Volvo CEO says engine merger with Geely saves jobs, costs

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Volvo’s rapid shift toward electrification put thousands of employees working on the automaker’s current range of internal combustion engines and hybrid powertrains at risk. To preserve those jobs while still charging at full speed toward a battery-propelled future, Volvo plans to merge its powertrain operations with those of parent Zhejiang Geely Holding Group. CEO Hakan Samuelsson explained the benefits of the move in an interview with Automotive News Europe Managing Editor Douglas A. Bolduc.

What message do you want the news of this planned merger to convey?
That Volvo has taken another decisive step toward electrification by adjusting its business structure accordingly. Secondly, because half of our cars will be hybrids we are securing the necessary resources to further develop gasoline engines to make them excellent hybrids. We are also securing this supply at a better cost because we are combining the volumes of Volvo and Geely. We already have a combined 2 million car sales today and that will continue to grow rapidly in the future.

How much will this move save Volvo?
We haven’t quantified it [the saving] but it will be huge. We are at least doubling the Volvo volume and that alone results in a significant cost savings. What might be even more important is that we are safeguarding our development resources.

How so?
Our development engineers would have been at risk of having their budgets squeezed if we were to do this alone. We would need to prioritize electrification, which means it’s likely they would not have gotten the resources they need to maintain their high level of competency. With this change we avoid this. We will continue to have very exciting r&d jobs for our team.

Do you need to reconfigure your powertrain network or can plants such as your factory in Skovde, Sweden, also produce full-electric powertrains?
No, I would say that Skovde should continue building combustion engines that we can use in hybrid cars. I don’t see it as an alternative for our combustion engine factories to try to build electric engines. It’s a very different competence. It’s much more honest and credible to say, “Guys, we need the combustion engine so let’s combine it with Geely so we can have higher volumes and more resources to do the job.”

How are the powertrains from Volvo and Geely being used currently?
The Geely side has one powertrain unit that supplies their brands, but Lynk & CO, for example, already takes more Volvo engines than Geely engines. We have two powerful powertrain units so the intention is to bring them together into one common supplier for Lotus, Lynk & CO, and so on. What’s also very importantly is that this unit is competitive. The best way to ensure you are competitive is to supply to third parties. We want to do that as well.

Why make this change now?
We believe we have an advantage by doing this very fundamental restructuring very early because the market for combustion engines will not grow in the future. We are doing exactly the right thing, which is utilizing synergies. That’s what you do when you are dealing with a shrinking market.

Will Volvo be the Geely Group’s center of competence for full-electric powertrains?
In a way, yes. Our role is definitely the electrification of the platform for our 60- and 90-series cars. If Geely wants advanced premium cars of that size, that’s the platform to use.

Will this new powertrain unit be listed.
It’s too early to say. Right now we are defining Volvo’s stand-alone [combustion engine] organization, which will have its own financial steering. The next step would be to bring the pieces together into one unit.



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