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Old 09-07-2004, 05:30   #1 (permalink)
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EU:Volvo aims to play in the luxury big leagues with addition of V8 offerings

Volvo aims to play in the luxury big leagues with addition of V8 offerings
MARK RECHTIN | Automotive News

GOTHENBURG, Sweden -- Volvo Car Corp. wants to increase the prestige of its automobiles by offering a V8 in its XC90 sport wagon and possibly other vehicles.

Volvo's first V8, a 4.4-liter, 315-hp engine from Yamaha Corp., arrives early next year in the XC90.

Sources say that because the XC90 shares a platform with the S60, S80, V70 and XC70, there is a strong chance that some of those vehicles also will get the engine.

By adding V8s, Volvo hopes to challenge Mercedes-Benz, BMW and Lexus by moving beyond its status as a "tweener" premium brand similar to Acura and Saab. This will be especially true in the United States, where Volvo sells 30 percent of its vehicles and likely will sell a majority of its V-8 engines.

Volvo is relying on features other than a big engine to step up the luxury ladder. In recent years, Volvo has added rollover protection and instant-traction systems to the XC90. It also has added computer-controlled chassis control to the S60R. A blind-spot alert system arrives this fall on many of its vehicles.

Volvo interiors also have been upgraded.

With more negotiating power under the Ford Motor Co. purchasing umbrella, Volvo can afford higher-end components for its vehicles.

'It makes sense'

Volvo's top executives won't confirm the plan to move further upscale, but they don't deny the merits of such an approach. They also admit they have a way to go to match the image of top German producers.

"Logically it makes sense (to expand the lineup) if the V8 engine is available," Hans-Olov Olsson, CEO of Volvo Car Corp., said at a press event here.

"We have to look at the whole product range," Olsson said. "Certainly there is room at the top of the range, and there is a key role for the V8 in the United States."

Volvo managers say that offering the V8 in other models already is in the works.

"If the V-8 is accepted in the XC90, then we can move on to other cars," said Hans Wikman, Volvo vice president for large cars. "We can continue climbing in the luxury segment. Having a V8 will bring us new customers and make Volvo more exciting."

Wikman said the decision to expand the V8 into other cars is "just a matter of time and money," and will be made within a year.

When pressed, he expressed confidence the decision will be affirmative.

"Some cars you need to drive the company's image," Wikman said. "Icons are important. We don't look at it like we're taking on the Germans. We look at it like capturing volume."

Spreading around the V8 makes sense from a cost standpoint, says Eric Noble, president of The Car Lab consulting firm in Orange, Calif.

"Once you get a V-8 engine, you need it in as many vehicles as possible to amortize the cost," Noble says. "If Volvo really wants to compete against the 5 series and E class, they need that V8 available."

V8 engines are essential for luxury brands because they bolster the brand's image and sweeten profit margins, Noble says.

"The V8 engines may only be 20 percent of the mix for Mercedes and BMW, but each one of those cars sold with a V8 provides $10,000 more per unit in price premium," he says.

The XC90 is Volvo's top-selling vehicle in the United States. Through August, the automaker sold 93,817 vehicles in the United States; 24,127 of those were XC90s.

Volvo sales in America are up 3.2 percent from 2003, a record year in which Volvo sold 134,586 vehicles.

Adding the V8 could give a much-needed kick to the aging S80. Only 9,646 units were sold in the United States through August.

The car is scheduled for a redesign in fall 2006.

Volvo executives say they want to sell 600,000 units a year globally by the end of the decade. This year they are on a pace to crack 450,000 units, which would be a record.

Note of caution

Although a V8 should add prestige, the downside is that the engine is being built by a Japanese firm known more for motorcycles than for luxury goods.

A Yamaha engine lacks the strong image of an engine developed in-house by BMW or Mercedes-Benz.

Another downside: The German brands and Lexus offer their top vehicles based on rear-wheel-drive platforms, which are seen as more luxurious than the all-wheel-drive adaptations Volvo will make from its front-drive platforms.

Vic Doolan, who marketed BMWs in the United States in the 1990s before becoming president of Volvo Cars of North America Inc., knows all about the challenges of upgrading a brand.

So while he is pushing hard for Volvo to apply the V8 into other vehicles, he expresses a note of caution.

"You can't be like Volkswagen and just bring out a V8 engine and declare yourself a luxury brand," Doolan says. "You have to earn your premium."
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