A scant three months into the job, Marc Gustafson, the new president and CEO of Volvo GM, is working hard to restore some of the luster to the company's tarnished image. It's not a role he's uncomfortable with. After all, he was largely credited with helping engineer the renaissance at Mack Trucks, where he served as executive vp of sales and marketing until he took the Volvo job last September.
Volvo watched as market share dropped into the single digits for much of last year, leading to a net loss for the U.S. operations. "We lost sight of the customer in our preoccupation on developing the new VN family," he admits.
"We have our work cut out for us," Gustafson says. "There's no secret about it." The heart of the strategy is to put the driver back into the driver's seat. "Our focus needs to be more from the market in, rather than from the factory out," he says.
"If we listen responsibly, work hard, and pay closer attention to keeping our customers satisfied, profit and market share will take care of themselves."
Gustafson cites the recent launch of the VN family as the first step in the process. In addition, shortly after his arrival, Gustafson announced the closing of the company's Orrville, Ohio, manufacturing plant and consolidated production in its rebuffed Dublin, Va., facility. "People here want to do a good job," he says. "The best way to improve is to get closer to the customer."
Gustafson divides the customer into two groups: the one you have and the one you want. The one Volvo has is the less-than-truckload fleet, where nine out of ten national carriers are customers (up from seven in ten a year ago). "Unfortunately, that growth happened in a market that's taking it on the chin with a 2,000 vehicle drop," he says.
The markets he wants to be stronger in are the longhaul truckload and regional service segments. In every market, "the pace of change is picking up," he says. "It's driven by the customer's customer. Shippers are in a squeeze and they are looking for reliable, on-time, low-cost transportation."
For the fleet, those demands translate into equipment that contains the latest in technology, productivity, efficiency, reliability, and durability. "A good product is not enough anymore," he adds. "We know that we also have responsibilities throughout the ownership cycle. Customers are looking for us to provide a competitive advantage. We are responding by developing our own finance company, parts logistics group, and new dealer communications system."
The newly launched VN will be "the stepping stone into the new market era," predicts Gustafson. "It will transform the company. Already we have changed the corporate structure to support this product in terms of production, service, parts, sales, and communications."
So confident is Gustafson that the VN represents the future, it will replace the existing product line by the close of the century, if not sooner. "Not only have our products been dated," he admits, "they have been a smorgasbord of offerings tracing back to the company's roots in White Motors, General Motors, and Autocar. As a result, a lot of our customers looked elsewhere. The direction for the future is a totally new product from here on out."
While this streamlining will result in fewer platforms, he says the company plans to offer more value from each platform. The fleet will derive better quality and lower prices through the combination of manufacturing improvements, fewer parts, and reduced service complexity.
The concentration of fewer platforms will enable Volvo to bring products to market faster. For instance, early next year the company will unveil a "Super Sleeper" model aimed at the heart of the big sleeper segment.
Part of that product line rationalization will eliminate the company's FE medium-duty product. With annual sales hovering around the 800 mark and only 7% of the market looking for cabovers, the future was bleak. Volvo took the final order last month and production will end in April.
While Gustafson is pulling the plug on the FE, he is not closing the door on the medium-duty market. "Our goals of increased profitability and strength mandate that we provide a broader range of product," he says.
Market forces of increased uptime play into Volvo's strength as a vertically integrated manufacturer, Gustafson believes. Its VE D12 engine is now being spec'd on 18% of its current production, with 24% of new orders carrying the spec. Approximately 30% of the VNs on order carry Volvo power. "Integration brings a benefit for everybody in the value chain -- the dealer, the customer, and the OE."
Gustafson is also enthused by the Volvo brand name, which is synonymous with safety. The question is how well safety sells in the marketplace.
"Safety is not a feature," he says. "It's a belief and value in the company that extends beyond the product. It's not something you bolt on. There's no question the whole development of our product line is built around safety."