Volvo Cars to Slash U.S. Model Line-Up in Effort to Reverse Sagging Sales

Volvo Cars, the Swedish carmaker owned by Zhejiang Geely Holding Group Co. of China, will slash the number of models it offers in the U.S. to focus on its best- selling vehicles in a bid to reverse years of declining sales.

“Five or six is probably a good number,” said Doug Speck, head of Volvo’s operations in the U.S., in a telephone interview yesterday, noting that Volvo currently offers nine models there. “We have to focus on the key segments with significant volume potential.”

The V50 station wagon will be discontinued, falling victim to U.S. car buyers’ change in taste from wagons to crossovers, Speck said. He declined to say when the car will stop selling, saying he wants to tell his 316 dealers first. Volvo, based in Gothenburg, Sweden, is still reviewing which other models will be cut from the U.S. line-up and has decided to mainly focus on the new S60 sedan and the XC60 and XC90 crossovers, he said.

Volvo’s U.S. sales have declined steadily since 2004 when it sold 139,384 cars. Deliveries slid 12 percent last year to 53,948 vehicles, while premium-segment rivals like Bayerische Motoren Werke AG and Volkswagen AG’s Audi gained. Volvo currently offers about as many models in the U.S. as the VW brand, which sold 256,830 vehicles in the country last year.

Focusing on fewer models is a good idea, said Michelle Krebs, an analyst at Santa Monica, California-based Edmunds.com.

“You can’t possibly effectively market that many models for a brand that small,” she said by phone from Detroit. “They need to trim their model line-up and put some marketing dollars behind the volume products they really want to push. They don’t have a loud enough voice.”

Marketing Push

Volvo rolled out a marketing campaign Jan. 24 pushing the S60. The carmaker will spend more on U.S. marketing this quarter than it did in all of last year and will sustain this level of spending through 2011, Speck said. This year Volvo expects “‘double-digit” percentage growth in the U.S., he said.

“They’ve given us a significant escalation in our marketing budget versus the last three years,” Speck said from Volvo’s North American headquarters in Rockleigh, New Jersey. Ford Motor Co., which sold the brand to Geely last August for about $1.5 billion, reined in Volvo’s marketing to save money as it prepared to offload the carmaker, he said.

The S60, which competes with the Audi A4 and BMW’s 3- series, will probably overtake the XC60 this year as Volvo’s best-selling U.S. model, Speck, 51, said. The S60, which starts at $30,975, comes with an optional system to automatically stop the vehicle at low speeds if someone walks in front of it.

Safety Reputation

Volvo’s long-held safety reputation has become less of an asset as other brands have become safer, Krebs said. Still, some customers continue to be drawn to the brand for this reason.

When Brooke Geller, a lawyer at the U.S. Department of Agriculture, looked to replace her Nissan Maxima a year ago, she chose a Volvo C30 coupe, partly because of that reputation.

“I wanted a small car,” said Geller, 33, who lives and works in Washington, D.C. “But I was concerned, I see these little Smart cars and the smaller normal-sized cars, and it seems they would be bad in an accident. I looked up Volvo’s safety ratings and it got really good marks, so that was very important to me,” she said by phone.

Kjell Bergh, who owns two Volvo dealerships in Minneapolis, Minnesota, said Volvo has suffered from its lack of fuel- efficient cars in the U.S.

“The very seriously lacking element in the United States is that we have exactly zero green products -- no diesel, no hybrids, nothing,” Bergh said by phone. “That’s a major error because Volvo’s customers historically have been by far the most green-oriented clientele in America. They have migrated to other brands for lack of choice.”

Speck declined to say whether Volvo may bring diesels to the U.S. Introducing hybrids and full-on electric cars, which it will do in “coming years,” is a higher priority, he said.

To contact the reporter on this story: Ola Kinnander at okinnander@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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