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Volvo gives in to Gardell

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12:31 CEST+02:00
Truck maker Volvo's board has changed its financial goals and is open for “a return of capital to stock holders,” the company said on Friday.

The decision comes after financier Christer Gardell, through his fund Cevian Capital along with British Parvus Asset Management, bought 8 million A-shares at Volvo and demanded changes be made earlier this week.

“We see Volvo has a healthy set of groups, with inner logic,” said Volvo boss Leif Johansson. “We don't think Vovlo Aero can be separated. Just the opposite — we think that there are big technological advantages with holding on to Volvo Aero.

The company's changed financial targets are motivated by, according to the board, higher profitability, stronger cash flow and lower risk.

Volvo's new target for operating margins is 7 percent over the growth cycle and includes all operating units except Vovlo Financial Services. The target was previously 5 percent to 7 percent.

The target net debt was increased from a maximum of 30 percent of capital to a maximum of 40 percent of its own capital. Growth is remaining the same with a goal of 10 percent.

At the same time, Prime Minister Göran Persson has suggested that the state-owned AP Pension Funds take control over Volvo.

“It would naturally be enormously good if those Swedish pension funds agreed and took such responsibility, he said to Dagens Industri on Friday.

Persson has reportedly given Industry Minister Thomas Östros the task of looking into whether the AP funds could take control of the company.

Both Göran Persson, and opposition leader Moderate Fredrik Reinfeldt have expressed concern over venture capitalist companies pursuing short-term interests in their purchase of Volvo stakes.

Gardell wants Vovlo to payout some 19 billion kronor to stock owners and sell certain pieces of the company.

“The reason we have invested in Vovlo is that we think the company is fundamentally undervalued,” said Gardell, adding that the investment is long-term.”

Cevian, on Wednesday, messaged that the company now controlled the equivalent of 5 percent of the votes at Volvo. The investment company Öresund, which owns 1 percent of the votes at Volvo, supports Cevian.

Fredrik Reinfeldt said he agreed in principle, but said that Social Democratic policy had help create the current situation.

"During the post-war period a kind of politics has been followed that has wished away the owner families who were prepared to take long-term responsibility. That is the price we pay when we now get more short-term capital interest and institutional ownership," he said.

Volvo, which makes commercial vehicles, employs 81,000 people worldwide, and is one of Sweden's largest employers. The carmaker of the same name was bought by Ford in 1998.

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