New boss puts Volvo in Scania gear

[kscarbel2]

Dagens Industri  /  May 112, 2016

In his first meeting with Volvo's economists, Martin Lundstedt picked up the guitar and played the State and capital.

But it is not primarily for their social skills, he got the job as president of Volvo. The mission is to "make a Scania" out of Volvo and increase the profits.

"I'm a bit of an industrial romantics," he says.

At the time of this interview, Martin Lundstedt has been head of Volvo Group for just over five months. He claims to be a bit taken aback by the sheer size of the company.

"I've been around and met with employees and customers, and known of culture. What has struck me is it's great size. We are in 194 markets with twelve brands in many different industries. My impression is that we have very good people. I do not lie awake at night worrying about our human resources. It feels great. "

He's just returned from a tour of Asia. In nine days he has squeezed in South Korea, China, Japan, Southeast Asia and Australia.

"Australia is a good example. Where we are the largest with over 26 percent market share, and image-wise, we are also strong. Most Swedes do not understand how big Volvo's global presence. It makes you feel proud."

That said, Martin Lundstedt came to the table prepared. He's been handpicked by Volvo Group board chairman Carl-Henric Svanberg from the company’s fiercest competitor, the smaller but far more profitable Scania, to bring up the level of earnings of Volvo.

Increase profits

Volvo Group has gone through many phases in recent decades. During the 23-year Pehr G. Gyllenhammar era, Volvo grew into a conglomerate that included everything from drugs to food and tobacco.

Then came Sören Gyll, who dedicated Volvo again by selling out, stock market listing or distribute shares in the companies that had no vehicle movement to make.

During Leif Johansson's time as president of Volvo, the car unit was sold to Ford Motor Company for US$6.45 billion. With that money, he grew Volvo’s truck and construction machinery segments in Japan, China, India and the United States, doubling sales over 14 years.

After Leif Johansson came Olof Persson, whose mission was to integrate Volvo’s growing number of business units and find synergies. He implemented a savings program of US$1.2 billion, which has begun to take effect, but had difficulty finding synergies. Persson was finally ousted after profit levels did not increase as Volvo’s board had expected,

On 22 October last year, Martin Lundstedt took over as president with over 20 years experience from truckmaker Scania.

DI: How do you want to sum up your time as Volvo Group CEO on the day you step down?

Martin: "The fact that we created the profitability and organic growth, and we took the plunge into an era of sustainability, electro mobility (vehicles powered by alternative energy sources), and connectivity."

"Just be Martin"

Martin Lundstedt grew up in Mariestad, and speaks Swedish, English, French and German.

He stays in touch with his home town, for example, he has a reunion with his old racquetball once a year.

"I had a good childhood, and my parents still live in Mariestad. It's nice to go there in the summer and just be Martin. "

He studied hard in school and was busy with sports, Boy Scouts and music. First he played the trumpet in a big band, then he bought a guitar that still makes an appearance at parties.

When he met the Volvo Group's economists for the first time, he chose to play the Blue Train The state and capital.

"That I would rather play the Swedish progressive rock, as the National Theatre, Hoola Bandoola, KSMB and Ebba Green. But I booms not too little Ted Gärdestad or Lars Frederiksen either. I can even play some Creedence Clearwater Revival if needed for singing's sake. "

Martin’s mother was a teacher and his father a dentist, but there were also entrepreneurial role models up close.

"I saw how they lived with their activities, and it has influenced me. This business of making financial statements every day, that I love. I was extremely inquisitive and wanted to know all about what they did."

Martin Lundstedt worked part-time at the paper mill in Mariestad, and before he entered Gothenburg’s renowned Chalmers University of Technology, he worked over a year in the local timber company Lamiform.

"I usually say that I learned more in that year than during all my time at Chalmers. I started unloading, since I came into the office and got to work with purchasing, production and much more. "

"I come from the Volvo Country"

When he was finished with Chalmers, he knew he wanted to work in industry, something else attracted not.

"I'm very interested in the combination of production and people, to bring things together. To implement, that's what is difficult, "he says.

"I'm a bit of an industrial romantics. When the night shift is going on a Saturday night while others are at home having dinner, that fascinates me."

Martin graduated from Chalmers in 1992 in the midst of a recession and job shortage. He searched for openings in Scania’s trainee program, where he was one of three who was chosen from a thousand applicants.

Twenty years later, he succeeded as Scania CEO Leif Östling. In between, he served in Scania management as head of engine development, production in France, director of product marketing and truck management.

Scania is known for its focus on profitability, working closely with its customers and its ingenious modular system. The latter means that the truck components, or building blocks, are designed as much as possible to simplify production, purchasing, administration and hold down costs. It also makes it easier to broaden the truck range. Volvo Group also works with modularized design, but has not progressed as far as Volvo.

When Martin Lundstedt joined Volvo Group, he came to a company that is three times as large, in terms of net sales. In many ways it is easy to understand why he said yes. Volkswagen takes an ever firmer grip on Scania, and it should be more enjoyable to be the president of a Swedish company than subsidiary manager of a German corporation.

DI: How did it feel, deep down, when you walked out from Scania to a job at Volvo?

