Volvo Ousts Persson as CEO, Scania Exec Tapped for Post

This story appears in the April 27 print edition of Transport Topics.

Sweden-based manufacturer Volvo AB changed CEOs April 22 as the company’s board of directors chose Scania Group CEO Martin Lundstedt to replace Olof Persson.

The company’s North American truck brands are Volvo and Mack.

Volvo, the world’s second-largest truck maker, reported first-quarter increases in sales and net income the same day.

Lundstedt will take Volvo’s top job in October, but Persson, CEO since 2011, is out immediately, the company said.

Volvo Chief Financial Officer Jan Gurander will serve as interim CEO until Lundstedt arrives. Gurander signed the quarterly report, not Persson.

“After three years of focus on product renewal, internal efficiency and restructuring, the Volvo Group is gradually entering a new phase with an intensified focus on growth and increased profitability,” said Carl-Henric Svanberg, chairman of Volvo’s board of directors. “This will be achieved by further building on our leading brands, strong assets and engaged and skilled employees all over the world,” Svanberg added.

Volvo has four manufacturing divisions, and truck-making generates a majority of sales and profits. It also makes construction equipment, buses, marine and specialty engines.

Persson gave a high-profile speech about energy and the environment  at the Mid-America Trucking Show last month. But shortly before that  the Swedish press was already reporting his job was in jeopardy.

Lundstedt started his career with Scania in 1992. Once an independent Swedish manufacturer, Scania is now controlled by Volkswagen Group.

Bloomberg News said the change was sparked by Sweden-based investment fund Cevian Capital, the second-largest owner of Volvo. Cevian executives want Volvo management to streamline operations so as to generate higher profit margins.

Investors endorsed the CEO change, with Volvo’s share price spiking 15% higher the day the change was announced.

Since the start of 2014, the quarterly profit margin at the truck division has ranged from a 1% loss during last year’s fourth quarter to a 12.1% gain during this year’s first quarter.

Much of the recent improvement, though, was a one-time capital gain worth $296.7 million generated by the sale of 1.27 million shares of Indian manufacturer Eicher Motors Ltd. Excluding the Eicher sale, the quarterly truck margin was 7.3%.

During the first nine months of last year, the quarterly truck margin ranged from 4.1% to 4.9%.

Asked for comment, Volvo and Mack’s U.S. offices forwarded the request to Sweden and said company management is assessing possible strategies that could be implemented after Lundstedt starts.

“It is business as usual. I and the other ones in the management team as well as all employees will continue the work we have started, and we look forward to get to know Martin in the fall,” Gurander said.

A U.S. Volvo dealer said he was hopeful the changes would not mean an upheaval here.

“Any leadership changes that may occur inside Volvo globally, I would hope would not have any negative trickledown effect on North America,” said David Thompson, president of Portland, Oregon-based TEC Equipment chain.

Thompson said he has found agreement that many dealers “are very supportive of Volvo and Mack’s North America management team. My stores have never achieved the level of returns we are now enjoying. I would certainly be surprised if Sweden would tinker very much with what’s working pretty well in North America.”

While the North American truck market was one of Volvo’s strongest areas, the OEM said currency fluctuations, especially against the strong U.S. dollar, diminished results.

The corporation earned 4.24 billion kronor ($508.7 million), or 2.09 kronor per share during the three months ended March 31. At the start of 2014, Volvo had net income of 1.14 billion kronor ($176.6 million), or 0.53 kronor per share.

Quarterly sales improved to 74.79  billion kronor ($8.66 billion) from 65.65 billion ($7.60 billion).

Before adjustments, global truck division sales rose 18% to 51.66 billion kronor ($6.2 billion), a 3% gain  when including foreign exchange.

Volvo maintained its forecast that industrywide registrations of new North American heavy-duty trucks will rise to 310,000 this year from 270,300 in 2014.