Chugach Mountains, ALASKA — These are rough roads for a car most often associated with affluent urban living, but with the introduction of the V70 XC, a vehicle designed distinctly for the American market, the Swedish automaker Volvo Cars is setting out for new and uncharted territory.
For years, Volvo enjoyed a unique and distinct identity. Seen as the leader in automotive safety, it saw sales soar as aging American baby boomers settled down to start families. But in recent years, Volvo’s message became muddled as more and more competitors began to focus on safety. And Volvo missed one of the most dramatic shifts ever to occur in the American market. A decade ago, when Volvo was at its peak, minivans, sport-utility vehicles and other light trucks accounted for little more than a quarter of the American market. Today, that’s approaching 50 percent, and boomers by the millions are trading in their passenger cars for light trucks — vehicles many perceive as being even safer than Volvo’s boxy sedans and wagons.
"In America, wagons have an image as a housewife vehicle," said Helge Alten, president and CEO of Volvo Cars North America, during a long drive through the rugged mountain passes north of Anchorage. "People want SUVs, and Volvo needs to have the right products for North America," the company’s single largest market.
Bridging the car-truck gap
Volvo V70 XC 2Enlarge Photo
1999 Volvo V70
But Volvo planners knew AWD alone wouldn’t be enough to draw many buyers back from sport-utility vehicles. So they raised the XC body a bit to give it a more macho, sport-ute-like appearance. Drivers also get a higher "command" seating position, a big draw for SUVs and other light trucks.
The design does create some tradeoffs. With its carlike platform, the XC boasts smoother ride and handling and markedly better fuel economy than hefty SUVs. But its limitations became obvious when a reporter tried to ford a small stream. He "high-centered" the wagon on a small boulder, leaving its wheels spinning helplessly.
But does that really matter? asked Peter Boisen, Volvo’s corporate product concept manager. "How many creeks does the average driver have to cross on the way to go shopping?" What does matter is that "it will get you to work in even the worst weather conditions."
The SUV challenge
Some critics question Volvo’s decision not to develop a true sport-utility vehicle, but considering there are already many players well entrenched in that segment, it may have been the only logical option. And while the hybrid niche is small right now, it appears to be headed for significant growth. Subaru, for example, reversed nearly a decade of declining sales with the introduction of the hot Legacy Outback, and Honda is struggling to meet demand for its CR-V.
"Clearly, (Volvo) is in a catch-up mode," said auto analyst Joe Phillippi of Lehman Brothers. "But if they can pull this off, they can carve out a nice chunk of what is now a niche as it evolves into a real (high-volume) segment."
Alten believes Volvo can sell 10,000 to 15,000 XC wagons a year. There’ll be some "cannibalization" of existing Volvo models, but he is confident many buyers will trade in competitive passenger cars. And some XC customers may even trade in SUVs and minivans, Phillippi added, to get better fuel economy and a more comfortable ride.
1999 Volvo V70
Signs of change
The XC is — for Americans, at least — just the most visible sign of change at a company that has faced several years of turmoil. In 1994, Volvo unexpectedly scuttled a long-planned merger with the French automaker Renault. The Swedish automaker’s chairman, Pehr Gyllenhammer, resigned in the wake of that break-off, and the next chairman aggressively moved to sell off Volvo's nonautomotive operations. Then, in March of this year, Gyllenhammer’s successor, Bert-Olof Svanholm, died following a long illness.
In many ways, the abortive Renault deal proved good for Volvo, according to Alten. "When the deal collapsed, it was urgent for us to get costs down. We had to tackle our distribution network" and begin work on a range of new products that might not have been needed if Volvo had paired off with Renault, Alten said.
There are signs Volvo is on the right road. Worldwide revenues during the first half of 1997 rose to 89,024 Swedish kroner, up from 78,059 a year earlier, and net income more than doubled, from 2.754 million SK to 6.462. European sales are expected to top 230,000 this year, up as much as 20,000 from 1996. And in the U.S., volume rose 3.8 percent during the first eight months of 1997, to 70,123 vehicles.
Still, there are plenty of long-term challenges. Volvo is stretching both its financial and engineering resources as it develops a range of new passenger cars that expand its appeal beyond traditional buyers. The recently introduced C70 coupe hints at the direction the automaker is taking. Its curvaceous design stands in sharp contrast to Volvo’s well-established, angular look. One of the biggest challenges will be to hang on to — and reinforce — the image of safety leadership Volvo long enjoyed.
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