Miscellaneous Features
Interview: Doug Speck, President and CEO, Volvo Cars North America
By by: George Achorn, photos by author
Apr 8, 2008, 09:27

Volvo Cars North America is under new leadership. The largest export market for the Swedish car manufacturer, America is an important stronghold for the brand and sales as-of-late have been lagging. On the upside, the brand’s latest product is some of the best they’ve ever built. On the down, so is everybody else’s save a few marque stragglers.

With the Premier Automotive Group’s Land Rover and Jaguar now officially spun off to Tata and the check for Aston cashed and likely spent, the once Premiere Automotive Group is now simply a group of one. Rumors around the industry suggest that Volvo is still being considered for sale as well, making these interesting times in the halls of Gothenburg and Irvine… well, Irvine for now.

One of the first moves initiated by Mr. Speck, a longtime Ford executive and one with plenty of PAG experience at Jaguar and Land Rover, was to announce VCNA’s plan to box their cubicles Irvine and move their offices back to the company’s facility in Rockleigh, NJ. That’s not the easiest thing to do - Volvo’s personnel having just gone west about five years ago. That said, it’s just one of the difficult maneuvers facing Speck as he takes the helm in the States and Volvo soldiers into its future.

Recently we caught up with Speck at the New York Auto Show and had a chance to sit down with the man. We asked him about the brand’s future, its products, its business, its take on the environment and also his view on just how performance models like the orphaned R-cars fit into the mix.

Swedespeed: Why don’t we start with your move back to the East Coast. Has this been a long time in discussion?

Doug Speck: It is an interesting combination of things. I tell people that my first formal opportunity to speak to the group with this new role that I have was the same day that I had to tell the group that we were going to have to move the business back from the west to the east. It was a day of mixed emotions, if you will. I said to them my personal opinion sensitive to their individual situations but presented on the business side it is hard to argue with the logic.

We are not big enough to justify having our organization in two locations. It clearly isn’t the most efficient way to run our business. It makes it more difficult in two ways: it makes it more difficult to communicate amongst your own team and secondly because we are located on the west coast it makes it more difficult to communicate with Sweden. I think there is a reason why the European brands are predominately on the east coast. I think the business decision is, without question, absolutely the right one. The effect that it has on our staff and even me, I have got a couple of daughters and a wife that are going to have to pick up and move again, makes it hard. We will be sensitive, but we are determined to get it done this year. Having concluded it, we will be better able to run the business.

Swedespeed: When will that be complete?

Doug Speck: We are going to have everything done by the end of the year. We expect that the bulk of the individuals who relocate will probably move over the summer because a lot of them have kids and they will want to get them into fall school.

Swedespeed: Wasn't Rockleigh a larger facility when Volvo was last there?

Doug Speck: We have more staff in Rockleigh today than Irvine. Right now we have about ninety positions in Irvine. We have about 200 employees in Rockleigh. So we are adding a small percent increase to Rockleigh off the base that already exists there. Rockleigh is the location where we are building.

Swedespeed: Do you have to expand what is there or can you make do?

Doug Speck: The building actually has the capacity for 270. We have some planning going on. We will probably end up taking a couple small components and putting them in a separate facility and that will create enough space for all of the Irvine staff that are moving to have space with the rest of the organization in Building B, which is how we affectionately refer to it, pretty eloquent name, Building B. We no longer have A or C, just building B.



Swedespeed: Everybody moves by the end of the year. You said it starts over summer.

Doug Speck: I think you will see people leaving as early as June.

Swedespeed: Do you think you will have much turnover of people during the move?

Doug Speck: I think it is inevitable. I mean, we have done this once before. Previous experience was about half the people remain. You look at some of the other businesses that have done similar things on a larger scale – Nissan. That was their experience.

Swedespeed: I think that is what Volkswagen and Audi are going through right now with the move to Virginia… maybe even less than 50%.

Doug Speck: It is hard. Like the rest of us, you get entrenched in your local community; friends, relatives, kids. You always have to be cognizant of the effect on your children. It is not easy.

Swedespeed: Do you still keep people regionally?

Doug Speck: Yes. We will have a Western region in Irvine. We are in the process of sorting out facilities for them. It won't be in the PAG building. It will be in a separate facility.

Swedespeed: I guess that building is a bit large?

Doug Speck: There will be some bigger decisions about the building and it is unlikely they will ask my opinion.

We talked about how the process was made - the timing. It is an interesting question. I can relate. I actually moved from New Jersey a year ahead of everyone. At that time I was with Jaguar in the 2007 calendar year. I have been and around this whole West coast facility now for eight years. Each year, at some point or another in the year, the questions and rumors arise; "Are we moving back East?" That is not a great way to live, each year wondering if you are going to have to move.

We will resolve that question and it won't pop up any more. So at least we will build some stability around that reality. No one is going to be asking if we are moving again. That will allow us to stabilize the business and focus on just the things that help the business succeed.

