Shunning Style

Volvo thrives on sensible cars

Since they were first exported to the U.S. 26 years ago, the tanklike sedans and boxy station wagons have endeared themselves to L.L. Bean-wearing university professors and affluent suburbanites. Today the safe and sensible Volvo has never been more popular. In a year when other auto manufacturers are struggling, Volvo's American sales are up 12.8%, and the car has passed Volkswagen as the bestselling European import. Last week the Volvo's proud Swedish parent announced that its earnings nearly doubled during the first nine months of this year, to $257 million, as sales increased by 37%.

Volvo is hardly ready to challenge Detroit, or even Germany, for U.S. supremacy. General Motors sold twice as many cars during the second ten days of November (181,000) as Volvo expects to sell (73,000) during all of 1982. Still, with models that range in price from $12,000 to $20,000, Volvo has succeeded in skimming some of the luxury cream off the automotive market, along with its prospering high-priced competitors Mercedes-Benz, BMW, Saab and Porsche. Notes Analyst David Healy of New York's Drexel Burnham Lambert: "Only the affluent can consider buying cars now. To them money is no object."

Volvo has thrived by developing a reputation for being a rock-solid, long-lasting car that can be counted on to hold its value. It often claims that the life expectancy of its models on Swedish roads is 19.6 years. During the mid-1970s, however, the company was often slow shipping parts to U.S. dealers, causing repair delays. And some Detroit-built cars, notably Chevrolet's Camaro and Corvette, have kept their resale value better than Volvos do.

This fall Volvo is making a bid for the performance market by introducing the 760 GLE, with racy options like a turbo-charged diesel engine and leather seats. Its sharply sloping hood and raised trunk make the 760 GLE look more like a new Oldsmobile Cutlass Ciera than a Volvo. And with a price tag of as much as $21,500, it will cost several thousand dollars more to purchase than a Cadillac Coupe de Ville.

In the past, introduction of a new-from-the-wheels-up model like the 760 would have meant a major financial commitment by Volvo. But following an ambitious diversification program that was begun six years ago, automobiles now account for only 35% of sales. The crown jewel was last year's acquisition of Beijerinvest, a large energy trading company, for $305 million. With the acquisition came 31 oil-drilling sites in the North Sea. In August, Volvo expanded its oil holdings by buying 50% of Hamilton Brothers Petroleum Corp., a private U.S. firm that also explores for offshore crude. Despite weakening oil prices, Volvo's overall holdings have prospered because the company has hedged its bets in other businesses, like food products. Its sales last year of $8.6 billion made it Sweden's largest industrial company.

The oil deals were engineered by Volvo's patrician chief executive, Pehr Gyllenhammar, 47. He belongs to Henry Kissinger's blue-chip international consulting group and wears a steel-banded watch on each wrist, one set for Goteborg time, the other for New York. Says he: "The diversification is not an escape from automobiles, but we believe that the industry is so strangled at the moment that it leaves no room for us to maneuver."

Volvo intends to control its sales growth in the U.S. by limiting the number of cars it exports. Says Gyllenhammar: "If we try to react too quickly to styles and trends, we lose our honesty. We have stayed away from putting green fur covers on the seats because someone says he might like green fur seats." If volume continues to increase, however, one option is to open the U.S. assembly plant that Volvo built in Chesapeake, Va., but decided in 1974 not to operate. Whether an American-made Volvo would diminish the Swedish mystique, only those loyal and affluent buyers know for sure.

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