Expensive consultant fiasco of Volvo

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Dagens Industri  /  March 21, 2016

Consulting giant is again under fire. McKinsey was behind Volvo's costly and unsuccessful reorganization. It has previously been criticized for charging for more hours than necessary, pulling out of the project and setting the prices - now it has also done a poor job.

The merger of the truck units became a fiasco when the new Volvo CEO Martin Lundstedt chose to return immediately to the previous business model with independent truck business units.

As a result, Volvo shareholders have taken steps to reduce the use of consulting firms after the failure of the group’s truck brands merger attributed to New York-based consulting company McKinsey & Company.

The U.S. consulting giant had advised former Volvo CEO Olof Persson on merging its four truck units, including Volvo, Renault, Mack and UD, hitherto independent, and assembling them into three geographical areas. The centralization strategy was supposed to result in faster decisions. Subsequently, the three zones have themselves been merged so that there is only one sales head.

This hyper-centralization resulted in a reduced the chain of command that prevented the brands from quickly adapting to their specific markets.

Now four years on, the failed merger of Volvo Group’s truck brands is viewed by shareholders as an expensive and time-wasting disaster for the company. McKinsey caused Volvo to lose market share and led to major and unplanned restructuring costs.