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Ford Takes Risk Going Upscale with Volvo

December 10, 2007

DETROIT – Ford Motor Co., after abandoning plans to sell Volvo Car Corp., now wants to move the brand more upmarket in a bid to boost sales and profits. But it is a risky strategy that is making Volvo executives in Sweden jittery because it could alienate traditional buyers, according to the Detroit News.

Last month, the day after Ford said it would keep Volvo - at least for now - the chief of Ford's European operations flew to Sweden to deliver a tough-love message to the folks in Gothenberg.

Inside the ultramodern Volvohallen, some 300 of Volvo's top managers sat uneasily in blond wooden chairs as Lewis Booth ran through a few slides detailing the company's third-quarter financial results. Once again, Volvo had failed to turn a profit.

His message was simple and direct: Volvo must become competitive on costs and revenues and it must do it by becoming a legitimate premium alternative to rivals like Lexus, BMW and Mercedes-Benz - not by reinventing Volvo, but by intensifying its focus on safety, simplicity and Scandinavian design.

"It's not a change of direction, it's just building on what they've got," Booth, chairman of Volvo Cars and president of Ford's European division, told The Detroit News. "We're looking to take customers from everybody. We're not going to achieve it by mimicking our competitors. We're going to achieve it by being what Volvo is - a strong Swedish brand with the values of that society."

Some executives in Sweden worry that by trying to transform Volvo from a near-premium brand into a full-fledged luxury marque Ford will damage Volvo's pristine image, according to Ford and Volvo sources. But they also know that Volvo could only survive as part of a larger, global car company like Ford. Volvo CEO Frederick Arp declined to be interviewed for this story.

At the same time, there is a growing realization in Dearborn that Ford, poised to sell Jaguar and Land Rover, needs a global luxury brand to truly compete on the world stage.

CEO Alan Mulally pushed to sell Volvo to raise much-needed cash for Ford's North American restructuring and narrow his international management team's focus to fixing Ford itself. But some advisers urged against unloading what is widely seen as one of the most respected brands in the automobile industry today.

Ford has also become increasingly dependent on Volvo's safety technology and engineering prowess, with Volvo platforms now providing the foundation for flagship vehicles like the new Lincoln MKS sedan.

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