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The Fear of US Tariffs Slows Volvo Growth Projects

Il Sole 24 Ore
Marco Valsania
April 9, 2019

Jeff Moore has been working for a long time in the automobile industry, for large international companies. He did it for a quite a while with Toyota and since last June has been with Volvo as Vice President of US Manufacturing and Manager of the new $1.1 billion plant just opened by the group in Ridgeville, near Charleston, South Carolina. This is the first US production plant for Volvo, in the heart of the American south that has become the undisputed homeland for many players in the automotive world.  Moore’s mission is certainly arduous. Volvo could find itself now specifically at the center of business disputes between the United States and the rest of the world. This historic brand, a symbol that since the beginning has represented elegance and safety, is in fact (since 2010 when it was purchased from Ford) owned by the giant Chinese holding group Geely. China itself has become the primary target of the Trump administration’s offense. “Production began in September, for now it is focusing on the national market with the new luxury S60 sedan”, explains Moore. This production, he states, is not at risk. It began with 1,100 employees and is now going strong with more than 1,500 workers”. It started with one shift. But, he adds, “at full speed, the plant should be running three shifts, almost 4,000 workers and be putting out up to 150,000 autos each year, half of which will be going abroad”. Among the most promising models, by 2022, will be a new generation SUV, the XC90.

It is regarding the future, that the biggest questions arise.  “The continued tariffs, admits the Vice President, put similar strategies, expansion plans, at risk”. The idea is that exports from Charleston could already begin and increase this year: Volvo is hoping to adhere to its plans, but has already had to adjust, to avoid excessive risks and costs from the ever-changing tariffs. It has had to, for the moment, detour models originally aimed to the Chinese market instead sending them to Europe. All while the Chinese were anxiously awaiting them. The upcoming arrival of the new XC90 has also been delayed by a year compared to the original plans.

Moore is an indicator of just how much this region around South Carolina has a wealth of international players in this industry. They are refusing to give up the fight against any obstacles. In fact Moore will be among the speakers this week at the local Auto Industry Summit in Greenville (which is also home to the enduring German BMW plant). Alongside him will be executives from Bosch and Michelin. The official themes could not be more heated: developing a qualified workforce and, without even needing to say it, business policies. Moore though, feels its important to note the successes achieved thus far: “The Charleston plant is a “green field” operation, that is, created from virgin territory”, he recounts, listing the reasons why they chose to come here to manufacture. “We were attracted by the benefits, first in terms of infrastructure, such as the export port. Highway and railway connections are ideal for logistics. Local and state authorities cooperated fully and were greatly welcoming to our company. The work force is also adapted to our activities, with a long manufacturing tradition and a foundation in the auto industry over more recent years”.

The project was launched with five buildings, including production, assembly and painting. “We also have a center for workforce training”, explains Moore, including technicians for assistance and vendors. In regard to the authorities and South Carolina businesses, Moore confirms that he never encountered any objections associated with the Chinese nationality of the parent company: “The Volvo brand has a Swedish tradition and is managed independently, without any direct involvement of the owner”. Already back in January, Charleston produced a good quarter of its cars sold in the US. And it is holding on to its ambitious goals even with the current challenges and the spectrum of tariffs. Under full production it expects to reach 60 world markets from Charleston. Within two years at this same site, various design activities are already anticipated along with manufacturing, and a continued evolution of development projects. As of now, representatives of the research groups are already on location, even though the centers for planning and innovative prototypes, such as self-driving cars, are located in California.

 

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