Auto Channel

US production in the future?

Rumors have surfaced about Volvo considering closing down their factory in Ghent, Belgium. The Ghent plant, which recently achieved status as the world's first carbon-dioxide free vehicle plant, has been in operation since 1965 and between 1972 and 2006 has seen 250,000 cars produced for the US market. But now, the weak dollar makes European car production for export to the USA very difficult and allegedly threatens the Ghent's plant operations according to AutoMotorSport.se.

Volvo CEO, Fredrik Arp, over the summer stated, "...production in the US is not on the table, but we have a close look at the situation all the time". With the biggest potential increases in sales found in Asia and Russia, Volvo is nowhere close to its maximum production capacity of some 600.000 cars annually, therefore, no need for a new factory, especially in the US.

However, the sales figures for the last few months in US show that the new V70/XC70 are declining, meeting only 50 percent of the estimated targets. Big sale item, the XC90, is also dropping and the S40/V50 is too expensive in the US. Volvo is doing a quick analysis of the situation and will have a new plan ready for spring.

But, right now it looks discouraging as 2008 may be the first year since the 1990's that Volvo dips below 100,000 units. 2004 was the best year yet with 139,000 cars sold through 350 dealers in the US. 2006 sold 116,000 units and 2007 will be around 106,000 cars. But if Volvo goes below 100,000 cars, there will be less need for dealers which could result in buyouts. However, one way to boost the sales would of course be the possibility of putting a "made in the USA" stickers on the cars.

Volvo does not want to close down the factory at Ghent, but the dollar is weak against the Euro and Swedish Kronor. Production of the new V70/XC70 moved to Torslanda Sweden while the Ghent plant produces the old S60, S40/V50 and the C30. A full work force will be used in week 20, when the production of the new XC60 starts, but Volvo may try to put off as many as 1,000 employees until then, which currently has 4,500 people.

As reported earlier, the next generation XC90 is delayed as a result of being too expensive and not fuel efficient enough. Volvo will start all over again and build a smarter, better car, but they loose three years and have to make a second (big) facelift of the present XC90 in 2009. The next generation XC90 will not be ready until 2011-2012, but maybe that will be the first Volvo produced in the States? Ford has plenty of production capabilities so the move should not be that hard for Volvo.