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August 2010 Baselines - The Story of Volvo Trucks

Long Before Safety, Seatbelts, And Station Wagons-Volvo Built Its Brand On Commercial Trucks

Text By Bill Senefsky

In 1915, while World War I was raging in Europe, Sweden's AB Svensks Kullagerfabriken (SKF) began an engineering study regarding the feasibility of producing motorcars.

Less than a year earlier, Scania Vabis had decided to abandon automobile production in favor of producing trucks, which, in light of the region's situation at the time, appeared much more profitable.

With the encouragement of the Swedish Association of Engineers and Architects, SKF decided to enter the domestically vacant auto market.

Two SKF employees, Assar Gabrielsson and Gustav Larson, were tasked with the project. Gabrielsson had previously been assigned to the North American and French markets and was a successful ball-bearing salesman who prided himself on his knowledge of motorcars. Larson brought with him an engineering background, as he had worked for the White and Pope automotive operation in Great Britain. This partnership was interesting in that the two men were in fact the main financiers of the new automobile program and only planned to utilize SKF for their production needs.

The Volvo Name
The SKF company had toyed with a new Volvo brand name-which it intended to use on a series of ball bearings scheduled to launch in 1915. The branded package product line did not survive, so the brand was conveniently switched over to the new automotive project. In Latin, the word Volvo means, "I roll."

Gabrielsson and Larson's new Volvo brand was a long time in the making, as the duo spent months and months on development work. They had to take into consideration Sweden's particular kind of weather and road conditions, which meant building a vehicle that could handle mud, snow, severe ruts, and potholes. The men finally decided on a single platform, dubbed the GL. Nicknamed the Larson, the GL was assembled in secret at an abandoned SKF bearing factory in Hisingen, Sweden.

As was common during this time period in Europe and North America, the new Volvo GL was fashioned from outside parts purchased from vendors and subassembly suppliers. The Volvo's prototype development and component testing took much longer than planned, with a final production version appearing in 1927. Dubbed the OB 4, or Jacob, the first unit produced was discovered to have its differential assembled backward, resulting in a vehicle that had one gear for going forward, and three for driving in Reverse.

Initial Volvo production began with 60 full-time employees producing five complete vehicles a week. The fledgling concern must have been satisfied with its first automobile's success, as a truck model was introduced a scant year later from design drawings that were completed before the Jacob's debut.

Volvo's trucks were quick to earn a rugged reputation and oversold each model run. Powered by six-cylinder inline gasoline engines, they were considered superior in construction to their European and North American counterparts. Their sales success financed the company for more than two decades.

The company introduced its durable six-cylinder truck engine to its automotive line in 1929 for entrance into the taxi market. Larger passenger platforms were also planned. The profits continued, and by 1930, the company was able to purchase its original assembly plant in Hisingen from SKF, along with its engine supplier, Pentaverken.

Depression and War Years
The effects of the Great Depression hit the Nordic countries hard, and Volvo's production ground to a halt. The company management began work on new models. In 1935, the newly designed PV36 Carioca-named after a popular Spanish dance-was launched. The new creation featured radical streamlined design queues, and variations of the new theme appeared on other Volvo vehicles. The success of the new product line allowed Volvo company stock to be offered for the first time on the Swedish stock exchange.

World War II interrupted Sweden's economy with a shortage of fuel supplies by 1940. Though Volvo managed to develop a novel means of producing a combustible gas from charcoal, the government prohibited private car operation. Wartime production did not cease, however. In spite of the hostile climate, the company purchased a gear manufacturer and an engineering company. The planning and production of new models awaited war's end. Both the company's PV444 and PV60 cars suffered delays due to material supply shortages and were not introduced until 1947. Their eventual success allowed Volvo's car production to exceed its truck output for the first time. By 1950, things were looking up, with more than 120,000 total automotive platforms produced.

Volvo and The Saint
The '50s and '60s brought changes to both the automotive market, and the vehicles that were offered. On the truck side of the ledger, a new Volvo factory was built in the city of Goteburg, Sweden, to produce an additional 15,000 trucks annually. New engineering developments included a fuel-injection system and turbocharged diesel engines. In 1956, the company took a gamble and decided to expand its production further with its entrance into the North American car market. In 1959, the new P1800 sports car was launched. Volvo wasted no time reinforcing its entrance in the world market by confidently supplying this platform for the popular English television series The Saint.

New safety equipment, including the three-point safety belt system and an extended five-year warranty arrived the same year. An interesting feature was that Volvo's guarantee covered accidental damage as well.

