Commentary: Difficult balancing act for new Volvo head

[kscarbel2]

Goteborgs-Posten / October 30, 2015

On Friday evening, Martin Lundstedt begins the weekend after his first full week as Volvo CEO.

He will spend his weekend working on everything from the company's structure to the internal work and customer care.

This week, Martin Lundstedt used the press meeting at a Volvo truck dealer repair shop to announce that business at Volvo will not continue as usual – the company will be heading into a new and different era.

"We have a lot of hard work ahead of us,” he said.

Not least, his work is about creating an all-new management culture very different from the just-ended Persson administration.

Lundstedt was invited to head Volvo by a board and investors extremely dissatisfied with where the company is today.

The Persson management team had from investment company Aktiebolaget Industrivärden’s headquarters in Stockholm (http://www.industrivarden.se/en-GB/Holdings/Investment-operation/). Owning up to a 30 percent stake in Volvo, the culture that characterized the Industrivärden world had deeply penetrated Volvo in the form of luxury yachts, mansions, extravagant use of private jets* and sponsorship of high-priced ocean sailing competitions.

Signalling a new day at Volvo, the group is selling the Gothenburg villa of ousted CEO Olof Persson, which had been purchased for SEK 30 million (US$ 3.6 million). Now CEO Martin Lundstedt will reside in his own apartment in Gothenburg.

With ex-Scania head Martin Lundstedt at the wheel of Volvo now, there is believe that Volvo’s days of provocative high-flying extravagances will end, as it has at other companies held by Industrivärden, since industrialist and financier Fredrik Lundberg became chairman of the investment company this past April.

Martin Lundstedt is a person who speaks warmly of working on the front lines of the truck business, and the importance of good corporate governance.

For example, top Industrivärden executives previously had the power to travel by private jet with their families on family trips at the company's expense to football games.

It's always a gamble for an outsider to come in and transform a business. And it hardly gets any easier by Martin Lundstedt coming from Volvo’s toughest competitor, a career step that is extremely rare at the executive level in Swedish business.

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* Private jet scandal gives Swedish giant rough ride

The Financial Times / January 22, 2015

The staid world of Swedish business was shaken on Thursday when a scandal over the use of private jets triggered one of the biggest corporate upheavals in the country’s recent history.

Industrivärden, the owner of controlling stakes in companies including Volvo, Ericsson and Sandvik, and Handelsbanken, Sweden’s biggest bank and an Industrivärden holding, will both get new chairmen and chief executives under the shake-up.

The jet scandal erupted after it emerged that wives and children accompanied directors on business trips abroad as well as to a hunting lodge owned by SCA, a paper and forestry company in which Industrivärden owns a large stake.

Svenska Dagbladet, the newspaper which broke the story, reported that one unnamed person even sent a jet from the north of Sweden to Stockholm just to pick up his wallet, which he had forgotten.

The affair has also shaken faith in the much-admired Swedish model of active ownership under which shareholders nominate board directors and help guide companies’ strategies. Industrivärden and the Wallenberg family foundations, Sweden’s two biggest holding companies, together control more than half of the market capitalisation of the Stockholm stock exchange.

Sverker Martin-Löf, the chairman of Industrivärden and SCA, is the big loser of the scandal as he will resign from all his board posts, including as vice-chairman of Handelsbanken and Ericsson and a director of Skanska.

He will be replaced as chairman of Industrivärden by Anders Nyrén, currently the holding company’s chief executive as well as the chairman of Handelsbanken. Mr Nyrén in turn will be replaced at Handelsbanken by Pär Boman, the bank’s well-respected chief executive who will also become chairman of SCA.

“Once the dust has settled from the battleground, we can say Sweden is a very small country. We are a very close-knit sphere with a lot of influence and we were too thinly spread,” Mr Nyrén told the Financial Times.

Swedish investors complained that power at Industrivärden was too concentrated between Messrs Martin-Löf and Nyrén, who sometimes signed off each others’ expenses.

He said the move would bring in “new blood” as chief executives of Industrivärden and Handelsbanken, with both moves expected to be announced soon, and that the jet scandal had merely “forced us to accelerate” a succession plan that was already in place for next year.

But group insiders spoke of a holding company that had at times lost touch with reality, led by Mr Martin-Löf, who had been chief executive or chairman at SCA for more than a quarter of a century. Mr Boman, who led Handelsbanken successfully through the financial crisis to become one of the European banks with the highest capital ratio, is expected to lead the clean up at SCA, which has already changed its company policy to ban family members from using private jets.

Dagens Industri, Sweden’s main financial newspaper, compared the size of the affair leading to Mr Martin-Löf’s departure to previous scandals such as Percy Barnevik’s SFr148m ($172m) pay-off from ABB.