Volvo Cars replaces CEO, will focus on China
Published on October 22, 2012 by Joey Wang
Frustrated by recent losses and a lack of momentum in the Chinese auto market, Volvo Car Corp.’s board sacked its chief and named a former executive of a German truck maker to lead its turnaround plan.
The auto maker, owned since 2010 by China’s Zhejiang Geely Holding Group Co., on Friday named Volvo director Håkan Samuelsson, a former chief executive at German truck maker MAN SE to replaced CEO Stefan Jacoby.
The move comes as the 85-year-old Swedish company has been hurt by sluggish demand in Europe and struggling to carve out a larger role for itself in the highly competitive Chinese auto market. Mr. Jacoby, 54, had taken a medical leave in September after suffering a mild stroke. Last month, Volvo reported a first-half loss of 254 million kronor ($38 million) compared with a profit of 1.2 billion kronor in the same period a year earlier.
“Competitors are doing much better than us and we are not following the strategy,” said Volvo Vice Chairman Hans-Olov Olsson at a news conference in Stockholm. He said the change had nothing to do with Mr. Jacoby’s health but said neither he nor Geely’s chairman were satisfied with the pace of change at the company.
“It is not a matter of pinpointing [what Mr. Jacoby was doing wrong], it is the board’s responsibility to act,” he said, adding that Volvo’s competition won’t slow down while the company looks to regain footing.
Mr. Jacoby could not immediately be reached for comment. Mr. Olsson said during the news conference that Mr. Jacoby is recovering.
There have been signs of strain between Mr. Jacoby and the company’s board over expansion and marketing plans. Mr. Olsson said there were no personal conflicts while characterizing the company’s past effort to create a compelling marketing plan for China as inadequate.
Mr. Jacoby, who was expected to return from medical leave next week, was a former Volkswagen AG executive who became Volvo CEO in 2010 and helped draft its $11 billion investment plan aiming to better compete with German auto makers in the Asian market.
Mr. Jacoby also had been working to secure additional financing to fund its growth and restructuring plans. Volvo has said it aims to sell 800,000 cars globally by 2020, and 200,000 cars in China by 2015. Last year, it sold 436,000 cars around the world and 47,000 in China.
For decades, Volvo has been a niche brand carrying a reputation for safety. The biggest markets have historically been North America and Europe, where the aim has been to attract well-heeled buyers with a collection of wagons, sport utility vehicles and upscale sedans.
Geely Chairman Li Shufu acquired the company from Ford Motor Co. in a bid to accelerate the domestic Chinese auto maker’s ambitions of becoming a global luxury car seller with China as its keystone market. Volvo, which historically built and developed cars in Europe, plans to build a plant in China.
“I see major opportunities for Volvo Cars to improve profitability, and accelerate our growth plan in China specifically,” Mr. Li said in a statement on Friday.
Mr. Jacoby may not have been able to meet the tough demands and keep up with the ambition that Mr. Li has, said Ian Fletcher, an automotive analyst with IHS Automotive in London. “Certainly, the amount of pressure he’d be under may well have impacted his health,” he said.
“One of the problems Volvo has is that it is still very much a small manufacturer,” Mr. Fletcher said. “A lot of auto makers have a far larger scale and it’s something Volvo as an auto maker still doesn’t have.”
During the news conference, Mr. Samuelsson said plans for massive investments, including a new China plant, are still in the works, but he committed to returning Volvo to profitability in the near term. Volvo sales fell 5.2% in the first half of 2012 and suffered cash outflows of $346 million through June.
In choosing Mr. Samuelsson, 61, Volvo opted for a seasoned executive with experience running major industrial companies. He drafted the international expansion MAN has pursued in recent years, and oversaw major purchases aimed at boosting the truck maker’s presence in emerging markets.
“He’s probably the best person on an international scale to lead the business,” Mr. Fletcher, the analyst, said. “You need someone to like Samuelsson who has had his fingers in a lot of areas before, and he can balance his time in the best possible way.”
Mr. Samuelsson’s time at MAN didn’t come without challenges. His failed attempt at a hostile takeover of Swedish trucking rival Scania AB in 2006 upset investors—including MAN’s eventual owner Volkswagen AG. In 2009, Mr. Samuelsson and other top-level executives resigned in late 2009 in the wake of a bribery scandal, although he wasn’t among the suspects named in a probe by public prosecutors.
Mr. Samuelsson said the company’s immediate focus is on cost control and finding a way to get back to profitability. He said he would look to jump-start operations in China.
“We are not happy with the sales development in China, which is our most important sales market,” Mr. Samuelsson said. “We have to put the China growth plan back on track.”
Mr. Olsson said the company has good products for the Chinese market—including the X60 sport-utility wagon and S60 sedans, but Volvo needs to improve its marketing approach.