From Autoweek ( long ):

"LOS ANGELES - What's wrong with Volvo?

After 10 years of U.S. sales increases, the luxury carmaker's sales are off 16.2 percent through August to 74,716 in a market up 1.3 percent over last year's near-record pace.

Dealers stuck with a load of aging S40s and V40s are using deep discounts to clear 2002 models. One Los Angeles retailer has advertised new S40s for under $20,000 - dangerous ground for a premium brand.

Through August, sales of the entry-level vehicle are down 7,200 units from the same period a year earlier. And at the top end of the lineup, sales of the flagship S80 are down 27 percent this year despite a boost from subvented leases.

Although inventories fell to a 79-day supply at the end of August, down from 83 days at the end of July, Volvo is headed in the wrong direction for a brand with the stated goal of doubling its sales in the next few years.

At the same time, parent Ford Motor Co. has charged Volvo with responsibility for delivering the lion's share of Premier Automotive Group profits in the next few years.

Volvo is outselling Audi and Infiniti, but not by much. And a chunk of the volume decline this year reflects Volvo's decision to back away from fleet sales. But by any token, Volvo executives concede, the automaker is trailing its competitors in the luxury segment.

"It has been a negative and tortuous year," admitted Vic Doolan, president of Volvo Cars of North America Inc. "But we're going to turn the corner and move forward strongly from this month on."

On the upside, the automaker has a full slate of new and redesigned products coming over the next four years and is renovating its certified used-car program.

Volvo also is climbing the key J.D. Power indices. Its initial-quality score rose 26 percent in 2002 and was tops among European brands. Its sales-satisfaction ranking improved from 10th to seventh. And customer service jumped from a mediocre 11th to fifth in the industry, also securing the top ranking among European brands.

And Volvo is not overspending on incentives, said Art Spinella, president of CNW Marketing/Research Inc. in Bandon, Ore., which tracks industry spending on incentives.

Volvo spent an average of $2,413 per vehicle in incentives in August, up from about $1,800 last August, but slightly less than Mercedes-Benz and Lexus, Spinella said.

Product - or the lack thereof - is at the heart of Volvo's problem.

It is the only luxury automaker without an entry in the red-hot $35,000-to-45,000 sport-utility market. The wagon segment, which Volvo dominates, has weakened. The 40 series, entering its last 18 months, can't compete against redesigned versions of the Audi A4 and Mercedes-Benz C class.

One analyst describes the 40 series developed by Mitsubishi as Volvo's "failure to admit real market value."

Doolan admits that Volvo miscalculated demand for the S40 and V40, so "I can't hold dealers responsible" for taking drastic pricing measures. Sales of the 40 series will slow even more next year before the arrival of the new model, he said.

Volvo is pinning hopes on its next two products. In November, the XC90 sport wagon will give Volvo a competitor to the BMW X5, Lexus RX 300 and Mercedes M class. The automaker expects to sell 38,500 XC90s a year - enough, it hopes, to push U.S. sales over 200,000.

The redesigned 40 series will be introduced next fall. It will be built off the European Ford Focus platform rather than the Mitsubishi Carisma's, and will be offered in several body and powertrain variants.

Meanwhile, high-performance "R" versions of the bread-and-butter S60 and V70 will debut at the Paris auto show this month and will arrive in U.S. showrooms in the spring.

Kjell Bergh, who owns Volvo stores in Minnesota and Florida, says he can't wait for the new vehicles.

"BMW, Audi and Mercedes have twice the breadth of product and are in segments we aren't in," he said. "Our sales are down this year, but once we fill the orders for the XC90 we will break even."

Volvo also has embarked on a major lobbying campaign with industry opinion leaders to improve its residual values.

"Our dealers and customers are at a disadvantage to our competitors, and consumers are concerned about resale value," said Angelo Nyars, vice president of sales operations for Volvo Finance North America.

Volvo residual values after 36 months trail Audi by several percentage points, Lexus and Acura by five or six points and BMW and Mercedes-Benz by six to seven points, according to industry tracker Automotive Lease Guide in Santa Barbara, Calif.

On vehicles in Volvo's price range, that can mean $2,500 to $3,000 less residual value at lease end, said Raj Sundaram, Automotive Lease Guide vice president.

"Quality is important, but what we look at even more is appeal," Sundaram said. "No matter what happens to Volvo's IQS score, the secondary market isn't catching on yet. But I think the outlook will be brighter with the XC90 and next S40 and V40."

Volvo hopes to bolster residuals by improving its certified used-car program. Warranty coverage will be boosted, and Volvo Finance will offer dealers floorplan assistance, advertising funds and low financing rates for certified vehicles.

"Many of the European automakers have had huge residual losses countered by currency gains, which are then poured back into more incentives," Nyars said. "I don't think any of us are comfortable with where our residuals are. We need to change our value perception."

 

"Product--or the lack thereof--is at the heart of Volvo's problem." Yup.

 

they will have all kinds of product...

marketing-speak gone awry.

 

want the s60r (way more than new s4), otherwise volvo lineup is lame

 

The 60 and 80 series have their pros and cons. Cany anyone say they actually like the S40 ?

 

An entry level European car, designed by Japanese company, owned by an American company - sounds to me like Volvo has lost its image...or simply can't choose one!

 

Not a performance car like the A4 or 3 series by any stretch of the imagination. Dynamics all wrong for having sports sedan fun. Volvo had better get its chassis engineers to wake up if the R is to have any teeth. Remember the hoopla over the Saab Viggen ?

 

you'll see the S40 is built in a Daf plant in Holland. Talk about orphan !

 

Taurus - not exactly a sporty chassis...

 

We have a formerly Swedish company marketing a car that is Japanese designed, Hollander built, owned by an American company. Used to be much more simple...and I'm not even going into what comes out of the parts bin at Fjord and where those parts are made!