By on August 19, 2011

Volvo, given up as beyond salvage by former owner Ford, was sold off to China’s Geely in the automotive equivalent of a yardsale at $1.8 billion. Saying no is always easier than saying yes (well, there are certain exceptions), so most augurs said: “This won’t work.” Asked why, they answered: “It was tried it before, and it failed.”

Wonders of wonders, it appears to be working: Volvo Cars reported an EBIT of 600 million kronor (about 93 million U.S. dollars) in the second quarter, 40 percent more than in the same period of the previous year, a statement from Volvo Cars says.

In the first six months of 2011, Volvo Car Corporation has delivered an operating profit of 1.2 billion kronor ($188 million). Not bad for Sweden’s biggest little car company.

“We are gradually returning to sustainable profitability although we have more work to do before we reach our objectives. A good sales increase is evident in many markets as we are working to revitalize the Volvo brand to attract more customers,” said Volvo CEO Stefan Jacoby.

Being owned by a Chinese company did not hurt Volvo at all. Globally, Volvo sold 230,746 vehicles in the first six months, an increase of 20.3 percent compared to 2010. In the EU, Volvo sold a respectable 127,862 units in the first  6 months. I don’t have Volvo U.S. sales for June, but in July they were reported as 41,898 for the first seven months.

Turning a profit on some 400,000 units annually is a chore. If they can get the volume up to say a million (doable with Chinese production), that quirky Swedish company could turn into a nice little business.

That other quirky Swedish company? Not so much.


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21 Comments on “Scary Chinese Experiment Proves: Swedish Cars Can Make Money...”

  • avatar

    What on Earth has EVER been quirky about Volvo?? And I say that as the current and past owner of 11 of them. Volvo makes solid, slightly to exeedingly dull cars, even as they occasionally try to sex them up a bit, usually with minimal success.

    There was never anything fundamentally wrong with Volvo, I think they sold it simply because they wanted one less thing to think about as they went about righting the main Ford ship. Personally, I think they should have canned Lincoln and kept Volvo, but what do I know?

    • 0 avatar

      Volvos have sometimes had quirky things about them – the oreo cookie vent controls and coin shelf of the 240 for instance. Or the big glass hatch of my 1800ES.

      But as someone who’s owned 11 Volvos and countless other lust-worthy vehicles, I think you know a lot. :^)

    • 0 avatar

      I feel like the C30 has a solid bit of quirky going for it. Hell, that is why I just bought one! It is pretty fun to drive, too. The interior is definitely different and the waterfall center console gets compliments for being different and odd all the time.

      In my opinion, Volvo has always had its own unique design language that seems very Swedish in nature. I guess thats what gives ’em ‘quirkiness’.

  • avatar
    Eric the Red

    I have respected Volvo cars in the past but I truly doubt any type of quality/safety/craftsmanship will continue under the new owners. People will for a period of time continue to buy them not knowing the background, but the qualities :they were previously known for will disapear and then why would someone buy one?

    • 0 avatar
      Dr Lemming

      Perhaps. But then the same could have been said when Ford bought Volvo. I’m adopting a wait-and-see attitude.

    • 0 avatar

      Why would you think this? The Chinese are NOT stupid, they know where the value of thier purchase lies. Its not like they are going to move production to China. Well, probably for Chinese domestic consumption, but those cars will likely not come to the States.

      And it is not like Volvo is anything special in any of these regards anymore anyway. A ’76 240 was a VERY safe car in relation to its peers, but a 2011 S60 is nothing terribly amazing by modern standards. Everyone else has caught up, more or less. Nice car, but no 3-series.

    • 0 avatar

      That drop in quality didn’t happen when Lenovo bought IBM’s PC division: the ThinkPads still have best-in class build quality and durability.

      Just because a company is owned by the Chinese doesn’t mean it’s managed by eejits.

  • avatar
    Hildy Johnson

    That is a profit of roughly $1,000 for each car sold – better than nothing, but still not great. They really do need to grow to become solidly profitable.

  • avatar

    “…better than nothing, but still not great.”
    Of course, but if the business model of the Chinese investors is different from the one that plain-vanilla investors like Cerberus would have, it might be OK for all involved.

