New Volvo Cars CEO Stefan Jacoby explains how the manufacturer intends to expand within other world markets, whilst returning to its core Swedish design values during a new chapter under Chinese ownership.
When Stefan Jacoby took over as Volvo chief executive a few weeks ago he vowed he would give himself 100 days for a deep dive into the company to visit factories, research and development facilities, dealers and to avoid the press.
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“Well, I failed. I soon realised I was totally wrong with that approach – there aren’t 100 days. You have to throw yourself straight into the cold water and start swimming.”
This is a new chapter for Volvo, completely independent from Ford and now under Chinese ownership. Not a state-owned business but an entrepreneurial one and also the only Chinese investment in a foreign car company.
Jacoby, most recently a top Volkswagen executive in the US, said: “For 10 years Volvo has been deep in the fabric of Ford ownership and we now face a challenge and with that come opportunities.
“My major focus is to stabilise the business although I have to say that Ford has done a very good job over the past few years and we will continue to have a long lasting relationship with them in terms of engine and platform sharing. Our supply arrangements will stay more or less the same.”
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By GlobalDataThe job, he said, is to define the future of Volvo. “In the mid-90s the company was on a par with Audi at around 400,000 vehicles a year, now Audi is building close to 1mi cars while Volvo has remained static. I believe a vision of 800,000 cars a year in 10 years time is achievable. We are putting together a strategy over the next six months to see how we can grow not only in emerging countries like China, but also in our established markets in Europe and the US. We are working on a product strategy and we have opportunities to get leaner and as a relatively small car company we can move quickly.”
Currently Volvo has capacity for around 500,000 vehicles a year. To achieve the step up Jacoby said additional manufacturing capacity will be available in China. [It currently shares local assembly with a soon-to-be-disbanded Ford-Mazda-Chongqing Changan JV – ed] The company will also establish engineering and research and development capability in the country.
Jacoby has extensive experience working in China for Volkswagen and has also worked for Mitsubishi. “I have lived and done business in Asia and that helps a lot as I think I understand the culture.
“China can represent around 30% of our business in the future but there is also a lot of potential in places like Eastern Europe, Australia, South Africa and Brazil. In Western Europe we have around 1.5% of the market and I believe we can grow.
“We have survived the economic meltdown with the help of Ford and have generated profit in the first half of 2010 along with positive cash flow – and we should finish the year on a positive note.”
Being owned by the Chinese provides opportunities to expand the Volvo brand in that country but Jacoby said it will not be so easy to help Geely in Europe.
“We are a luxury brand and I can’t see Volvo dealers selling Geely products and our new owners understand this.”
Jacoby indicated that the company will move away from the ‘sports executive’ car approach of recent years.
“We need to focus on luxury – I don’t believe in the word premium, it sounds like you are making people pay for something they do not necessarily get. Volvo has lost its distinguishing points as a product. You can immediately recognise you are sitting in a BMW or an Audi for example and I don’t think Volvo is there yet.
“The first project is to define what the brand stands for. In the Volkswagen Group everyone knew what each individual brand meant. Volvo at the moment is not sharp enough or in harmony of what the brand stands for.
“It needs to return to its Swedish roots. Not so much sporty but more functional with Swedish/Scandinavian elegance – different from say Jaguar or Bentley. Simplicity is the key.
“We need to stop copying the Germans we should express what Scandinavia stands for – high values for human beings, strong social security and welfare. We don’t have to be the same size or have the same package.
“A new face is something we are looking at. We need a more distinguishing front end and this will be the first step in our new models.
“We don’t want to put technology into our cars for the sake of it. We want technology that is easy for people to understand and use. They need to be comfortable with it.”
Perhaps a more conservative approach? “Well the new S60 is very good dynamically and shows what we can do, but is it where we need to be? If I am looking at role models from the current range then XC60 is what Volvo is all about and the C30 is fantastic. It has great potential and a very attractive design.
“We are looking for practical functionality and good Swedish design. What do I mean by that – well you can look at IKEA for exactly that, it is also very simple. We need to combine this with elegance.
“Apple is another good example of functionality, even young children find Apple products easy to use. Things can be too complicated – too much going on around you and too much to learn.
“My dream is to have a car without a handbook. You look at some of these, particularly in some premium cars, and they are as big as a bible. Maybe there is too much technology and not enough aimed at the human interface.”
While looking for simplicity, safety remains a priority, as does the environment. Jacoby said: “We are working on various initiatives. We will introduce the C30 electric model into small fleets next year and the V60 will be available as a plug-in hybrid from 2012 with emissions of just 50g/km of CO2.
“EVs are not yet competitive but we will achieve economies of scale as the market builds. Battery prices are already coming down.”
Jacoby said that Volvo was working on putting the batteries in the central tunnel through the passenger cabin both for safety, and for vehicle balance as well as being able to use larger batteries for greater range.
He added that the company is currently running a health check on its products and vehicle architectures. “It may be that we come down to just two, or even one platform. All options are open as are potential partnerships with other companies, you see this all the time. We just have to ensure we keep our own identity.
“We will also continue to develop our own engines. We see powertrains as a core competence. We will have new engines which comply with all the upcoming emissions regulations worldwide – from low to high capacity, petrol and diesel.
“That said, I think engines will reduce in size across the industry. The latest economic crisis has pretty well seen the end of the eight cylinder engine and who knows even the future of the six cylinder. Downsizing engines is being accepted even in the US and by doing this you reduce weight and CO2.
“I can also see a future for electrification to boost power in four cylinder engines and in four-wheel-drive systems.”
