Volvo drives cash into its Swedish factories

Volvo Cars will spend almost half of a multi-billion investment on its production in Sweden, the company said in a statement on Monday.

• Former Volvo CEO to receive generous pay-off (5 Nov 12)
• Volvo halts production at Swedish plant (15 Oct 12)
• Volvo Buses to shut down Swedish factory (3 Oct 12)

The main recipient is the assembly plant in Torslanda, near Gothenburg in western Sweden, but a similar facility in Olofström and an engine factory in Skövde will also see upgrades.

It is part of a 70 billion kronor ($10.5 billion) investment spanning from 2011 to 2015.

Nearly half is earmarked for Sweden, the company said, and about a third of that money will go to upgrading the existing factories.

The overhaul is meant to help Volvo Cars as it embarks on two main technological upgrades.

One has been dubbed Scalable Product Architecture (SPA) and allows the manufacturers to approach car assembly somewhat like flatpack furniture – the same component parts can go to putting together different products.

"When 40 percent of the design is the same for all car models, regardless of scale, we make financial gains that increase our competitive edge," said product development head Peter Martens in a statement.

"SPA gives us technological independence, we won’t have to rely on any previous owners. It will cover two thirds of our total sales.”

The second upgrade concerns a new engine type, which will be manufactured in Skövde.

The loss-making carmaker was acquired by Chinese firm Geely from Ford about two years ago.

In September, Volvo Cars reportedly issued an ultimatum to its Swedish suppliers to slash prices by a fifth before 2015. Otherwise they would not be part of the company's ambitious expansion plans.

The stated aim was reportedly to almost double last year's 449,000-car production by 2020.

The company’s purchasing director Axel Maschka has denied issuing such an ultimatum.

He told business daily Dagens Nyheter, however, that he hoped to rely more on suppliers in China.

"We are planning to buy about 25 percent from Chinese suppliers. We will reinforce our cooperation with Geely over our purchases in China," he said.

AFP/The Local/at
Follow The Local on Twitter