Dramatic change in AB Volvo

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Economic Columnist Torbjörn Isacsson, Göteborgs-Posten  /  April 22, 2016

Expectations of AB Volvo's quarterly report are large and how it will go forward with Chinese partner Dongfeng

Today, Volvo Group will present the first quarter report of what is now a largely new company. And the reaction was expectations for big improvements going forward.
Volvo concluded a report heavy week on the Stockholm Stock Exchange.

In a fairly short time, the truckmaker has undergone major changes in board members, management and structure.

In terms of ownership, Swedish investment giant Industrivärden remains Volvo Group’s dominant investor. But it is a completely new Industrivärden as Volvo’s board is represented by their new CEO, Helena Stjernholm.

With the spoils are also other new requirements of ownership.

Financial newspaper Dagens Industri reports that Board Chairman Carl-Henric Svanberg spearheaded two years to ensure that profitability is increased.

Otherwise, Dagans Industri correctly predicted that previous Scania chief Hakan Samuelsson, currently CEO of Volvo Cars, would join truckmaker AB Volvo’s board at the annual shareholders meeting last week.

After this year's meeting, eight of AB Volvo’s eleven board members have been replaced since 2013. It’s a dramatic change in such a large company. Nevertheless, there might still be additional changes.

After bring in old Scania people at the board level, Scania-fication at the management level has occurred to an even greater extent since ex-Scania President and CEO Martin Lundstedt took the helm at Volvo's leadership.

And it's not just top managers who were pulled in, in some cases, they have even brought their secretaries.

For a Volvo, which for decades has been a pronounced senior executive-led company, the new line-up of ownership, directors and top management is revolutionary in scope. It is arch rival Scania that so clearly represents the new influences at Volvo, and the risks of internal culture clashes should not be underestimated.

Most outsiders agree that it was necessary for Volvo to change.

On the structural side, Martin Lundstedt has already attacked the strategies put forward by AB Volvo’s former management consultant McKinsey & Company.

In the future, AB Volvo will be far less grandiose, and more about Scania-like organic growth and improved profitability.

“We will continue to decentralize and use the power of the organization to drive the company forward,” said Martin Lundstedt.

Volvo has long suffered from poor profitability, while the market is weak in many areas. The company has made some tough cuts to realize savings, which will hopefully be reflected in the earnings.

With today's report, a great deal of attention will be paid to how AB Volvo’s joint venture* with Chinese truckmaker Dongfeng is developing. If successful, the JV would make Volvo the largest truckmaker in the world by volume, but profitability is far from proven world class.
 

* In January 2015, Former AB Volvo CEO Olof Persson spent US$886 million to acquire a 45 percent non-controlling stake in Dongfeng Commercial Vehicles, one of Dongfeng Group’s two heavy truck divisions. Volvo first began talks with Dongfeng in 2007, initially demanding an equal 50/50 partnership. Dongfeng steadily refused, and Volvo from 2011 conceded to accepting a non-controlling minority stake.