Volvo Ousts CEO Persson

[kscarbel2]

Bloomberg / April 22, 2015

Volvo AB, under shareholder pressure to boost profit margins, ousted Olof Persson as chief executive officer, as the world’s second-largest truckmaker seeks to revamp strategy amid tougher competition.

Martin Lundstedt, the top executive at rival truckmaker Scania AB, will succeed Persson in October, the Gothenburg, Sweden-based company said in a statement Wednesday. In the interim, Chief Financial Officer Jan Gurander will take over Persson’s responsibilities as of today. Volvo shares surged the most in more than six years.

Volvo is seeking to finalize its business review by the end of this year, Gurander said during a conference call with analysts. “That’s our challenge, from which we’ll start fresh into 2016.”

The sudden change in leadership follows efforts by Cevian Capital AB, the second-largest owner of Volvo’s voting rights, to lobby the truckmaker to streamline operations and boost margins. Volvo is intensifying a push for growth and increased profitability, as the world’s second-largest maker of commercial vehicles faces increased competition from Volkswagen AG, which bought Scania and Germany’s MAN SE in recent years. Persson led the truckmaker for almost four years.

Scania’s head of production and logistics, Per Hallberg, will take over as acting CEO, the VW unit said in a statement today.

Volvo’s CEO appointment “may now spark discussions about his new agenda and what it will mean for the group’s strategy,” Michael Raab, a Frankfurt-based analyst with Kepler Cheuvreux said in an report. “Considering that the fate of Volvo hinges on trucks, his strong background in this industry is clearly helpful.”

Shares Surge

Volvo’s shares soared as much as 16 percent, the biggest intraday jump since February 2009, and were up 14 percent at 115.30 kronor at 2:38 p.m. in Stockholm. That pushed the stock’s gain for the year to 36 percent, valuing the manufacturer at 245 billion kronor ($28 billion).

Cevian, which holds 14 percent of Volvo’s votes, welcomed the management change. Co-founder Christer Gardell said Lundstedt is “very well suited” to take the truckmaker’s profitability to the next level. “There’s probably no one better,” he said in an e-mailed response to questions. In 2010, Gardell supported Persson as a successor to long-time CEO Leif Johansson.

Persson had set a target of making Volvo the most profitable heavy-truck maker by realigning production of the European Volvo and Renault brands, cutting overhead costs and expanding overseas. The company didn’t make the executive available for comment.

Fatter Margins

The new CEO faces the challenge of restructuring a European production network that’s “too dispersed” in part because of past acquisitions and local political interests, said Kepler’s Raab.

Still, Volvo’s operations have improved. In the first quarter, Volvo’s margin rose to 6.1 percent from 3.9 percent as operating profit, excluding restructuring charges and a gain from the sale of shares in Eicher Motors Ltd., climbed to 4.6 billion kronor. Including those items, operating profit was 7.07 billion kronor.

Lundstedt has spent his career at Soedertaelje, Sweden-based Scania and has been president and CEO of Scania since 2012. Starting this year, he reported to Volkswagen’s new trucks chief Andreas Renschler, who previously led Daimler AG’s commercial-vehicles division, the biggest in the world. Renschler joined Volkswagen this year to push integration between Scania, MAN and VW’s delivery-van business.

“After three years of focus on product renewal, internal efficiency and restructuring, the Volvo group is gradually entering a new phase with an intensified focus on growth and increased profitability,” Volvo Chairman Carl-Henric Svanberg said in the statement. Lundstedt is known for his “winning leadership style.”

.

[kscarbel2]

Volvo names Martin Lundstedt from rival Scania as chief executive

The Financial Times / April 22, 2015

Volvo Group has ousted its chief executive and replaced him with the boss of rival Scania as the truckmaker looked for somebody with “deeper experience” of the (truck) industry to help complete its turnround after a fall in profitability.

Carl-Henric Svanberg, chairman of Volvo, said he had chosen Martin Lundstedt from Scania to replace Olof Persson as the Swedish maker of commercial vehicles and construction equipment needed to move on from cost-cutting to focus more on improving its truck business.

“It is time to think: where do we go in the next phase of our development?” Mr Svanberg told the Financial Times.

He pointed to Mr Lundstedt’s 25 years at Scania in roles including engine production and development, marketing and sales, and chief executive since 2012. “It’s a strength for Martin. Of course, if you have spent your life in trucks you know an awful lot,” Mr Svanberg added.

Mr Persson, whose experience was in Volvo’s construction equipment and aerospace engine businesses, paid the price for the Swedish group’s consistent decline in profitability during his four years in charge. A restructuring programme designed to reduce costs by SKr10bn and cut more than 5,000 jobs has only just started to bear fruit.

In the first quarter of this year, Volvo’s operating margin jumped to 6.1 per cent from 3.9 per cent. The better than expected results, combined with the appointment of the highly-respected Mr Lundstedt, led to Volvo shares gaining 14 per cent.

