Swedish Automaker Changing for the Better

Change is not always easy. Hard decisions must be made when companies are not performing as well as they hoped. Torben Eckardt, Managing Director of Volvo Car México, says it is better to suffer a six-month painful transition rather than deal with a bad operation for years to come.

“Volvo’s approach in Mexico has not been the best in previous years, which is why our new strategy will focus on improving all neglected aspects of our operations,” says Eckardt. Although the brand’s sales grew 20 percent in 2016, which was above the industry’s overall performance of 18.6 percent growth, its overall market share remains at 0.1 percent with 1,607 units sold by the end of 2016. As the new Managing Director of Volvo Car in Mexico, Eckardt was not pleased with what he found after arriving to the country.

“Our distributors were underperforming both in terms of business management and customer service,” he says. Eckardt took office in June 2016 working as a part-time consulting partner and assumed his position full-time on Oct. 1, 2016. By Nov. 15, 2016, he had already shut down the biggest dealership Volvo had. “This is an indication of the commitment we have to improving performance,” he says.

Eckardt’s improvement strategy puts Volvo in a tough spot. On the one hand, the brand has shut down six dealerships and service points while on the other, the latest findings from J.D. Power’s 2017 Customer Satisfaction Index show a decrease in general satisfaction in sales in Mexico. “We know clients expect to have showrooms and repair shops close by but we decided not to rush into looking for a distribution partner,” says Eckardt. “We want to find the right fit for our customers.” This is taking more time than he expected, however. Eckardt has found a cultural barrier that has complicated the way the company does business. “In Mexico, there is too much eagerness to please and promise things. The most common words I hear are ‘don’t worry,’” he says.

Eckardt is now learning to navigate the Mexican penchant to say “yes” when asked for something. Although his previous experience in Turkey and Sweden have shown him two different points of view of how to do business, they do not fully compare with how Mexicans operate. “In Sweden, when you ask someone for something and they cannot do it, they say ‘no.’ That ‘no’ is absolute and is non-negotiable,” he says. “In Turkey, when you ask for something and people say ‘no,’ they actually mean ‘maybe’ and they are willing to negotiate to find the best deal for both parties. In Mexico, no one says ‘no’ and that creates uncertainty.

This does not only affect Volvo Car México internally. Eckardt has also found that this approach creates false expectations on the part of consumers, which in the end, affects the brand. “This is not the way we want to work,” he says. “We want to be honest about our capabilities and we will not overpromise and underdeliver anymore.”

As proof of the company’s willingness to establish clear and honest goals, Eckardt concedes that Volvo’s previously stated target of reaching 15 percent growth in sales by the end of 2017 is too ambitious. This is mainly due to the company’s restructuring of its dealership network and the challenges the country has faced with a volatile dollar-peso exchange rate. “Our dealer network is not completely ready and our numbers have suffered in 2Q17,” he says. That being said, Eckardt expects that once internal changes are finalized between 3Q17 and 4Q17, Volvo will reap the benefits of a possibly growing premium market, which by 2016 grew by 18.6 percent compared to the numbers from 2015.

Eckardt has high expectations for Mexico and he is sure Volvo will be able to mimic its success in the European market. The brand is also bringing the new generation of the XC60 to Mexico in August 2017, which according to Eckardt will be another flagship product for Mexican customers to understand the true Volvo experience. The company might still be looking for a new distribution partner but in the meantime, the company already has plans to open a new showroom in Santa Fe in August 2017 and another one in Puebla by the end of that month. Before the end of September, Volvo will open a third dealership on Presidente Masaryk avenue. “Opening three new showrooms in just two months shows we take Mexico seriously, that we are stronger than ever and that we will achieve our goal of 15-20 percent growth by 2018.”