Sweden to back Volvo’s European loan bid

Volvo Cars is likely to get support from the Swedish government in its request for a substantial loan from the European Investment Bank (EIB).

Sweden to back Volvo's European loan bid

“We will most probably accept Volvo Cars’ application and send it to the European Investment Bank in time for its board meeting on March 12,” Jöran Hägglund, a state secretary at the industry ministry, told financial daily Dagens Industri.

Volvo Cars requested a loan of five billion kronor ($567 million) from the EIB on January 29 to help it scrape by as its beleaguered US owner searches for a buyer willing to take on the loss-making unit.

It is however unlikely to receive the loan if the Swedish government refuses to act as guarantor, as it has indicated it would in the case of another Swedish car maker Saab, owned by General Motors (GM).

“Unlike GM, Ford has clearly said it will take its full responsibility as owner and will guarantee cash flow to Volvo Cars until it finds a new owner” for the unit, Hägglund explained.

Dagens Industri however reported that European competition legislation would block the government from guaranteeing more than 90 percent of Volvo Cars’ requested loan.

GM warned last week that Saab would have to file for bankruptcy protection “as early as this month” unless it received help from the Swedish government, which flatly refused to step in and rescue the auto maker.

As a result, Saab last week applied for restructuring, a legal process run by a court-appointed administrator, in a bid to survive on its own.

Enterprise Minister Maud Olofsson however said Monday the Swedish government would not guarantee a loan to Saab unless GM found the unit a new owner.


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.