Reputation of safety helps eclipse Lincoln BY BILL KOENIG BLOOMBERG May 28, 2004 Ford Motor Co.'s Volvo unit, helped by a reputation for safety and new models such as the XC90 sport-utility vehicle, has outsold Lincoln this year and through April was the automaker's top-selling luxury brand in the United States. Volvo has been profitable since being acquired in 1999 for $6.45 billion, Ford has said, without giving figures. The Swedish unit boosted U.S. sales in 17 of the last 18 months. Ford hopes it can replicate Volvo's results at its other luxury brands. The company has set a goal for Volvo, Jaguar, Land Rover and Aston Martin in Europe and Lincoln in the United States to contribute a third of earnings by 2006. Volvo led the company's Premier Automotive Group, which includes the four European brands, to a $164-million pretax profit in 2003 after a $740-million pretax loss a year earlier. "Volvo is clearly carrying Ford's Premier Auto Group," said Brian Bruce, head of equity investments at Boston-based PanAgora Asset Management, in an e-mail interview. "Jaguar's and Aston Martin's losses combined with Land Rover's lack of profitability make Volvo the key driver" of Premier. The automaker has been unable to get consistent profit from its European luxury brands. Jaguar, acquired in 1989, has been struggling back from a $500-million loss two years ago. Land Rover, bought in 2000 for about $3 billion, has been at about break-even, Ford has said. Aston Martin, whose acquisition was completed in 1994, is the smallest part of Premier, selling about 2,000 cars a year. The automaker had total 2003 net income of $495 million after losses totaling $6.4 billion the previous two years. Ford has said Premier could earn as much as $600 million before taxes this year. The company doesn't break out results for Lincoln, which is part of its North American operations. Volvo's U.S. sales last year rose 22 percent, the best among Ford brands, to a record 134,586 vehicles. This year, Volvo sales rose 7.5 percent through April to 44,155. Lincoln in the same period fell 6.4 percent to 43,713. Volvo's XC90, introduced in late 2002, led the unit's sales last year with 35,723. The sport-utility vehicle has gained 39 percent in this year's first four months. "That XC90 is awesome," said Dan Poole, vice president of equity research at National City Corp. in Cleveland, which manages $23 billion, including Ford shares. Volvo also benefits because in the United States, "society is getting a little bit older, getting a little fussy in terms of safety issues," he said. Volvo, whose cars and trucks sell for about $25,000 to about $49,000, has added vehicles such as the XC90 that stray from its traditional boxy styling. At the same time, the unit continues to emphasize that its vehicles shield the passenger compartment in collisions. Part of its U.S. Web site is devoted to testimonials from buyers who say their Volvos saved their lives in accidents. The Insurance Institute for Highway Safety gives Volvo's XC90 and S80 its highest ratings for front-crash tests. "Volvo has leadership in a niche: safety," said PanAgora's Bruce, who helps manage $13 billion, including Ford shares. "Add in the recent styling improvements combined with reasonable pricing, and you have a winner." There seems to be "increasing awareness that Volvo has a very exciting product as well as a safe product," Victor Doolan, president of Volvo's North American operations, said in an interview in early April at the New York auto show. Volvo is introducing the new S40 sedan in the United States. Volvo competes at a lower price than other Ford luxury brands. Jaguars sell for about $30,000 to $86,000 and Land Rovers for about $26,000 to $73,000. The price for Aston Martin sports cars is more than $100,000. Lincoln, part of Ford's North American operations, sells cars and trucks for about $33,000 to $57,000.