Volvo AB, 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 declining truck market.
Svanberg, who has led BP since January 2010, will succeed Louis Schweitzer, the 69-year-old former chief of Volvo’s biggest shareholder, Renault SA, 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. Volvo in recent months has shifted focus to profitability from sales 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 fell as much as 1.30 kronor, or 1.8 percent, to 72.3 kronor and was down 1.2 percent as of 2:30 p.m. in Stockholm. The shares have plunged 39 percent this year, valuing the company at 155 billion kronor ($22.7 billion).
Olof Persson became Volvo’s chief executive on Sept. 1, and set a goal that month of putting the manufacturer at the top of the heavy-equipment industry in terms of operating margins. A reorganization of Volvo’s truck business along geographic regions rather than by brand should eventually boost the company’s margin 3 percentage points, the CEO said last month.
Volvo, which also owns Mack trucks in North America and the Renault truck brand in Europe, reported an operating margin last year of 6.9 percent of sales, compared with 19 percent for Swedish rival Scania AB, the truckmaker with the industry’s highest profitability, Bloomberg data shows.
Svanberg’s challenges will include generating earnings even as demand for vehicles weakens. Volvo predicted Oct. 25 that the European heavy-truck market will shrink 10 percent in 2012 from the 240,000 vehicles forecast for 2011.
Svanberg’s appointment will be voted on at Volvo’s annual shareholders meeting on April 4, the truckmaker said.
Volvo should be able to boost its margins “a few percentage points,” partly by making sales and administration more efficient, said Gardell at Violet Partners.
Persson, ushering in the biggest cultural shift at Volvo since the manufacturer sold its car division in 1999, wants to streamline the manufacturer further by disposing of its aero-engine business.
Svanberg, 59, built his reputation by reviving the fortunes of Ericsson, the world’s biggest maker of wireless networks. He became Ericsson’s fourth CEO in five years in 2003, arriving after seven quarters of losses totaling $4.7 billion. Net income in 2009, his last year at the company, totaled 3.7 billion kronor.
Before joining Ericsson, Svanberg was CEO at Assa Abloy AB, where he created the world’s biggest lockmaker with at least 45 acquisitions and sevenfold sales growth.
“Big changes are taking place in this globalizing world on how to build your market positions, do technical development and generate product sales,” Svanberg said. “I hope my background will be of good use.”
Svanberg, who has a master of science degree from the Linkoeping Institute of Technology and a bachelor of science degree in management from Uppsala University, started his career at engineering company ABB Ltd.
Born in the Swedish town of Porjus, within the Arctic Circle, Svanberg used to play ice hockey for Bjoerkloeven’s junior team in Umeaa and held jobs including welder, dock worker and garbage man as a student. Sailing has been his main hobby.
Svanberg, contracted to work at London-based BP three days a week, attracted criticism in the U.S. after the 2010 Gulf of Mexico oil spill that cost CEO Tony Hayward his job. After a meeting with President Barack Obama, Svanberg said BP cares about the “little people” affected by the disaster. A trial to determine BP’s liability starts on Feb. 27 in New Orleans.
“It’s absolutely my ambition, and as far as I know the board’s wish, that I continue” at BP, he said. “One of the ideas with board work is that the members can contribute with a perspective from other industries. I think everyone feels it’s fine that I take on something more.”