Supplying Volvo

IHS Automotive Supplying the OEMs SupplierBusiness Supplying Volvo

2014 edition supplierbusiness.com IHS Automotive SupplierBusiness | Supplying Volvo

Contents Introduction ...... 5 Financial Overview...... 7 First-half 2013 summary...... 7 Product and platform strategy...... 9 Introduction...... 9 Current major model programmes...... 11 V40...... 11 S60/V60/XC60...... 11 V70/XC70...... 12 S80...... 12 XC90...... 13 Future platforms and model programmes...... 14 SPA...... 14 CMA...... 16 Powertrain strategy...... 16 New 4-cylinder engines...... 17 Purchasing strategy ...... 20 Overview...... 20 Interview...... 22 Lars Wrebo, Senior Vice President of Purchasing and Manufacturing at Volvo...... 22 Introduction and evolution of the purchasing function at Volvo ...... 22 The role and significance of Geely...... 22 Implications for suppliers...... 23 The significance of the new platforms ...... 23 Size and scale of purchasing function …...... 25 Developments in China...... 25 Sourcing in Sweden...... 26 Government support...... 27 Supplier assessment...... 27 Supplier finance...... 27 Directed sourcing, managing tier two suppliers...... 28 Supply chain security...... 29 Logistics...... 29 Implications of the new platforms for manufacturing...... 30 Expanding existing manufacturing operations...... 30 Reasons for S60 being made in two places …...... 31 Supplier interview: David Grice, Johnson Controls Sweden AB...... 32 Production strategy and manufacturing footprint...... 34 Introduction...... 34 A growing manufacturing network...... 34 Sweden...... 34 Gothenburg – Torslanda...... 34 Uddevalla...... 37

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Skovde engine plant...... 37 Floby component plant...... 38 Belgium...... 38 Ghent...... 38 China...... 40 Major new investment...... 40 Chengdu supplier network ...... 42 Environmental compliance...... 43 Joint model development with Geely...... 43 Technology...... 45 Introduction...... 45 Vehicle connectivity...... 45 Extending pedestrian detection technology to cyclist detection...... 45 Night driving improved through innovative high-beam systems...... 45 Self-driving, autonomous cars...... 45 New battery concept: energy storage within body panels...... 46 Forward model program...... 47 OEM-Supplier survey results...... 48 Introduction to the SuRe Index...... 48 Methodology...... 48 Executive summary...... 48 Profit potential...... 50 OEM level...... 51 Organization...... 51 OEM level...... 52 Trust...... 52 OEM level...... 53 Pursuit of excellence...... 53 OEM level...... 54 Outlook...... 54 OEM level...... 55 Figures Figure 1: Volvo Concept XC Coupé...... 10 Figure 2: Volvo Concept Coupé...... 10 Figure 3: Volvo V40...... 11 Figure 4: Volvo S60...... 11 Figure 5: Volvo V70...... 12 Figure 6: Volvo S80...... 12 Figure 7: Volvo XC90...... 13 Figure 8: Volvo XC90 Safety Cage...... 15 Figure 9: Volvo Drive-E diesel engine...... 17 Figure 10: Volvo Drive-E petrol engine...... 18 Figure 11: Geographic split of Volvo purchasing (2012)...... 20 Figure 12: Volvo’s Skovde engine plant...... 37 Figure 13: Production at Volvo’s Ghent plant...... 38 Figure 14: Production at Volvo’s Chengdu plant...... 41 Figure 15: Teams at Volvo’s Chengdu plant...... 42 Figure 16: Volvo forward model program 2013–2021...... 47 Figure 17: SuRe Index 2013 - Top of the Ranking...... 49 Figure 18: SuRe Index 2013 - Middle of the Ranking...... 49 Figure 19: 2012–2013 Profit potential results on scale...... 50

Figure 20: 2012–2013 Organisation results on scale...... 51 Figure 21: 2012–2013 Trust results on scale...... 52 Figure 22: 2012–2013 Pursuit of excellence results on scale...... 53 Figure 23: 2012–2013 Outlook results on scale...... 54 Tables Table 1: Volvo Cars: financial highlights first-half 2013 vs. first-half 2012...... 7 Table 2: Volvo Cars retail sales first-half 2013 vs. first-half 2012...... 7 Table 3: Volvo 2012 sales by powertrain type...... 7 Table 4: Volvo sales forecast for 2013 and 2018 by nameplate...... 8 Table 5: Volvo model production forecast, including platform...... 13 Table 6: Sequenced suppliers at Volvo’s Ghent plant...... 39 Table 7: Parts delivered DSV from a warehouse within the Ghent complex...... 39 Table 8: Volvo production forecast by country and production plant 2010–2017...... 43