Volvo Mulls Centralized Media-Buying and Slashes Marketing Costs

05 December 2000

Almost one hundred executive are to lose their jobs with the closure of Volvo Car Corporation’s European sales office in Brussels. At the same time, the Ford-owned Swedish carmaker will also slim down Volvo Cars International, its unit responsible for sales outside Europe and North America.

The streamlining is part of an edict to lop up to ten per cent from Volvo’s annual sales and marketing budget of SKr10 billion ($1.03bn). Says chief executive Hans-Olov Olsson: “We are addressing the cost issue by eliminating one layer of our European sales organisation.”

He also warned that there will be further job cuts in its various national sales operations and at group headquarters in Gothenburg: “There will be redistribution and elimination of headcount in all three [sales] areas," says Olsson.

Nor are employees the only casualties. Volvo dealers are also being asked to bite the bullet and in Germany letters have already been received by 320 dealerships proposing a new commission structure and performance appraisals, the latter having a direct link with the renewal of dealers’ two-year contracts. The move emulates action already taken in France.

The carmaker also dropped a heavy hint that it plans to consolidate its advertising budget in the hands of one media buying agency. Such a move, says senior vice-president for marketing, sales and service Dieter Laxy, would achieve savings of $10m in the first year. The company is re-examining advertising spending and the possibility of direct marketing to existing customers via the internet.

The slash strategy is necessary to protect Volvo’s margins, despite the fact that the unit is the only consistently profitable part of Ford’s Premier Automotive Group – the other members of which are Aston Martin, Land Rover, Lincoln and Jaguar. "We need to change our mindset in the organisation around the world whether it's in headquarters, dealers or sales regions," Laxy said.

News source: Financial Times