‘Swedish car makers should come home’

With Ford and GM, the respective owners of Volvo and Saab's car divisions, struggling for their survival, Sweden needs to regain the initiative and nationalize its auto industry, argues Rolf Wolff, dean of the School of Business, Economics and Law at Gothenburg University.

'Swedish car makers should come home'

Extraordinary times call for extraordinary measures. A time of crisis is also a time of possibilities, a time to think again and think in radical new directions. With the entire vehicles industry in crisis and parts of the auto industry hanging in the balance, we in Sweden are reacting like it’s the 1980s.

While the United States—the country which has been the world’s ideological driving force, laying the groundwork for neoliberalism, a belief in economies of scale, shareholder value—has gone and nationalized mortgage institutes, banks, and insurance companies in an attempt to save them, we in Sweden continue to refrain from discussing the future of our most important industry.

While the German government has indicated it will take action to aid carmaker Opel and the US federal and state governments will soon assume responsibility for the country’s largest car manufacturer, we in Sweden are talking about short-sighted measures to deal with job losses.

Sweden’s car manufacturers are soon going to reach the point of no return. We all ought to take a moment to think about what would happen in Sweden if both Volvo Cars and Saab Automobile ceased to exist.

What would happen to Sweden in the short term, and, even more importantly, in the long term?

Some may say, fatalistically, that an industrial era has simply come to an end. Many will spend time analyzing what happened after the fact and try to appear knowledgeable in hindsight.

But let’s be clear about one fact, here and now: the industrial knowledge which we stand to lose will never be recreated.

If Volvo Cars disappears as a base for industrial knowledge and skills, then Sweden will never again have an auto industry. All the knowledge and skills would be lost, and with it all future associated development potential would be gone. Forever.

Bearing that in mind, there is now only one viable course to take: for the state to assume ownership of Volvo Cars.

Why not? If the state can own an energy company, then it can just as well own a car manufacturer. If the state can own and secure an investment company, it can do the same thing with a car manufacturer.

There isn’t any economic research which proves that the state is, by definition, a bad owner.

In the wake of neoliberalism, financial professionals and global management consultants have argued that all state ownership is ineffective and inherently bad.

These same people have earned huge sums of money by selling these “solutions” to governments around the world. As a result, governments, and therefore citizens, end up losing their core possession: assets of long-term importance which also happen to provide solid long-term returns. The same sort of thinkers have also created the one-sided view that economies of scale are a law of nature. As a result, this large-scale ideology is seen as applying to all industrial production, including the auto industry.

But quite apart from economies of scale, there is also a market logic in a global economy whereby the success of a company is dependent on satisfied customers. A company like Volvo Cars could easily survive with 600,000 satisfied customers who continue to buy its products, assuming the products match the requirements of its customers and society at large.

Perhaps it will now finally be permissible to call into question America’s economic ideology without fear of being called a Luddite. Asian economies, which are going to dominate the world in twenty to thirty years’ time, are already thinking differently. They are replacing quarterly report capitalism with long-termism, a strand of cultural DNA which is going to take the defenders of short-term thinking by storm.

While the Americans are busy doing everything we consider ideologically incorrect, it is happening again: we are caught flat-footed, paying the Americans’ bill for the financial crisis while they destroy our industrial base.

The dean of one of the leading business schools in the US, Duke University’s Fuqua School of Business, has said that only a quarter of what they teach is relevant in the global economy of today. The curriculum has to change.

Can we in Sweden afford, in political and industrial terms, not to take this on board? Of course we can’t. Rather than managing lay-offs after the fact, the Swedish government should bring Volvo Cars back to Sweden in order to secure the industrial future of the company and the country. And who knows what the future will bring? Who would have believed just 15 years ago that little old Porsche would take over the entire Volkswagen group?

Translation: The Local. A Swedish version of this article appeared on November 24th in business daily Dagens Industri.


Sweden’s Volvo regains strength after pandemic puts brakes on earnings

Swedish truck maker Volvo Group was hit by a sharp drop in earnings due to the coronavirus pandemic, but business rebounded at the end of the year.

Sweden's Volvo regains strength after pandemic puts brakes on earnings
Volvo Group CEO Martin Lundstedt. Photo: Adam Ihse/TT

In 2020, the group saw “dramatic fluctuations in demand” due to the Covid-19 pandemic, chief executive Martin Lundstedt said in a statement.

For 2021, Volvo raised its sales forecasts in its trucks division – its core business – in Europe, North America and Brazil.

However, it said it also expected “production disturbances and increased costs” due to a “strained” supply chain, noting a global shortage of semiconductors across industries.

The truck making sector is particularly sensitive to the global economic situation and is usually hard hit during crises.

In March, as the pandemic took hold around the world, Volvo suspended operations at most of its sites in 18 countries and halted production at Renault Trucks, which it owns, in Belgium and France.

Operations gradually resumed mid-year, but not enough to compensate for the drop in earnings.

With annual sales down 22 percent to 338 billion kronor (33.4 billion euros, $40 billion), the group posted a 46 percent plunge in net profit to 19.3 billion kronor (1.9 billion euros).

Operating margin fell from 11.5 to 8.1 percent.

However, the group did manage to cut costs by 20 percent.

“We have significantly improved our volume and cost flexibility, which were crucial factors behind our earnings resilience in 2020,” the group said.

Volvo's business regained strength in the second half of the year.

“Customer usage of trucks and machines increased when the Covid-19 restrictions were eased during the summer and this development continued during both the third and fourth quarters,” it said.

“Both the transport activity and the construction business are back at levels on par with the prior year in most markets.”

For the fourth quarter alone, the company reported a 38-percent rise in net profit from a year earlier.