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April 18, 2020 12:00 AM

Volvo to take hard look at R&D projects, CEO says

Douglas A. Bolduc
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    Vehicle face-lifts are one area where Volvo might cut back, CEO Hakan Samuelsson said.

    Volvo will thoroughly scrutinize its R&D projects to determine which will survive as it tries to recover from the coronavirus crisis.

    "There are thousands of projects within our R&D and we have to question whether we need to do them all," Volvo CEO Hakan Samuelsson told Automotive News Europe.

    Vehicle face-lifts are one area where the automaker might cut back, he said. "We need to reduce our cash burn."

    Volvo is not alone in making hard choices about its future projects.

    The coronavirus pandemic will cause automotive research budgets to decline by 17 percent this year and 12 percent in 2021, according IHS Markit, which said development budgets also are expected to suffer, dropping 13 percent on average in 2020 and 8 percent in 2021.

    "With cash flow drying up due to sales activity grinding to a halt in core markets and little prospect for an imminent 'return to normal,' automakers and suppliers are looking to shore up their finances by preserving cash and other noncritical expenses," the research company said.

    IHS Markit's automotive supply chain and technology team surveyed 140 suppliers and automakers in Europe, North America and Asia. Twenty-eight percent of respondents said they expect revenue will be impacted beyond the next 12 months.

    Respondents also said they expect some R&D activities now outsourced to be brought in-house, especially at midsize and large automakers and suppliers.

    Other projects are being postponed. According to the survey, there could be a six-month delay in mature projects and early-stage projects are most likely to be delayed by a year or more.

    One survey respondent said: "As venture capital money dries up, many startups, especially in lidar development and autonomous-driving software, will disappear."

    Volvo's money-saving push will not, however, come at the expense of its aim to be a leader in some key areas.

    "Electrification, autonomous driving and our future technology development are an absolute priority," Samuelsson said. "Any changes there would jeopardize our strategy, so they will be really safeguarded."

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