Economy, Auto

Volvo Readying US Factory

Volvo Readying US FactoryVolvo Readying US Factory

Volvo will build the vehicles that sell best in the US at its new factory there, but not the newly redesigned XC90 crossover, said Lex Kerssemakers, the brand's US chief, Automotive News Europe writes.

Giving the biggest clues to date, Kerssemakers, CEO of Volvo Cars of North America, said "we will select a model that will be in the highest demand in the United States."

He noted the compact XC60 crossover and the S60 compact sedan are the brand's hottest US vehicles. Sales of the XC60 rose 54 percent in the first four months to 7,754.

Kerssemakers would not disclose how many models Volvo eventually will produce in the United States. Volvo has said it will initially make 100,000 vehicles at its new $500 million factory in Ridgeville, S.C., near the port of Charleston.

Like its German competitors with plants in the South, Volvo will export vehicles made at its new plant. "It is too early to say," what percent will be exported or whether the factory will be the sole global source for a specific vehicle, Kerssemakers said.

Lars Wrebo, global senior vice president of purchasing and manufacturing, said initially the local content of vehicles coming out of South Carolina would be 55 to 60 percent largely because the engines will be sourced from Sweden.

Volvo would have to produce 300,000 vehicles annually in the United States to justify an engine plant in this country, he said.

The US factory will be one of three Volvo plants producing vehicles based on Volvo's new Scalable Product Architecture -- the others are in Sweden and China, Wrebo said.

The first vehicle to use the new architecture is the XC90 crossover.

"It will be proven technology" when US production begins, Wrebo said.

Kerssemakers last week signed an agreement with South Carolina to build the plant there. He said 7,500 people have indicated on Volvo's recruitment website that they are interested in a job. The plant will begin hiring in 2017 with production slated to begin in late 2018.

The Swedish brand said it estimates factory employment will grow to 2,000 in the next 10 years and "up to 4,000 people in the longer term."

Volvo is following in the path of European competitors Mercedes-Benz and BMW in building a factory in the South, but it doesn't have the sales volume or reputation of the German brands.

Volvo sold 56,366 vehicles in the United States last year -- just more than half of its proposed new American factory capacity. Kerssemakers said Volvo's prestige will rise as its new products hit the market.

Already, the XC90 is blazing the way with positive feedback from dealers and initial buyers and will be crucial in positioning Volvo as a true premium player, he said. "We don't have to start from scratch. The XC90 and the next two to three products will clearly show that Volvo is on the right track."

Kerssemakers said Volvo has 3,000 orders for the XC90 and expects to sell 15,000 to 16,000 of the crossovers in the US this year and 25,000 in 2016.

Volvo will launch 14 vehicles by 2020, about two new vehicles each year and "the majority will replace current products," with one or two all-new vehicles, Kerssemakers said.

The next two redesigns will be the S90 sedan that replaces today's flagship S80 sedan and the V90 wagon that replaces the XC70.