Analyst: Martin Lundstedt faces a major challenge

[kscarbel2]

Goteborgs-Posten / October 17, 2015

On Thursday October 22, twenty-three year Scania career veteran and president since 2012 Martin Lundstedt will takeover as head of AB Volvo.

Analysts see Volvo as a serious challenge for Martin Lundstedt. [Compared to Scania], the companies are very different and he has great pressure to increase profitability.

The analyst who monitors AB Volvo has closely followed the developments that led to Olof Persson being ousted, and Martin Lundstedt being recruited from Scania.

Anders Trapp, analyst at SEB, still think that what happened six months ago is remarkable, and there is no other reasonable explanation other than the board feels Lundstedt will be significantly better at delivering higher profitability.

“You took the course to a rough treatment by Olof Persson. It is unusual to throw out someone to pick the one that you think will be better, much like in a football team. I have not very often seen this in Swedish companies,” says Trapp.

Another analyst points out two main problems that Martin Lundstedt in one way or another need to address. While the truck business in the Western world is in fairly good condition, Volvo is more unfocused in the rest of the world. In addition, Volvo Construction Equipment (VCE) has big problems.

“It is important to streamline the trucks' investment in Asia, because that's still where the future of the trucks are in terms of growth. It is one of the major issues,” he says.

Scania’s Martin Lundstedt comes from a company that works well, and has done so for a very long time.

“There has always been a stability at Scania that made it possible to create a culture of incremental improvements, planned improvements. Volvo is something else entirely - the big throw, big business, big changes,” says Trapp.

He sees this as a huge challenge for Martin Lundstedt, to lead Volvo to become "more evolutionary and less revolutionary."

“Parts of the organization are probably ready for a Scania model, with continuous improvement. But far from the whole company,” said another analyst.

He also suggests that the two organizations are very different and have been working for quite different strategies. AB Volvo has "hastily invested in attempts to catch market opportunities somewhere. While Scania invested where they can make money, always successfully employing a long-term strategy.”

Anders Trapp at SEB says Lundstedt’s 20 years at an organization that works well give him truck experience of what works. And everything indicates that he has received a strong mandate from the board to implement changes.

The degree to which Volvo will be reorganized remains to be seen.