Volvo plans $500M factory in U.S. to revive sales

David Shepardson
Detroit News Washington Bureau

Chinese-owned Volvo Cars said Monday it will build a $500 million assembly plant in the United States — as the U.S. auto sector faces increasing pressure from Mexico.

Volvo said the investment is a sign of its "long-term commitment to the U.S. market. The company has drawn up a short list of potential locations and full details of the location of the new factory and the size of the investment will be announced at a later date."

“Volvo Cars cannot claim to be a true global carmaker without an industrial presence in the U.S. Today, we became that,” said Hakan Samuelsson, CEO and president, in a statement. “The U.S. is an absolutely crucial part of our global transformation and today’s announcement makes it perfectly clear that Volvo is in the U.S. to stay.”

Earlier this month, Daimler AG said it would invest $500 million at its Charleston, S.C., plant to build Sprinter commercial vans — another big investment in the United States by a foreign automaker.

But in recent years, Mexico is attracting more investment by foreign automakers than the United States.

Toyota Motor Corp. is considering building a new plant in Mexico for $1 billion or more and about a dozen major automakers have expanded in Mexico or announced plans to open new plants. With lower wages and free trade agreements, Mexico is becoming increasingly attractive for auto expansions — and nearly 80 percent of all vehicles built in Mexico are exported. Mexican auto production rose by more than 25 percent in 2014.

This month, Volkswagen AG said it will make a $1 billion investment to expand a plant in Mexico to build its next generation Tiguan SUV. In December, General Motors Co. said it will invest $5 billion in Mexico over six years and will add 5,600 new jobs. GM said the investments will "help establish GM as Mexico’s No. 1 vehicle exporter.”

Volvo Cars has been doing business in the U.S. since 1955.

The new plant is part of Volvo's plan to eventually sell 100,000 cars a year in the United States. Volvo U.S. sales fell 7.9 percent last year to 56,366 vehicles and are flat this year.

“The U.S. Volvo dealers are delighted with this announcement,” said Chip Gengras, chairman of the Volvo dealer council in the U.S. “It clearly illustrates Volvo's long-term commitment to the U.S. market.”

Ford Motor Co. acquired Swedish carmaker Volvo in 1999 and the Dearborn automaker sold Volvo Cars in 2010 to Chinese firm Geely Holding. Volvo Cars’ head office, product development, marketing and administration functions are mainly located in Gothenburg, Sweden.