Volvo Cars CEO aims for margins befitting a premium carmaker

FRANKFURT, Sept 10 Tue Sep 10, 2013 2:03pm EDT

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FRANKFURT, Sept 10 (Reuters) - Swedish carmaker Volvo expects its profit margins to reach levels on par with those of premium-segment rivals once a 2020 goal of doubling global annual vehicle sales is attained, Chief Executive Hakan Samuelsson said.

"When we have reached 800,000 we should of course be solidly profitable," Samuelsson told Reuters on Tuesday.

Volvo expects higher volumes and margins to help it break even this year on a forecast volume of 425,000 in sales after it made an operating loss of 577 million Swedish crowns ($87.20 million) in the first half.

Wholly owned by China's Zhejiang Geely Holding Group Co., Volvo is seeking to take on larger global luxury brands such as BMW, Daimler's Mercedes-Benz and Volkswagen's Audi to win market share big enough to foot the bill for the vast investments needed to develop new vehicles.

BMW and Mercedes-Benz target sustainable operating margins anywhere between 8-10 percent at their automotive business.

Samuelsson declined to name a specific margin target, however: "I want to have a more stable basis cost-wise before we start communicating that."

The Gothenburg, Sweden-based company aims to eke out cost savings by sharing more parts between different cars in its range, and by deepening its base of suppliers in China.

"We have to be leaner in our own administration. We have a programme now running reducing about 100 white collar jobs," Samuelsson said.

Once these three strategic pillars are completed and the company attains its 800,000 vehicle sales goal by the end of the decade, then margins should be comparable to its peers.

"Then we should reach profitability levels that you could expect for a premium manufacturer in this size," the Volvo Cars CEO said.

Daimler Chief Executive Dieter Zetsche told Reuters he expects profit margins at the Mercedes-Benz luxury car business to improve further next year thanks to a rejuvenated model range. (Reporting by Christiaan Hetzner and Irene Preisinger; writing by Edward Taylor; editing by David Evans)

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