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Old 01-24-2006, 08:44   #1 (permalink)
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US:Volvo weighing proper strategy for bringing new three-door hatchback to U.S.

Hatching a Hatch

Volvo weighing proper strategy for bringing new three-door hatchback to U.S.

By MARK RECHTIN | AUTOMOTIVE NEWS

AutoWeek





DETROIT -- Volvo's C30 three-door hatchback is the Swedish automaker's first attempt at a small car in more than 20 years, and the company is struggling with the right ingredients.

In little more than a year, the C30 will be sold here. Yet Volvo Cars of North America still has not determined which engine will power the vehicle, how the C30 will be equipped and how it should be priced.

The issues are critical because Americans have not embraced most small premium vehicles in recent years. Volvo's U.S. executives, interviewed here at the North American International Auto Show, where the C30 Design Concept was shown, want a powerful, well equipped car. But will it then be too expensive?

Volvo executives say the company is considering three avenues for the U.S. edition of the C30. But they can select only one because of limited volumes expected here. The choices, with estimated prices, include:

Pitching the car as an entry-luxury urban commuter with an inline four-cylinder engine and a sticker price of around $23,000.

Sacrificing some volume but gaining performance credibility by equipping the C30 with a turbocharged five-cylinder engine for around $25,000.

Loading it up with gadgetry and all-wheel drive and pricing it at around $30,000.

Anne Belec, CEO of Volvo Cars of North America, says the car must have "a purity of concept." She is against equipping the vehicle as "small, cute and with a base engine."

She says: "It needs a great powertrain, great audio and great wheels. It's important for people to not think of it as a small car because then they expect small power and a small price."

All-wheel drive?
Hakan Abrahamsson, the C30's project director, says a turbo-five is the most attractive option because of the performance premium.

Debate rages within Volvo about whether to equip the car with all-wheel drive. Abrahamsson prefers not having it, even though it would help with traction.

"Small, light and quick equals a handling advantage," he says. "Every kilogram counts in speed and fast handling. You may get ultimate traction with all-wheel drive, but it's heavier and less agile."

The hardest part, Abrahamsson says, is that Volvo will be chasing buyers who are new to the brand and who may need convincing that a family-car company can create a pocket rocket.

Volvo can make these decisions so late in the game because the car is derived from the same platform as the S40 sedan and V50 wagon. The C30 is 9 inches shorter in overall length, though slightly wider, than those vehicles.

Volvo product planning czar Lex Kerssemakers says Volvo also evaluated a two-door coupe and a wagon. Those proposals were killed because "the design was not crisp. We know we will lose some sales because of that, but we wanted to be outspoken."

Volvo Cars of North America can choose only one variant because the European and Asian markets will gobble up the majority of the volume, expected to be about 75,000 units globally. The U.S. sales arm cannot afford the cost and complexity of bringing multiple variants of a car that likely will bring only 1,000 sales a month.
Difficult segment
It doesn't help that the weakness of the dollar against the euro and Swedish kroner will force up the car's sticker price in the United States.

Several failures in the compact premium segment, such as the BMW 318ti, Mercedes-Benz C230 and Saab 9-2, suggest that demand for the C30 will be modest.

The Mini is considered a success despite its cramped interior and modest power.

"From an equipment basis, the Mini does not add up," Belec says, "but people have to have it because it's cool."

Volvo Car Corp. CEO Fredrik Arp says Volvo might be willing to forgo profits to sell the C30 in America at a price Americans would be willing to pay, then make up the difference on high-margin vehicles such as the XC90 crossover.
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