Volvo CEO on new XC90: 'There is no second chance'

GOTHENBURG, Sweden (Bloomberg) -- The new XC90 is part of Volvo's drive for "more attractive cars" to close the sales gap with BMW, Audi and Mercedes-Benz, the three biggest premium automakers, CEO Hakan Samuelsson says.

The new premium SUV is crucial because it is Volvo's first complete model under the ownership of Chinese billionaire Li Shufu's Zhejiang Geely Holding Group Co. It uses an all-new platform and is the first model with no components from former owner Ford Motor Co.

"There is no second chance, of course. This has to work. We're confident it will," the CEO said in an Aug. 15 interview at the carmaker's headquarters in Gothenburg's Torslanda district.

The second-generation XC90, which replaces a version built since 2002, is a key part of Volvo's $11 billion project to produce a broad range of models on a new platform offering a selection of electric-power variants and safety components.

The XC90 is scheduled for its first public presentation on Aug. 26 and enters showrooms next year.

"I hope that through this product, it will allow Volvo to once again find self-confidence," Li, chairman of both Volvo Car Corp. and Geely, said last month in an interview in Hangzhou, China. "To find once again, the territory that belonged to Volvo in the 50s and 60s, and to once again possess the market share it ought to possess."

Volvo, which introduced the three-point seat belt as standard equipment in 1959, is emphasizing the XC90's safety as well as its premium features. It will load the premium SUV with crash-avoidance technology and accessories such as a crystal gear-shift lever by glassmaker Orrefors and a proprietary touchscreen compatible with Apple Inc. and Android devices.

The BMW X5 and Mercedes M-class rival also will have headlights shaped like Thor's hammer and space for a humidity-controlled cigar case.

'First shot'

"This car is Geely and Volvo's first shot after the merger so it has to be loud and heard widely," said Han Weiqi, a Shanghai-based analyst at CSC International Holdings. "It also gives a hint on the future of Volvo under Geely's ownership, which is to consolidate its position as a premium brand."

Ford Motor Co. bought the company for $6.45 billion in 1999 from Gothenburg-based Volvo AB, which had decided to focus on manufacturing trucks and construction equipment, and the two Swedish vehicle producers no longer have equity ties.

Ford sold Volvo Cars to Geely for $1.8 billion in 2010 as the U.S.-based company got rid of premium brands amid a streamlining project after the global recession.

At the time of the purchase, Li said he intended to help Volvo "recover the ability to generate blood" instead of relying on successive blood transfusions.

Volvo's worldwide sales peaked at 458,000 autos in 2007. Its biggest slice of the U.S. market, now the world's second-largest auto market, was 0.8 percent in 2004, versus 0.3 percent now, according to David Ibison, a spokesman. The brand has accounted for a little less than 2 percent of Europe's auto market for the past three years.

Sensing traffic

The XC90 will be equipped with a more vertical grille than its predecessor, as well as headlamps and indicator lights embedded in hammer-shaped fixtures. It will come with as much as 400 horsepower with an optional electric motor add-on.

Safety features include systems to sense other cars' distance and speed at an intersection, prevent the SUV from straying from its lane and tighten seat belts in the event it leaves the road. Volvo is betting on the model helping the company reach annual sales of 800,000 vehicles and an operating margin of 8 percent of revenue, in line with premium-auto competitors, by 2020.

The manufacturer sold 427,840 cars in 2013. Delivery growth this year is likely to be "close to 10 percent," Chief Financial Officer Hans Oscarsson said in an interview, compared with an earlier forecast of a "good 5 percent" gain.

Production of the current SUV at the Torslanda plant ended in July. The model is still being built in Daqing, China, exclusively for sale in that country as the XC90 Classic.

Even with the brand's focus on safety, which includes a program to eliminate car-crash fatalities by 2020, drivers look at all aspects of a vehicle when buying a Volvo, said Andreas Bauer, a co-manager of the Autohaus am Goetheplatz dealership in Munich that handles the marque.

"The most important thing is that the design of the car appeal to the customers," Bauer said by phone. "People won't buy the car for its safety features if they don't like it aesthetically."