However, Volvo’s operating margin was 9.7 per cent when Mr Persson took over as chief executive and 7.9 per cent later that year when he announced plans in front of investors to increase profitability by 3 percentage points.

A combination of increased costs to launch its biggest product offensive in decades, difficult truck markets in Europe and Latin America, and problems in its construction business in China took their toll on the operating margin, which sank to 3 per cent last year.

By contrast, Scania has long been the leading truckmaker in the industry for profitability, making an operating margin of 9.5 per cent last year.

Mr Svanberg said Volvo and Scania, which has been fully taken over by Volkswagen in recent months, faced different issues. “Scania has been a truck company for a very long time and had the chance to optimise their business. They came to the end of the road because they were in a few markets only. We are in a different situation: we have acquired a lot but not optimised parts of our business,” he said.

Mr Lundstedt, who will take over in October, will focus on how to get the best out of Volvo’s stable of truck brands including Renault, Mack in the US, UD in Japan, Eicher in India, and Dongfeng in China as well as improving its production and development work, Mr Svanberg said.

Further changes at Volvo are possible: the Gothenburg-based group is looking to sell parts of its IT business while some investors are keen for it to exit from the construction equipment business that makes excavators, pavers, and backhoe loaders.

Mr Svanberg said the core of both trucks and construction equipment was diesel engines and gearboxes. “It is very logical to have a construction equipment unit. It doesn’t mean we will abide by it,” he added.

[kscarbel2]

Volvo lands a man who, as Zenon C.R. Hansen would say, "knows something about trucks."

Volvo's never had a warm-hearted leader with integrity before (the characteristics of a Scania man). This should be interesting

[Red Horse]

Just out of curiosity, what percentage of Volvo's business isin construction equipment? This new guy I assume has no experience in that field.

Also, I see words like.."streamline operations" and .."cutting overhead costs" and the standard "synergism" buzzword comes to mind.

Hope this does not spell trouble for Mack

[hatcity]

would be very interesting to see what happens.

With the previous Mack/Scania partnership, is this guy from the old days?

Perrson was pushing the Vulva brand, but diehards (like us) just wouldn't let Mack die.

[41chevy]

would be very interesting to see what happens.

With the previous Mack/Scania partnership, is this guy from the old days?

Perrson was pushing the Vulva brand, but diehards (like us) just wouldn't let Mack die.

Said the Pontiac lovers. It's all about the money in the end, not product or customer loyalty in most of todays corporate world. Paul

[james j neiweem]

I can smell Scania V-8's in the Titan.

[TeamsterGrrrl]

This is the latest in a series of "musical executive chairs" moves at the Euro based truckmakers. If the CEOs have no brand loyalty, why should we?

[kscarbel2]

This is the latest in a series of "musical executive chairs" moves at the Euro based truckmakers. If the CEOs have no brand loyalty, why should we?

You always bring some good thoughts to the table. But in this case, I must respectfully disagree with you. Martin (Lundstedt) has been with Scania for 25 years. He is not one of today's "musical chairs" executives. Rather, he's the kind of professional career truck man that Mack people were..........pre-Volvo.

No doubt Volvo's board offered him generous compensation, but Martin is not a man about money. He's a passionate truck person. Obviously, he's looking at a choice, to be his own boss at Volvo at the high point of his career, or work under Andreas Renschler at Scania (Volkswagen's truck unit head previously with Daimler's Mercedes-Benz truck unit). I'm not aware of any ill feeling between Lundstedt and Renschler, but I can understand the human side of Lundstedt's decision.

All that have followed Mack's management shuffles under Volvo know the business unit is full of unqualified incompetents from top to bottom. There's every reason to believe that the situation can improve under Lundstedt.

Lundstedt is not a construction guy. Perhaps he'll have Denny Slagle run Volvo's construction unit (Denny's background is construction machinery..........not trucks). Problem solved.........if Denny is good at construction.

[bulldogboy]

This probably reinforces the feeling among many here that if a Mack/Scania partnership had occurred years ago, a powerhouse company would have dominated the heavy truck business.

I have no knowledge of the truck industry but it seems to me that there is fierce competition in Europe, Asia, and South America among many heavy truck manufacturers, more so that in

North America. While we have Volvo, DTNA, Paccar,and IHC, the rest of the world has these plus VW, MAN, Scania, Ford, and other Asian manufacturers. Must be a tough business with

so many players.

bulldogboy

[41180]

Any chance this new CEO has a soft spot for mack and could unleash the bulldog ? Nice to see optimism from kscarbel on this one

[fxfymn]

If he truly knows trucks, and the truck market, than Mack should fare well since he will most likely take them back to the market they once excelled in: heavy duty trucks. While I see more and more Western Stars filling this niche, I don't think any brand is so solidly entrenched that it cannot be supplanted. A good product with the appropriate marketing plan should be successful in becoming the dominant brand.

