Volvo plans $500m U.S factory to revive sales

Volvo Car Group plans to invest about $500 million to build its first auto factory in the U.S. in a bid to revive sales, which have tumbled over the past decade.

The plant will start operation in 2018 and produce vehicles built with the same underpinnings as the XC90 sport-utility vehicle, Gothenburg, Sweden-based Volvo Cars said Monday.

The company has drawn up a short-list of possible sites and will decide later on the plant's location, size and models.

"The U.S. is an absolutely crucial part of our global transformation," Chief Executive Officer Hakan Samuelsson said in a statement.

"Today's announcement makes it perfectly clear that Volvo is in the U.S. to stay."

The Swedish car maker, which was bought by Chinese billionaire Li Shufu's Zhejiang Geely Holding Group Co. in 2010, is seeking to revive prospects in the U.S., where sales last year totalled about 56,000 vehicles, less than half the brand's peak in 2004.

The plant will give Volvo a local presence, putting it on a similar footing as BMW and Mercedes-Benz, and also help reduce risks related to currency fluctuations.

Geely is pushing Volvo to become more global and plans to raise the brand's global output to about 800,000 cars by the end of the decade from a record 466,000 deliveries last year.

The expansion is part of a five-year, $11 billion investment program that includes overhauling the brand's product range.

Underpinned by the revamped XC90 SUV, Volvo targets sales this year of about 500,000 cars.

The XC90 is the first vehicle developed completely under Geely's ownership and will serve as the basis of future models.

The U.S. factory would be Volvo's fifth worldwide, adding to two in Europe and two in China, the manufacturer said.

The plant would build vehicles for the United States, where Volvo Cars has a medium-term target of selling 100,000 autos a year, and may supply other markets.

BMW's plant in Spartanburg, South Carolina, makes almost all of the Munich-based carmaker's SUVs, and the plant is the biggest exporter of U.S.-made cars to markets outside North America.

Stuttgart, Germany-based Mercedes, which ranks third against BMW and Audi AG in global luxury-auto sales, has its main SUV production site in Tuscaloosa, Alabama.