Ford is replacing the head of Volvo, its ailing Swedish division, in a bid to revive the fortunes of the premium carmaker.

The US carmaker is moving its chief operating officer of European operations, Stephen Odell, to Volvo to help turn around its fortunes.

Fredrik Arp, Volvo’s current president and chief executive, is quitting the company after three years at the helm.

Ford has ruled out selling Volvo although it looked at the option of offloading the Swedish business in order to strengthen its balance sheet as it did with Jaguar, Land Rover and Aston Martin.

Ford has increased the use of shared components between its other brands and Volvo to try to reduce costs. However, this could make a sale more difficult as it did with Jaguar and Land Rover. With the two British brands, the prospect of selling them together was seen as virtually impossible because of the level of crossover between them.

Alan Mulally, Ford’s chief executive, said: “Stephen Odell brings to Volvo a wealth of experience of strong leadership in the automotive industry. Given his strong track record at Ford, Jaguar and Mazda, the time is now right for Stephen to take up this new challenge at Volvo.”

Ford is under pressure to reinvigorate Volvo, a brand which had built its reputation strongly on safety. But in recent years it has become less fashionable, has suffered an erosion of customer loyalty, and other carmakers’ standings in safety and reliability have increased.

In common with some other premium brands it has recently taken a beating in the tougher western car markets. Volvo lost $270 million in the first half of this year compared with a $3 million profit in the same period in 2007. In June Volvo announced the biggest job cuts in its history with the loss of 2,000 posts - eight per cent of its workforce.

Volvo has also taken more of a hit from the weak dollar than some of its competitors because it doesn’t make any cars in the US and North America is its biggest market.

Mr Arp has implemented cost-cutting and streamlining at Volvo but it is thought that Ford now believes that a new product range is the key to Volvo’s revival. Mr Odell said: “Volvo is one of the great iconic automotive brands. The very attributes that make Volvo distinctively Swedish - its heritage of safety, environmental concern and its Scandinavian design - appeal to customers around the globe. Our strategy is to enhance the premium nature of Volvo by further strengthening these attributes.”

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