Volvo's 6.5 Billion Dollar War Chest
It could be the defining deal of his career: Volvo CEO Leif Johansson's sale of the company's car division to Ford Motor Co. for $6.5 billion is making waves in Sweden, where Volvo has long been considered a national icon. And its ramifications are likely to be felt throughout the European auto industry. Now, industry watchers are waiting for Johansson, 47, to make his next move. Many expect him to use the cash from the sale of the car unit to finance a takeover of Swedish truckmaker Scania. But that means clashing with the Wallenbergs, Sweden's No. 1 corporate family, whose Investor holding company controls Scania. Johansson spoke with BUSINESS WEEK's London bureau chief, Stanley Reed, about the Volvo shakeup.
Q: Are you concerned about criticism in Sweden of your deal with Ford?
A: There has been quite a reaction--an emotional one. I must say that when you do things like this it is emotional, because of the heritage and national pride of what has been achieved at Volvo. Between 2 a.m. and 4 a.m., I [feel] tense. But when I flip the lights on and look at the need for cash flow ahead--the need to invest in probably two new models in the next 10 years, the fact that we are No. 23 in the world, and the fact that we are placing the car division with Ford's very large resources--all that convinces me that this is the best thing to do.
Q: Is this deal likely to be a model for others involving Swedish companies?
A: We are all coming into a new common market, and we will have to get used to national borders and national identities becoming European and, in autos and other industries, global. In that case, this is a role model and a signal for many national industries in Europe and elsewhere. We should create competitive structures and companies rather than fall back on easy nationalist positions.
Q: The market seems to be saying you need another big deal.
A: I understand that the market out there is asking what is the wise and sound and friendly way of spending the [$6.5 billion Volvo gained from the deal]. Our share price probably won't go up until we show that.
Q: What is the status of your attempt to acquire Swedish truckmaker Scania?
A: We acquired 13% of Scania because we think it is a good company. [We would like to go further] given the right set of circumstances, including price and also a common view with Scania's management, board, and [its controlling shareholder] Investor. We wanted to make sure that we did not wake up one morning and see Scania gone. We think we have achieved that. There is a constructive dialogue going on. But we will not overpay, and we have other opportunities if we cannot find a good opportunity with Scania.
Q: Are you worried about Investor's negative reaction?
A: We came into a situation where we felt we needed to act quickly. I understand Investor's reaction; I know them very well personally. The situation is that we came up on two different sides of business interests. It was important for Volvo not to wind up standing in line in an official bidding process for Scania, which we were afraid of. Our intention was never hostile, but [we did not want] to have an alternative fly away before we discussed it.