Volvo Offers Some U.S. Dealers Some Money to Close

Robert Farago
by Robert Farago
volvo offers some u s dealers some money to close

Volvo is adopting the the Big 2.8's' overarching management strategy for '07: cut your way to prosperity. Automotive News [AN, sub] reports that Volvo's sliding sales have reached the point where the brand sells just 260 vehicles per dealer per year. FoMoCo's Swedish division is taking action, "asking its unprofitable and marginal dealers in the United States to give up their franchises." Asking? As in pretty please? The article takes its sweet time getting to the meat of the matter– how much Ford's going to pay these svag dealers to shutter their showrooms– and then serves-up a side dish. AN reveals that Volvo U.S. CEO Anne Belec has already allocated funds for the buyout program but "declined to say how much or how they would be used. Neither would she say how many stores are targeted for closing but made clear that it is more than a handful." I think they forgot to ask "Can you be any more vague?" In terms of actual news, Volvo's abandoning its sponsorship program (goodbye tennis) and leasing programs (in favor of low-interest loans), and focusing its marketing on larger and more heavily loaded cars (just in time for the compact C30's arrival). Volvo's retail advisory board chairman and store owner Ben Stein is not impressed. "The dealers are getting tired of a cut-cut-cut strategy," he said. "We need a game plan for sustained growth." Ya think?

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  • Cammy Corrigan Cammy Corrigan on Dec 25, 2007

    chuckR Huh? What are you talking about?

  • Landcrusher Landcrusher on Dec 25, 2007

    I think I am seeing a trend here. There seems to be a real downside to expanding ones product line in the car business. Volvo was popular when they had a couple models that screamed - VOLVO! Volkswagen also seems to have too many models, as well as a few other manufacturers. Is it possible to go back? What are the penalties for reducing volume? This story talks about the need and cost to shed dealers. Unions have to be a problem, as well as the book cost of shutting a factory. I guess it's REALLY hard to go back to the roots. Is it possible? A good idea?

  • Steven Lang Steven Lang on Dec 26, 2007

    Interesting theory Landcrusher. I would argue that there is a lot more fragmentation of today's buyers vs. those of 15 to 20 years ago. SUV's, CUV's, Hybrids, Premium pickups of varying sizes... and we're not even getting to the fact that so many manufacuters are simply entering into areas that would have been verboten back in the days of yore. Some would say that the peak time for Volvo was back when they had a 240, 740, 940 and 960 to choose from. All boxy, square, safe and you could them in any shape as long as it was a sedan or wagon. I disagree. What's killing Volvo now is that everyone is simply taking on everyone else and the company simply does not have the products to compete at some of the larger segments. The S40, S60 and S80 can not beat out most of their Japanese and German competitors when you look at their current asking prices. Most folks don't think, "Hmmm... I can get $8000 off an S60. They think, "Hey, I want a BMW/Audi/Lexus/Mercedes" and they use the MSRP as a general indicator of what price level they shoul begin their car search process. Now you can also throw in the XC90, V70, C30 and XC70 into the mix. 7 vehicles are far greater than the 4 of that they had back in 1993 (or the 3 they had in 1990) but there are a slew of names they need to fight against even in those niche markets. The fellow looking at a wagon may also take a gander at the SUV's and/or CUV's of other manufacturers. That wasn't the case when Volvo was offering up it's classic square bodies. The C30, a very unique duck in the automotive waters, still has to contend with Mini, Honda, VW, Audi, Nissan, and perhaps Toyota if they decide to move the Tc upscale in the next model run. In this day and age, it's hard to find even one car that doesn't have six other alternatives in today's market. That wasn't the case in the 'Good Old Days' of Volvo. One other note. I always felt that the Five Hundred should have been marketed as a 'Volvo 260'. Volvo still has plenty of cache in today's market and one of the reasons why the 850 was so successful in the mid-1990's was that it appeared to be a good replacement for those who wanted a Camry with a bit more of an upscale feel to it (they went after many of the same buyers). The Five Hundred should have been marketed in a similar way ... but with a far nicer dashboard and door panels than can be found in the 500. All wheel drive could have been a part of the package as well. I can just imagine the tagline, "The Volvo That Has It All." It's always amazed how folks who hate American cars will still gladly consider a Volvo due to it's reputation for safety and durability. I think many mainstream buyers are still looking for cars that are unexciting to drive, but comfortable and pleasurable to own. Volvo may be Ford's answer to those 'import only' buyers in that particular mindframe.

  • ChuckR ChuckR on Dec 26, 2007

    katie Not much of teh funny if I have to explain. I thought it was odd that a Japanese car company would use the name of an Iranian tribe for a car marketed in France.