Volvo in crisis

High fuel prices are causing sales of Volvo’s rough cars to plummet in Sweden, too

Volvo has long stood for "safety with Swedish steel" in Germany, but this concept is no longer particularly contemporary. Rising fuel prices and the environmental discourse are causing noticeable sales problems for the voluminous Volvo sleds today. In the homeland Sweden one speaks of a Volvo crisis.

Volvo means "I roll," but that doesn’t apply to the SUV monster XC90, which remains on the showroom floor in the primary sales country, the U.S., and elsewhere. And just a few years ago, the XC models (XC stands for Cross Country) were Sweden’s biggest single export in the USA.

The concept of putting safety before fuel economy was commendable in its time and a world-famous part of the image of the Volvo brand. In Sweden, with its rough distances, the comfortable long-distance gas-guzzler is still the most sold passenger car. For Swedish company representatives, a black V70 is still the preferred leasing model. In contrast, public employees are now much more likely to vote for Toyota.

The Volvos consume too much fuel. This is now also the case for ordinary Swedish consumers, who used to make the purchase of a Volvo almost like a patriotic act. The Svenssons and Johanssons now have their eyes on the hybrid gasoline/ethanol models, especially because anyone who buys an okowagen until the end of 2009 with a government subsidy of 10.000 crowns (about 1.040 euros) can calculate.

In May, 30% of new cars sold were FFVs (flexible-fuel vehicles), compared to 14% in May 2007. Otherwise, ethanol is used as a fuel on a large scale only in Brazil and the USA. In Europe, Sweden is a clear pioneer, while Germany lags behind. Ironically, however, a model that is made in Germany has been chosen for the third time by various panels to be the okowagen Nr. 1 have been chosen. It is the preserved Ford Focus Flexifuel, which has been produced for several years with a hybrid engine in the Ford factory in Saarlouis – exclusively for Swedish consumption, bypassing the German consumers, so to speak.

Volvo does not score very well in Grona bilister’s evaluation, as there are cheaper models that are just as good. Incidentally, Volvo’s smallest flexi-fuel vehicle, the C30, uses Ford’s Focus chassis. The situation is reflected in Volvo Car Corporation’s latest quarterly report, which shows a loss of 725 million kronor. 91 million in the second quarter of last year. In the Swedish media, people point to Volvo’s lack of foresight in the discussion about global warming, while Volvo cites the worsening dollar exchange rate and rising oil prices as excuses.

1.200 employees of Volvo in Sweden now face dismissal. Since 1999, Volvo has been part of the Ford Group, which is not doing too well either. The bad result of Volvo is bad news for the management in Dearborn, because the market value of Volvo has dropped by one third since its purchase. The Swedish homepage of Volvo Car Corporation is now almost desperately marketing a green line with various perks for the okomodels that exist in spite of everything. Offers 10% insurance discount, the same discount on Hertz rental cars if you own an ecological Volvo car, cheap E85 fuel (as if that were necessary), free Ecodriving lessons and Green Car Drive, which means car pools at affordable fees for college and university students. And in the fall, they are us, three well-behaved "model siblings" will be launched, which already comply with the 2012 EU standard of 120 grams of CO2 per kilometer.

Whether that helps? Dearborn was skeptical and preferred to let the Volvo go the same way as Jaguar and Landrover, but this time not to the Indian Tatra. Instead, rumors of a sale to one of the big Chinese car companies have recently surfaced.

This would be a joyless end for Volvo, whose first production model left the factory in 1927. The big breakthrough for the Goteborg company came with the car boom after the world war, with Volvo PV444 and the international best-seller Amazon, the rough and almost indestructible models of the 200 series in the 1970s – in Sweden known as "Sozi-Container". In the following decade, with the 700 series and later series, the focus was on luxury models with more feeling, which were particularly popular with American customers.

Of course, the sleek Volvo P1800 sports car that Simon Templar, alias Roger Moore, used to escape his numerous pursuers in the British TV series The Saint should also be mentioned. But that was an interlude. Volvo has also played a role in contemporary German history. The GDR Staatsfuhrungsghetto in the Wandlitz forest estate became known in Berlin vernacular as Volvograd, an expression that referred to a special delivery of the 264TE (Top Executive) sedan to Erich Honecker and his team.

Volvo’s bad luck with green models

However, it is unfair to claim that Volvo always focused on fat cars. There were also small and medium sized vehicles, the most famous being the DAF small car, which was made in cooperation with a Dutch car manufacturer. But when it comes to small and medium sized cars, one has to reckon with formidable international competition. After a number of excursions and impetuous cooperation plans with other large carmakers, the company returned to its core profile of large cars in the 1990s, which gradually paid off – but is now a source of uncertainty for Volvos.

Nor is it true that Volvo has never been interested in environmentally friendly fuel alternatives. For eleven years there was a Volvo running on biogas. Biogas is more environmentally friendly and less controversial than ethanol alternative E85. 15 percent is still blended with gasoline, but in winter the proportion of gasoline in Swedish filling stations is increased by stealth. Biogas is also decidedly cheaper than E85, but you have to fill up at special biogas stations, and they haven’t kept up with the production of biogas Volvos in Sweden. So in 2006 they loved to drop this oko-dream model, called Volvo Bi-Fuel, although nowadays the future of biogas cars can be seen as positive again.

Before, the biogas flop was very disadvantageous for Volvo, because the company missed the ethanol wave, which the domestic GM competitor Saab knew how to use purposefully. Now the value of used cars is very low, you can buy a Bi-Fuel for about 30 000 crowns. Not particularly pleasing for businesses and the environmentally conscious who bought the bi-fuel car in good faith.

But the last word has not been said. According to Grona bilister, Volvo V70 and V50 were among the best-selling FFVs in Sweden in May this year, albeit in fierce competition with the Saab 9-5 Biopower and Ford Focus Flexifuel. Volvo’s Swedish slogan "Volvos varde varar langst" (Volvo’s value lasts longest) seems a bit outdated nowadays.