[kscarbel2]

Volvo Dismisses Its CEO

Wall Street Journal / April 22, 2015

Volvo AB dismissed its chief executive, Olof Persson, on Wednesday and said it would hire the boss of Scania to oversee efforts to boost profitability and restructure the world’s second-largest truck maker.

During his four-year term, Mr. Persson was criticized for failing to halt an erosion in profit margins despite a 10 billion Swedish kronor ($1.15 billion) cost-cutting program from 2012-15 that has so far included nearly 4,000 job cuts.

He will be replaced from October by Martin Lundstedt,who since 2012 has served as chief executive of Scania, the Swedish truck maker acquired by German group Volkswagen last year. In the meantime, Volvo Chief Financial Officer Jan Gurander,who worked closely with Mr. Lundstedt during his own tenure as CFO at Scania in the early 2000s, will take temporary charge, Volvo said.

“The board has come to the conclusion that we’re better served by someone with longer experience in the truck industry,” Volvo Chairman Carl-Henric Svanbergtold reporters.

Mr. Svanberg downplayed the board’s focus on cost cuts and margins in an interview with The Wall Street Journal and said Volvo will have to concentrate on getting all parts of its global organization to pull in the same direction.

“You can’t reach world leadership through cost cuts alone,” Mr. Svanberg said. “It takes leadership skills to optimize the energy within an organization. You have to have a clear vision and people within the organization need to feel ‘this is what we try to accomplish’,” he added.

In a statement announcing the shift in leadership, Mr. Svanberg highlighted Mr. Lundstedt’s 25-year-experience in the commercial vehicle industry as well as that “he is well known for his winning leadership style.”

He rejected analyst and media speculation of a rift between the board and the outgoing chief executive and said that he still expects the company to deliver on its cost-cutting plan by the end of 2015 despite being 6.5 billion kronor away from that target.

Swedish business newspaper Dagens Industri claimed last month that Mr. Svanberg was looking to replace Mr. Persson after growing frustrated with the company’s performance following three years of an overhaul to improve margins.

After Volvo acquired a number of truck brands globally in the early 2000s, Mr. Persson had his work cut out in trying to streamline the company, which makes trucks under its Volvo, Mack, Renault, and UD brand, as well as in a joint venture with Dongfeng in China. Volvo also produces busses, marine engines and construction equipment.

“The board has come to the conclusion that we’re better served by someone with longer experience in the truck industry,” Volvo Chairman Carl-Henric Svanberg told reporters.

Mr. Svanberg downplayed the board’s focus on cost cuts and margins in an interview with The Wall Street Journal and said Volvo will have to concentrate on getting all parts of its global organization to pull in the same direction.

In 2012, Mr. Persson told investors that he planned to improve Volvo’s operating margin by three percentage points from 8.7% in 2011. But, faced with weak demand for its overall construction equipment business and for trucks in Latin America, the margin instead fell consistently to 3% in 2014. Volvo said Wednesday that the margin had risen to 9.1% in the first quarter of 2015.

Shareholders, including Swedish activist fund Cevian, have openly criticized the pace of restructuring under Mr. Persson’s leadership. Shares have gained 17% in the past two years, but sharply underperformed both the broader Nordic market and truck-making rivals. On Wednesday, shares rose 13%.

“Martin Lundstedt will be key in taking Volvo to the next step, where focus will be on the whole business, costs as well as income,” Christer Gardell, founder of Cevian Capital which owns 12.9% of votes in Volvo, said.

Speaking about Mr. Persson’s dismissal, a representative of one of Volvo’s institutional owners said the move came as a surprise seeing as the company has made progress with its effort to improve margins.

“Sometimes your timing as CEO is just bad,” the representative, who declined to be named, said. ”He has faced challenges in the market that are not within his control, but I guess at some point you have to try something new.”

Mr. Lundstedt is partly credited with maintaining Scania’s robust margins, which stood at 9.2% in 2014.

Speaking about Mr. Persson’s dismissal, Handelsbanken analyst Hampus Engellau said: “It’s a bit surprising since he’s far into Volvo’s organizational change finishing this year.”

Mr. Persson wasn’t immediately available to comment.

Scania has previous experience in cutting costs and reshuffling its operations and is widely known for its robust margins, which stood at 9.2% in 2014.

[kscarbel2]

A tremendous amount of bitterness is now flowing throughout the Volvo empire aimed at its board.

By choosing an outsider to lead Volvo, the board is effectively saying that Volvo itself in their judgement does not have a single individual qualified to take the helm

Not a single person with long experience in the truck industry, a clear vision and a "winning leadership style" (i.e. leadership skills).

Certainly, when you look at the unqualified Volvo people now manning the Mack brand, that is indeed true.

[james j neiweem]

What input do mack Engineers have in designing new products and components. It makes sense that volvo would want to promote commonality of parts and pieces but beyond that it would be good if Mack and Volvo engineering had a rivalry going. Where does renault fit in to the scheme of things. I get the impression they are not on as tight a leash as Mack.