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Volvo considering closer integration with Ford of North America, building cars in the U.S.

by Drew Johnson

Volvo may may link future product development with Ford of North America, a new report finds. Volvo currently shares several platforms with Ford of Europe, as well as Jaguar and Land Rover, but the weak dollar and pending sale of Jaguar and Land Rover has Volvo considering closer integration with Ford of North America.

The new architecture sharing with Ford of North America would make it possible for Volvo to produce cars here without having to make a huge investment in a new production facility. "If we are sharing components and platforms, then we don't need a huge site of our own," Volvo CEO Fredrik Arp told Automotive News. "But if we have our own components and platforms or share with Ford of Europe, then we have to go it alone."

Other European automakers -- such as BMW and Mercedes-Benz -- have opened production facilities in the U.S. due to the poor exchange rate. Volkswagen also recently announced that it would open a plant in the U.S.

Volvo is more dependent on the North American market than any other European brand -- selling 30 percent of its cars in NA -- so the exchange rate has offset any of the brands improvements, including a 9.8% increase in gain in labor costs and a $50 million dollar reduction in global warranty costs. The exchange rate has ballooned from $.87 on the euro in 2002 to its current rate of $1.47.

However, the shift to North American production assumes that Ford will not sell its Volvo brand. that Volvo is not on the auction block, contrary to and despite announcing it last week. If Ford does move to further integrate with Volvo, it could make the sale of its last PAG brand more difficult because the companies would be so intertwined.