Volvo Needs To Cut And Share
Li Shufu, Chairman Geely
Two months ago, we wrote that Geely will pour $11 billion into a development program for the next generation Volvos, and that half of that money would go to Sweden. Our commentariat did not quite buy that and said that the technology will go to China. Right they were.
Volvo will open a new R&D Center in Gothenburg alright, where it will develop the announced modular architecture called SPA (Scalable Product Architecture) and VEA (Volvo Engine Architecture). But it will be a cross-brand strategy for Volvo and Geely. A modular architecture has high up-front costs, it only makes sense when deployed in volume. Strangely, Volvo now says that the R&D Center will develop a new C-segment car, and “in parallel, the development of the Volvo Cars architecture for larger segments (SPA) continues within Volvo Cars’ own R&D organization. The first SPA vehicle will be launched in 2014.” Lower volume larger segments are not as much suited for modular as smaller segment high volume cars.
But first, there will be painful cuts. Volvo isn’t doing so well, and it needs to shed “1,000 more jobs and save more than $200 million to reach breakeven this year after sales and Chinese growth have lagged,” as Reuters reports.
Volvo already did cut 900 contract staff last year, now 750 consultants and some white collar staff will need to go.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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Chinese are just hanging Ina holding pattern till they can snag some existing tech. I say put a death watch on Volvo, it'll take a few years but when every new model is not better than the competition, you have a problem. And when every single model moves away for what made Volvo a Volvo, that,s just suicidal.
I concur. Volvo death watch. I give them 6 years.
Look from Geely perspective. What else would they spend the money to buy Volvo, then invest some more in it? It's not like Volvos are immensely profitable or selling in huge volumes.
Is Volvo laying off engineers or assembly line workers?.. that should tell you what the Chinese masters need from Volvo