In terms of cadence of the decision-making, the decisions went pretty quickly. In the end, Ford, and this is an interesting statement, track back to a statement Mulally made when the decision to keep Volvo was made. He talked about giving Volvo more economy. This is an example of that. The Ford business essentially said to Volvo, "You need to figure out what is best for you in terms for you to run the business well and if that involved a decision to leave the facility then we, Ford, will end up dealing with that issue". And that was actually what released us to make the business decision to move back East, because otherwise, the facility issue would have been significant for Volvo had we had to hang on to it. Ford has essentially taken on that issue.

Swedespeed: Was there ever any pressure to move to Dearborn?

Doug Speck: Nope, never came up. That is a rumor. They said, "Volvo, you figure out the best way to run Volvo." I think it is a great example of autonomy. I was encouraged by that kind of approach if you will.

Swedespeed: You mentioned a West coast region. Are you going to have any people in Detroit?

Doug Speck: No. We will have a regional office in Atlanta, which we do today. We will have a regional office in the west coast and we will have a regional office in the northeast. That will be our regional field structure.

They will have sales and customer relations responsibilities. Basically this is all of the things that a field organization does in terms of interaction with the dealer network. They will be responsible for network. They will be responsible for retail and wholesale in the field. They will be responsible for customer satisfaction, working with dealers. Their responsibilities don't change on the back of this structural change and move.

Swedespeed: Design center stays?

Doug Speck: The design center stays out there (California).

Swedespeed: Do you move your local people there?

Doug Speck: As far as I'm aware we have no plans to do anything other than what we have been doing.



Swedespeed: On to more interesting conversation for you, with the brands there are a lot of changes. You are taking over, adding your own touches to it while your neighbors in the Premier Automotive Group building are departing. How does that change Volvo?

Doug Speck: To me whatever the result of the Land Rover/Jaguar decision that Ford makes, I don’t envision that to have an effect on Volvo whatsoever. We have been riding pretty autonomously. We might have some back shot systems related stuff that is combined. We have some product related plans that were combined. We will craft agreements that address those product related plans, but as it relates to the brand, the image of the brand, and what the customer perceives of Volvo, I don’t see that to have much of an effect… specifically Land Rover/Jaguar.

As it relates to me in this new role, a couple of points: Volvo is a brand that people trust. It is a brand that people are confident about. It is a brand that represents the epitome of safety. All we are going to do is foster those key core values. We are embarking upon a strategic direction that really reinforces the subject of design. As an addition to all of those core values lets say that we will add a consistent focus behind the subject of our also having great designs.

So you will see us move forward and as you see us talking in terms of messages and as you see us get creative from a marketing perspective. Consistently we will be focused on interior and exterior design as a hallmark, benchmark strength for the brand. I think XC60 is a good example of continued evolution. C30 is a tremendous example of that. We have to break the moniker of boring to be able to improve on the subjects of luxury and premium status. Design provides us an opportunity there. That isn't a direct result of me going from this job to that job or Anne going from this job to that job. It is a strategic direction we have really been following now for probably a year, year and half and we will be talking more about it that we have been in the past. You will hear Fredrik speak a lot about design today. I think we will be about all of the things that we have traditionally been about but even more so than in the past we will build really cool looking cars.

Swedespeed: Those are also models geared toward I'd imagine the younger end of your spectrum. Is that something you will try to carry over to the rest of your range, trying to be bolder with the packaging?

Doug Speck: Yes, absolutely. To me it does not matter if you are sixty or thirty. You like cool design. It is appealing.

We use this term 'appeal'. You look at J.D. Power, they have an appeal study, there is a way to measure whether or not you are making progress. That is an objective that we set out for the business in all future designs, to be more bold. I think, again, they have done a very effective job on the last few models. C30, C70, XC60 are all really good examples of following that belief.

Swedespeed: My readers are probably a little bit different than your typical clientele but one of the main focuses we see generally in the enthusiast side of our business is performance. One of the reasons I asked what was going to happen with the changes to PAG was because Jaguar encompassed a different segment of the European automotive market - luxury certainly but also performance. I guess what I am wondering is, as Jaguar leaves the portfolio, does that make more space for Volvo to expand into performance?

Doug Speck: I don't think in the past we have said, "Well let’s not build this more high performance power train because we have Jaguar in our portfolio." I am unaware of that ever coming up in any of the decisions I have been involved with so I am not sure that having the Jaguar brand in the portfolio has effected decisions about power train. So that does not really change what we will be doing in the future versus what we have been doing in the past. The bigger issue is what our plan is as it relates to horsepower or as it relates to fuel economy and what we think the image of the brand should be and represent to the community? I mean you will see us launch XC60 on the back of a 281-horsepower T6 all-wheel drive, which will be the first car we will put out in the range in America. It is a very, very fun car to drive; good dynamics and we will be talking about that and the way we will communicate the car. We are clearly aware we need to compete in the luxury business in this arena. But, I think in addition to that we are very focused on the subject that we are known to be an environmentally conscious brand, so there can be some dichotomy there. We need to do a better job in America of bringing powertrains that complement the other end of the spectrum. I think there is a lot more focus right now on that than performance to be clear.

