Opposition urges state car industry takeover

Leading government ministers have ruled out the possibility of a state takeover of Volvo Cars should embattled US owner Ford elect to sell its Swedish subsidiary, Dagens Nyheter reports.

Opposition urges state car industry takeover

“It’s not in our industrial policy to own carmakers and we will not jeopardize taxpayers’ money,” Enterprise and Energy Minister Maud Olofsson told the newspaper.

The centre-right government has instead pursued a policy of selling state assets since it came to power in 2006, including its share in telecoms operator TeliaSonera and drinks maker Vin & Sprit.

“We need to look at what the government can do without jeopardizing taxpayers’ money,” Olofsson said.

Cash-strapped Ford announced on Monday it was considering selling Volvo Cars, its last foreign premium marque, as the three big US carmakers ask US lawmakers for a bailout of 25 billion dollars in government-backed low-cost loans.

Volvo Cars, which the Volvo group sold to Ford in 1999, has been hit hard by declining sales, as interest for its big, costly models dwindles.

While a final decision on Volvo Cars is not expected for several months, there is already fevered speculation about possible buyers, with Germany’s BMW and France’s Renault suggested.

“But selling car companies in the midst of this financial crisis is hard,” Olofsson acknowledged.

The car industry accounts for 15 percent of Sweden’s exports and, with some 700 companies and suppliers, employs about 140,000 people.

With General Motors expected to announce a possible sale of Saab, Sweden’s other carmaker which GM has fully-owned since 2000, the opposition called on the government to reconsider its position.

“I think the crisis is too serious and the risks are too big to not intervene,” Mona Sahlin, the head of the Social Democratic party that has dominated local politics in the post-war period, told Swedish news agency TT.

Sahlin said the state should consider stepping in as a temporary owner.

“I would like to know what kind of contact (Prime Minister) Fredrik Reinfeldt has had with (French President) Nicolas Sarkozy and (German Chancellor) Angela Merkel,” she said, noting that France will soon announce plans to support its automotive industry.

Olofsson was adamant however.

“These two companies (Saab and Volvo) are running at a loss of about 11 billion kronor ($1.3 billion) a year.

“We would have to get the companies to break even and then invest to produce new cars that would have to be marketed and sold. Who can say that that kind of ownership is temporary,” Olofsson asked.

Metal workers’ union IF Metall expressed anger at the government’s position.

“Regardless of what happens with the ownership question it’s important that we, like the rest of the European car industry, get help. I’m concerned by Maud Olofsson’s comments,” union representative at Saab, Paul Aakerlund, told TT.

“I think some kind of support is needed regardless of what the situation is in the future. It could be temporary ownership or a capital injection. I think that’s necessary for us … That’s how bad the situation is,” he said.

A poll at the weekend showed seven of 10 Swedes want the state to take over Volvo Cars temporarily.

In the third quarter, the company posted a net loss of $458 dollars, nearly three times its full-year 2007 loss of $164 million.

Volvo Cars has already announced it will slash 6,000 jobs, including 3,900 in Sweden, out of 24,400 employees worldwide.


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.