Martin: "It is clear that it was a very special feeling. I have many good friends left at Scania. But I felt I must do this, I was curious. When you are asked if you want to lead Volvo, it is an indefinable force that turns your stomach, actually. But one should not forget that I come from Volvo country, as I grew up in western Sweden."

It’s noteworthy that Martin's youngest sister still works at Scania. She is a civil engineer and director of product planning at buses.

DI: What did she say when you took this job?

Martin: "Finally!", Jokes Lundstedt says with a broad smile.

Got 5 million

DI has previously reported that Martin Lundstedt received a lump sum of 5 million Euros (US$5.7 million) when he signed the contract in the Volvo Group. He wants to explain the background to it.

"It sounded like I got a transfer fee to another football team. But it was not. What I got was compensation for any bonus in Scania, which I would have had if I had remained there," he says.

"It felt a little sad, because I seemed to be greedy. But in fact I’ve never been a money-focused individual. I work hard and I'm fortunate to have a good salary, but it is not the driving force for me."

Martin Lundstedt is known for his people skills. He loves to meet customers and be out on the assembly line talking with employees. In this sense, he is quite the opposite of his predecessor, Olof Persson.

And when Volvo Group board chairman Carl-Henric Svanberg justified the appointment of Martin Lundstedt, he noted in particular that the new Volvo head "is known for his successful leadership."

"Actually, you should not worry so much about their own leadership, because it may not work anymore. But I'm interested in people, and their activities, for real. I want to convey that we are a team. Although there is a hierarchy because you have to organize themselves, but for the rest we are colleagues who are running together in different roles," says Martin Lundstedt.

"I like it operational, but not excessively structured. I’m an emotional person and can be annoyed, but my dad taught me that you should not be at loggerheads with someone when you go to bed. So I would rather pick up the phone and make a call before I fall asleep. "

He is also renowned for its great capacity for work, and ability to remember numbers as well as names of the people he has met.

"As for the thing with numbers and names, this is linked to my interest in people and the business."

He says that his weak point is that he is not moving enough, exercise and physical activity may be too little space in his life. But he has no problem to relax.

"The question is often: 'How do I recharge the batteries?' Then it sounds as though you recharge the batteries on the job, but I do not see it. The job also gives me energy. For me, my job and personal life flow together, but it isn’t a problem. Everyone has to find their formula, "he says.

"When it comes to managing stress on the job, I think the most important parameter is that people feel they can participate and influence their own situation. Otherwise, powerlessness and frustration arise. To be seen at work is extremely important."

During Olof Persson's tenure, Volvo Group’s four truck brands including Volvo Trucks, Renault Trucks, Mack and UD Trucks, were merged together. Now under Martin, they have been separated once more, with three regional organizational units with overall responsibility for all brands in each region.

Independent brands

When Martin Lundstedt was appointed, he orchestrated a return to Volvo’s previous business model with independent brands.

DI: Was it difficult to convince the board that you wanted to break up an organization that had just been merged?

Martin: "No. We fully agreed that this is the way to go. It is important that each brand and business area be responsible for its own profitability. In such a large organization, you must be careful to ensure that business acumen is not lost. Decision power must be where it belongs. However, we retain joint purchasing, production and product development."

Martin says Volvo’s business is increasingly shifting from sales of vehicles to the sale of sophisticated industrial solutions. Customers want help with everything from repair and maintenance to financing and insurance.

"We sell a complete solution, instead of a product that has an aftermarket. Actually I do not like the word aftermarket, for it is the customer's main market. All this implies greater responsibility for us," he says.

"The retail sector is a good example, where many companies have very ambitious targets in terms of reducing carbon dioxide emissions. This puts the indirect demands on us too."

Optimistic about China

Geographically, one can say that Europe is currently Volvo Group's only bright spot right now, as it looks tough throughout the rest of the world. In North America, which had one of its best years ever last year, demand has fallen sharply forcing us to reduce production by 30 percent.

"But it depends as much on stock build-up as falling demand," says Martin Lundstedt.

Brazil is in a deep economic slump and growth is slowing in China. But in the long term, Martin Lundstedt is optimistic about the Chinese market.

During Olof Persson's tenure, Volvo Group sold its Volvo Aero subsidiary, as well as Volvo IT.

Investors, with activist fund Cevian in the lead, are calling for more spin-offs. Most have speculated the sale of Volvo Construction Equipment (VCE).

"For me, it is not the key issue on the agenda right now. It is rather to ensure that we develop our own organization in a good way. In addition, I note that, given the incredible headwind that VCE had on their end markets, including China, they have done a great job. I would rather emphasize that, compared with the industry, they have developed well," says Martin Lundstedt.

Moving from the glamour

At the end of the year, the Volvo Group will relocate its Gothenburg headquarters from the Volvo Car era facility in Torslanda to Lundby, where about half of the group's operations already are.

"The move is important from a practical point of view. We need to sit close to the business, especially when we have clients visiting. And I want to be able to go down and rub shoulders with the engineers. I like that," says Martin Lundstedt

[james j neiweem]

Any chance of a return of the E9 as he was head of engine development at Scania?

[kscarbel2]

The more you learn about Martin (a genuine truck man), the more an informed person is forced to think, what in the world was the board thinking when they appointed Persson to the company's helm. Like so many executives today, he spoke a good line..........but was actually clueless in all the critical areas.