Volvo AB (VOLVB), the world’s second-largest maker of commercial vehicles, named BP Plc chairman Carl-Henric Svanberg to take the same role at the Swedish company and steer it through a weakening truck market.
Svanberg, who has headed BP since January 2010, will succeed Louis Schweitzer, the 69-year-old former chief of Volvo’s biggest shareholder Renault SA (RNO), who declined re- election, the Gothenburg, Sweden-based company said in a statement today.
The Volvo post would mark a return to Swedish business for Svanberg, a citizen of the country and former chief executive officer of Stockholm-based electronics maker Ericsson AB. (ERICB) Volvo in recent months has shifted focus to profitability from growth. BP, Europe’s second-biggest oil company, said last week it would be happy for Svanberg to serve at both companies.
“This is a great solution,” Christer Gardell, whose Violet Partners LP is Volvo’s third-largest shareholder by votes, said in a phone interview. “Carl-Henric has a strong record and I have big confidence in him as a businessman.”
Volvo announced a new goal in September that it should be at the top of the heavy-equipment industry in terms of operating margins. Volvo, the maker of Mack trucks in North America and Renault trucks in Europe, had an operating margin last year of 6.9 percent of sales, compared with 19 percent for Swedish rival Scania AB (SCVB), the truckmaker with the industry’s highest profitability, Bloomberg data shows.
Svanberg’s challenges will include generating profits even as demand for vehicles weakens. Volvo predicted Oct. 25 the European heavy-truck market will shrink 10 percent in 2012 from the 240,000 vehicles forecast for 2011.
Volvo fell as much as 1.05 kronor, or 1.4 percent, to 72.55 kronor and was down 1 krona as of 10:28 a.m. local time in Stockholm. The stock has plunged 39 percent this year, valuing the company at 155 billion kronor ($22.8 billion.)
Svanberg’s appointment will be voted on at Volvo’s annual shareholders meeting on April 4, the truckmaker said.
An ongoing reorganization of Volvo’s truck business along geographic regions rather than brands should eventually boost the company’s operating margin by 3 percentage points, Chief Executive Officer Olof Persson said last month.
Volvo should be able to boost its margins “a few percentage points,” partly by making sales and administration more efficient, Gardell said.
Svanberg, contracted to work at London-based BP three days a week, attracted criticism in the U.S. after the Gulf of Mexico oil spill last year that cost CEO Tony Hayward his job. After a meeting with President Barack Obama at the White House, Svanberg said BP cares about the “little people” affected by the disaster.
The trial that will determine BP’s liability in the spill starts on Feb. 27 in New Orleans.
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