The early '60s found the company further expanding new plant manufacturing facilities, including one in Canada.

A new L495 Titan series truck (followed by the L4571 tilt-cab) appeared in '64, and with it came another Volvo truck plant in Belgium. Four years later, truck assembly began in Australia. The company broke ground for its widely known research and engineering center in 1970.

Volvo Goes On a Shopping Spree
In 1972, the company purchased a 33 percent interest in the Dutch automaker DAF. Peugeot and Renault were also utilized for final assembly of Volvo vehicles to increase European production. At the height of the oil crisis from 1973 to 1974, Volvo increased its hold on DAF, even changing its name to Volvo Car BV. A year later, the company proposed a straight merger with its main competitor, Saab-Scandia AB. Not interested, Saab allowed the deal to falter.

The purchase of several oil, food, finance, and trading industries followed-including restructuring the automotive operations into a subsidiary. For some reason, Volvo even entered the pharmaceutical business. In 1980, the turbocharged Volvo 240 appeared, which, along with changes to the 340, furthered the company's reputation. Two years later, the refreshed automotive line included the 240, 340, and 760 series. By 1981, the company increased its global presence with the purchase of White trucks of Cleveland, Ohio. In 1986, Volvo formed a joint venture with GM Heavy Truck in North America. The purchase of Britain's Leyland Bus Group followed.

Big, Big Changes
Sweden's economy was in big trouble by 1990. With its export sales slowing, many established concerns went under. This same year brought about the control of Saab by General Motors. Volvo signed a cross-ownership agreement with Renault for the sharing of research and development for its automotive operations. The company's earlier pharmaceutical and food businesses were merged into a government-controlled holding company known as Procordia AB.

The Volvo 940 and 960 automotive series were launched, along with the radical five-cylindered 850. The company entered into a vastly unpopular agreement with Mitsubishi, allowing the latter to manufacture parts for automobiles it planned to produce in France. The French, being protective as usual, resented the move.

Volvo posted a massive loss of $469 million in 1999, and another $416 million loss was posted the following year. A full merger with Renault was on the table but was voted down at the board level. The long-term result was the Renault connection quietly dissolved by 1994. This same year found Volvo focusing on engine and vehicle platform production. Its earlier food, financial, and drug businesses had now been sold. Its joint venture with the Clark Company and VME was purchased and branded: Volvo Construction Equipment.

With automotive sales slipping in North America, the company decided to move into the luxury market with its first entrant, the C70 series in 1997. That same year, Volvo sold its remaining 11 percent interest in Renault.

Volvo Trucks North America
Champion Road Machinery from Canada was purchased along with the entire operations of Volvo's joint venture with GM Heavy Duty Truck Corporation. Volvo Trucks North America was officially formed. In 1998, the company purchased the Samsung Heavy Equipment business. This excavator line was merged into Volvo's South Korean operations.

By far, the year 1999 brought huge changes for Volvo. First, the company purchased 13 percent of its Swedish truck rival Scandia AB (Saab's truck business), with the intention of fully merging the two firms. Then, deciding to focus entirely on the heavy commercial market, the company sold its Volvo automotive business to Ford Motor Company in March 1999 for $6.5 billion. This sale of the automotive brand included Volvo logo rights to be used on cars, along with light- and medium-duty trucks. Company factories in Belgium, Sweden, and the Netherlands were also included in the sale.

The earlier Scandia deal continued with a suggested sale price of $7 billion but, fearing a monopoly, government pressures killed the deal in April of 2004. Another purchase was attempted in 1999, for a 5 percent stake in Mitsubishi Motors' bus and truck business. This deal failed when DaimlerChrysler purchased a greater stake a few months later.

Undaunted, Volvo purchased the assets of Renault SA's heavy-truck business in 2000. The United Sates-based Mack Trucks were part of the package. This $1.59 billion venture made Volvo Europe's largest commercial truck maker and immediately brought it to number two in North America-which meant Volvo was the second largest builder of heavy-duty trucks in the world.

Despite continued changing economic conditions, the company expanded its Volvo, Renault, and Mack brands. New plants have been constructed in Eastern Europe and China. The company's construction business is now ranked third worldwide. Only Caterpillar and Komatsu remain ahead.

Volvo has come full circle since its founding at the beginning of the last century. Though automobiles were produced in limited numbers first, truck production was always Volvo's most profitable entity and remains so today.

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By Bill Senefsky
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