cars news 10: Volvo’s New U.S. Plant Tooling up to Make S60 in South Carolina

The S60 might not be the obvious choice as the first vehicle Volvo builds at a new plant under construction outside Charleston, S.C. And some might question the Swedish automaker’s decision to pick the U.S. over lower-cost Mexico for a $500 million North American assembly plant.

But those are the decisions that were made back in 2014. Construction is about two-thirds done, and the plant on schedule to be in production for the third quarter of 2018.

Initially the Volvo plant will employ 2,000 workers who will make 60,000 S60 mid-size sedans a year, half of them for export. There is plenty of land, and the buildings are designed to double capacity to 120,000 vehicles a year sometime in the next five years, with some additional investment in equipment and another 2,000 employees.

The current S60 is made in China, but that will likely be phased out in early 2019, and South Carolina will be the sole global source of the sedan. At some point, in three or four years, a second vehicle will go into production in the U.S. In the next six months there will be a decision on what that second vehicle will be, said Lex Kerssemakers, senior vice president of the Americas and president and CEO of Volvo Cars USA. It could be an all-new model or a second generation of an existing model.

Kerssemakers knows it makes sense to make crossovers in the U.S., given their popularity, but product decisions had already been made and locked in.

What other Volvos could be built in the U.S.?

A candidate could be the XC90, the large SUV that has revived Volvo’s fortunes since it was launched in 2015; the XC90 will be the oldest vehicle in the Volvo portfolio by spring 2019. Its popularity has meant it is in short supply in the U.S. and all the other major markets. U.S. sales fell in the first quarter because of the shortfall in supply. But Kerssemakers said the plant in Sweden is running at full capacity and more XC90s are in showrooms this month.

Other candidates include more 60-series vehicles. The XC60 midsize crossover is expected to be popular and could require extra capacity. It currently accounts for about a third of total Volvo sales globally. The 2018 XC60 was first shown at the Geneva auto show last month and will make its North American debut this week at the New York auto show. There will be a V60 wagon available in early 2018, but it will be lower volume even though Kerssemakers thinks Americans will embrace wagons again as they look for something different. Volvo is currently selling the larger V90 wagon in the U.S., but it must be ordered online and takes up to 10 weeks to arrive at the dealership. The CEO will be happy if Volvo sells 4,500 to 5,000 V90s this year in the U.S.

The Charleson plant could make any of these future vehicles because all 90- and 60-series vehicles were developed on the Scalable Platform Architecture, or SPA.

Less likely is that the U.S. plant would build the smaller XC40 compact crossover launching at the end of the year for sale in early 2018. It is on a different platform, known as the Compact Modular Architecture, or CMA. The XC40 is currently built in Belgium, and a new plant in China will start production of the compact crossover later this year. Volvo is still working on the next-generation V40 and S40 and has not given a timetable for their launches.

Construction in South Carolina

In South Carolina, Volvo held the groundbreaking for the new plant, known as “Volvo Project Thor,” in September 2015. Girders and huge, hulking buildings now occupy a 1,500-acre site in the woods and wetlands about 40 miles west of Charleston, where about 800 workers are on the construction site daily. Hiring for assembly jobs will begin late in the year. The plant will start building its first bodies by the end of the year, leading up to production launch in August 2018, said Katarina Fjording, vice president of purchasing and manufacturing for the Americas.

The site includes the plant, test track, training center, and office building. Stamping will come from supplier Gestamp, one of about 4,000 global suppliers for Volvo.

South Carolina is already home to BMW in Spartanburg and the Mercedes-Benz Sprinter van plant.

It is part of an overall investment of $11 billion by Volvo globally.

Back in 2007, when Volvo was one of Ford’s brands, the Swedish marque could see it had no future under then-CEO Alan Mulally’s One Ford global plan. “It was clear we would become independent again,” Kerssemaker said. China’s Zhejiang Geely, owned by billionaire Li Shufu, bought Volvo from Ford in 2010 for $1.5 billion, and there was much skepticism about its ultimate future in the U.S. But Volvo used Geely’s backing to get loans and has invested $11 billion in new platforms, 2.0-liter turbocharged engines, and plants to reinvent Volvo.

The Swedish automaker decided it would build a plant in the U.S. because it is a key market. The idea of Mexico was briefly considered and quickly discarded by global CEO Håkan Samuelsson.

Volvo has two assembly plants in China with a third that will be operational later this year. Volvo also has an engine plant in China, assembly plants in Sweden and Belgium, and engine and components facilities in Sweden.