Swedespeed: Does that leave room for diesel?

Doug Speck: I think it does.

Swedespeed: That is a frank answer. I wasn't expecting that! If it leaves room for diesel then how soon might that be, feasibly, if you wanted something in the market today?

Doug Speck: I’m probably not going to get involved in discussion of timing right now. I will leave that to Fredrik to makes those announcements. Clearly, we believe there will be diesel market that will grow in America.

,b>Swedespeed: Does that still leave any room in the brand; you mentioned the focus on the environment, does that leave any room for the like R-halo cars like you have had in the past?

Doug Speck: Right now there isn't a plan to let's say bring the R design with performance like the former R-halo like we had. That isn’t the plan. It does leave room obviously. I will tell you; personally I like cars that have a bit of an edge to the way they drive. I think it adds a component of a premium nature to your brand. I think there is an edge that you like to have there.



Swedespeed: I think there is always that conundrum with those. The numbers may not always be there, but the people that buy them tend to be the ambassadors.

Doug Speck:
I don't thin there is any doubt about that. Part of this is; every business sits down and says" where do we focus our resources?" Right now our resources are more focused on environmentally conscious power trains than they are building a regeneration of the R. That doesn't mean we will never do an R but right now that is not our focus.

Swedespeed: Is hybrid something you all are considering?

Doug Speck: I think there is an opportunity for hybrid as well. Define hybrid though. Hybrid today may not be hybrid tomorrow. There is hybrid diesel, there are electric cars that are actually hybrids because they have a gas engine but they run 95% of the time on electric power versus today's hybrids, which are closer to 30-40% on electric power. You get a huge difference there in fuel economy because you are not using your gas engine very long.

Our Recharge concept is more about the average consumer may drive to and from work - 60 miles - so if you have an electric car that has a 90 mile range very infrequently do you need to get to the gas component. To me that is actually a bigger opportunity for hybrid than the current version because you can make better financial sense of the economies. If you read a lot and look at what the payback is now for a hybrid, it is a very difficult economic decision to make sense of. So you are buying it more for a philosophic statement. To me this limits the potential. The economy has got to make sense.

At three dollars per gallon, with a 34 mpg hybrid, to pay $3000 extra for the car it is hard to get payback, which could be 18 years. At 100 mpg and $6 per gallon with the same kind of premium, the payback narrows down significantly. To me that is when the potential really starts to go up in terms of a mainstream type of a product. I think that is what a lot of the industry is focused on right now. You have to make a leap frog from just going from 28 to 32 to 36. Again I repeat, that is one of our focus right now - that equation. We aren't in position right now to say yes to this right now with this timing so I am not going to go into that today.

Swedespeed: In the recent past there’s been talk of dealerships - pairing down and trying to make it more streamline. Can you go into what your strategies there are a little bit?

Doug Speck: At our core we need a network that succeeds. There isn't a brand in the car business that works well and has a network that isn’t working well. I have a very, very, very firm belief that part of our responsibilities as a brand, as a sales company, as a distribution company in America is to have a structure that allows the network to have the potential to have a good return on their investment. With that comes good people in the retail side, which are the critical component to success, in addition to facilities that represent the brand well, a good experience for the customer. You start with that as a precept in terms of what your goals and objectives are and then you go out and look at how you are doing today.

Our network is not as healthy as it needs to be. My personal opinion, a component of that involves the number of outlets we have got, particularly the metropolitan areas, the result in through-put per outlet that our dealers are delivering to the customer and how that compares to the competition. We do not fair well in that comparison. We will make an improvement in that arena by working with dealers that are in a position that is not as viable for the long term to come to an amenable solution. Remove that dealer from the network and the surrounding dealers will benefit.

We have been very clear. This would have to be a mutually agreed solution. If a retailer that we think ought to consider it says no we will back away and keep working with them to make them as strong and profitable as possible. We are determined; we are going to get the bulk of it done this year. If we can get the VCNA restructuring done this year, a good component of this network action we are taking this year done, combine all those variables with an XC60 being launched in the first quarter of next year and you look into it and see that we have a good foundation to work off of and a bright future ahead of us. That is the 2008 calendar view of the year.

I tell my dealers, don't think that doesn't mean I am going to wake up and not worry about how many cars we sold that day, this week. That is the trick; do not lose sight of the fact that that has to be your focus in the car business. If you see us losing focus then rap me on the head and we will fix it because we still have to sell cars every week. As a business we have to fix some of the infrastructure issues… resolve them. Our goal is to do that this year so we can put them past us and just deal with how we create a bright future for the Volvo business. We have a lot of objectives in that area for this calendar year. You could argue that this is a good year to do it. The industry is going to be tough so it is probably a good year to take that kind of thing on right now.

Swedespeed: I wish you luck with the new position.

Doug Speck: It won't be boring, I guarantee you.

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