard
12-16-2007, 09:15 AM
I can afford to purchase ANY vehicle I want but certainly will not purchase the US Volvo XC without a Diesel and certainly will not spend $58K on a Volvo. Ford can price the Volvo anyway they want but they have lost me as a customer.-Dick

bwik
12-16-2007, 02:35 PM
God, you are so wrong on both:confused:



Really? What do you think XC70s cost? You can look it up if you like.

Of course, Ford cares about the resale market, but what they really care about is NEW cars. 2008, 2009. $38,000-$45,000. And up.

People do pay that. And Volvo buyers (maybe this isn't you or me) are very high income. They can afford anything on the market. Ford is beginning to realize this. Their #1 luxury brand is not Jaguar, and certainly isn't Lincoln (lol). It's Volvo. Volvo can be a BMW and Mercedes alternative. Slightly cheaper, with Swedish design, and good performance.

Volvo has a bright future. Mostly because of its enviable customer pool, one of the best pools you could hope for. The cars aren't even that great. It's the customers' thirst for the brand (and the styling) that make Volvo a success.