Is Volvo ready to roll again?
A laggard lately, the Swedish safety king is launching a new product offensive.
By Alex Taylor III, FORTUNE senior editor

NEW YORK (FORTUNE) - After a runup in the early years of the millennium, Volvo is falling behind the pack.

Its U.S. sales fell 11 percent in 2005 and are down another 11 percent this year. The Swedish brand renowned for its family values ranks behind such middle-of-the- pack players as Subaru and Infiniti in sales and just barely ahead of also-rans Suzuki and Mitsubishi.

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That's a major problem for Ford Motor (Research), which bought Volvo in 1999 expecting it to be a high-growth company. It believes Volvo is a more vibrant brand with greater expansion possibilities than its other upscale brands Jaguar, Lincoln and Mercury.

Volvo has been hurt by an aging product line, slow- selling new models, and more aggressive competition from Mercedes, BMW and Audi. It has been slow to capitalize on the success of its one SUV, the XC-90, and has allowed Toyota (Research) and Honda (Research) to grab some of the safety and environment limelight.

To get up to speed again, Volvo brought in an outsider, Fredrik Arp, as CEO a year ago and tasked him with the rollout of three important new models. His mission: To boost global sales from 445,000 last year to 600,000 by 2009.

Visiting New York in May to watch the start of a leg of the Volvo Ocean Race, Arp handicapped Volvo's opportunities:

"Currently we are a little bit behind the market in terms of sales. That is partially because we we're not having a lot of launches in 2006.

"The first new model is the C70 coupe and cabriolet, which we launched in the beginning of the year. That's going to be a doubling vs. the old C70 in volume -- abut 20,000 cars worldwide.

"It has a three-piece retractable top so you don't have the road noise of a typical cabriolet. It looks very, very promising and it will give us some halo effect. People will say the old boxy Volvo from the 1980s is in the past.

"The next beauty is the S80. It will be in the U.S. in the first week of February '07. It has more luxury than we used to have, as well as new safety features.

"Then we have the C30 design concept. We will launch the production car in September in Paris. This is a smaller Volvo with a two doors and a hatchback. This is a compact car in a segment where Volvo didn't have anything.

"Overall, we have set a sales target of 600,000 cars by '09. To get there we need to enter another new segment with a good car. So there is one more car coming in the '08-09 time frame. [Analysts expect a baby brother to the successful XC-90 crossover called the XC-50].

"Volvo can be as big as Mercedes or BMW [which sell more than one million cars apiece] but we have to be committed over time, consistent, and decisive.

"We aren't as individualistic as BMW or Mercedes -- we lean more toward the family -- but we're still a prestigious brand of car. If we can grow in a good way, than why not? We have some good opportunities."


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