Volvo considers North American production

Ford Motor Co's Volvo is considering producing vehicles in North America because of the weak dollar, Fredrik Arp, chief executive of the Swedish brand, said on Monday.

Volvo, Ford's Swedish luxury unit, is also planning to shrink its 350-strong dealer network in the United States in 2008 to align its distribution channel with lower sales volume, Arp said.

"The North American market continues to be difficult for Volvo because of the dollar decline," Arp said in an interview on the sidelines of the North American International Auto Show.

Arp said one way to counter the falling value of the U.S. dollar was to produce vehicles locally.

"It's an alternative," Arp said. "We are into analytical phase now. We are studying (the option)."

Volvo could use Ford's production facilities in North America, Arp said, adding that he expects the study to conclude in the second quarter.

Ford's Swedish luxury unit, which currently has production facilities in Sweden, Belgium and China, has been badly hurt by the strong euro, strong crown and weak dollar, which makes exporting cars to the United States uncompetitive.

Volvo has been the most successful company among Ford's stable of foreign brands, dubbed Premier Automotive Group. But its profitability has declined in recent years.

Ford does not break out the financial results of individual brands, but Arp said Volvo was "continuously close to break even level."

Arp said the 40 percent decline in the value of dollar in the last three years had cost the brand $1 billion in earnings over that period.

"We haven't moved the needle in profitability," he added.

Volvo sold 458,323 vehicles last year worldwide, up 7 percent from 2006. But sales in the U.S. market fell 8.4 percent to 106,125 vehicles.

Arp said he expected U.S. sales for the brand to fall another 10 percent in 2008, but then remain at that level in the near term.

"I would expect (sales) to around levels of 2008 and slightly grow from there," he said.

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