  • avatar

    This is because Volvo has something to sell (“safety”, plus the beautiful new S60). Saab, on the other hand, has nothing distinctive to sell.

    I doubt Chinese ownership had much to do with with Volvo’s recent success, except a little early life support. Saab is terminal.

  • avatar

    Volvo, given up as beyond salvage by former owner Ford, was sold off to China’s Geely in the automotive equivalent of a yardsale.

    I don’t at all agree with the first part, but the second part is right on, and was due not to giving up, but on having to survive and not divert mental, or capital, resources to either VCC or JLR.

    Truth be known, both JLR and VCC had pretty much turned the corner (finally) under Ford control, as had most of the GM brands, but the problem was that this happened about 5 years too late, and as both of the motherships were coming into rough economic waters … only difference between the fate of Ford and GM vis-a-vis Ch.11 was that Mullally saw that the had to double-down on the loans, as well as jettison anything that was a marginal contributor…

  • avatar

    I still think that it was a massive mistake by Ford to dump Volvo but I’m not running that ship.

    Geely (and all the other owners like Tata) seem to have a good handle on what works. No fast moves, attend to your knitting and keep your course.

    The biggest issue will be the redesigns. Will the Chinese let the Swedes lead or will they micromange the designs into the ground. So far, so good.

  • avatar

    Volvo’s current problems can be traced directly to the early 90s, when, for the first time in the company’s history, they introduced a completely new platform and engine family at the same time (the 850 series). The cost of the new platform (and its associated 5 and 6-cylinder engines) exceeded two billion dollars, nearly emptying the corporate coffers … and this caused Volvo’s board of directors to panic. At the time they saw the Japanese competition continuing to shorten product cycles and they jumped to the conclusion that they’d never be able to make enough cash off their new FWD platform before they’d be forced to replace it. This fear of future product investment is what chased them into the arms of Ford and the rest is, well, history.

    Although those worry warts on the BOD were wrong–in that two decades later they’re still somewhat successfully spinning product off that platform–I’m still glad I sold my Volvo store in the mid-90s. Mainly due to pricing, Volvo has lost their traditional demographic (in both Europe and North America) and under Ford was never able to successfully target a replacement group of buyers. Why would anyone want to buy a less attractive, less prestigious and lower performing car for the same money as an Audi or BMW?

    • 0 avatar

      “Although those worry warts on the BOD were wrong–in that two decades later they’re still somewhat successfully spinning product off that platform”

      The problems at Volvo Group went far beyond the car division. The Group had joined the mergers & acquisition spree fashionable at the time and had become an unweildly conglomerate. This ultimately led to a crisis culminating in a change of leadership and the sell-off of parts of the business in order to right the ship.

      As for that first FWD platform, its last new product was the first generation C70 launched in 1997. All subsequent new models were on the new P2 platform (98-06 S80, 01-09 S60, 01-07 V70/XC70, 02+ XC90) or the new Ford-Mazda-Volvo C1 platform, starting with the 2004 S40. Current models (S60 and larger, except the old XC90) are on yet another new platform, EUCD. The Board was correct in its assessment of the investment in new platforms, engines, etc., that would be needed.

      The fundamental problem for Volvo Cars was and remains the lack of scale required to generate the revenues to fund those investments. Product cycles have therefore been much longer than those of competitors. Volvo was nevertheless profitable up until 2005 with record sales in 2004 and 2007; but those long product cycles eventually took their toll.

  • avatar
    Educator(of teachers)Dan

    I think Volvo’s gonna be ok. And good for the Chinese that they made something out of a company that us “westerners” basically didn’t want anymore.

  • avatar

    Ford selling Volvo is like turning down flaming cheesecake for dessert when you are about to throw up. Ford’s sale wasn’t a judgement call against Volvo – it was just not the right time for Ford to figure out how they are going to get well again and deal with Volvo simultaneously.

    It was Ford’s loss, but they knew that.

    Volvo is a good company and a good product. It was a great thing for someone interested in having a car company in buying. Geely got lucky and they will enjoy owning Volvo.

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