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Boardroom tension mounting at Volvo

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IOL mot pic jan17 Volvo Concept Detroit

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Volvo Coupe XC Concept, seen here at the Detroit motor show, reflects the glitzy design direction envisaged by new Chinese owner Geely.

Detroit Motor Show - The path Volvo plans to follow is in question because of discord at boardroom level between new Chinese ownership and traditional European ways.

The management of the 87-year-old Swedish carmaker, acquired by China's Geely in 2010, is torn between a desire to hang on to its roots - a focus on safety and Scandinavian understatement in car design - and a desire to produce the big, flashy, high-end vehicles prized by affluent Chinese customers and which would compete head-on with BMW, Mercedes-Benz and Audi.

Chinese tycoon Li Shufu, founding owner and chairman of Geely and chairman of Volvo since the takeover, is growing increasingly frustrated with Volvo's management team, many of whom are Swedish or other European nationalities, while Volvo executives in Gothenburg, Sweden, believe that Li's strategy poses a huge risk.

The long-simmering discord seems likely to cause further turmoil among the board of directors, which replaced Volvo's chief executive in October 2012.

“Allegations of supposed frustration are pure speculation.”

As the tussle over Volvo's identity drags on, Li and his close advisers are now asking, “Who is Volvo's real boss?”

Insiders say Li has been diplomatic in his dealings with management but that he might resort to “more forceful ways” in achieving his aims, which could include installing people more sympathetic to his vision on Volvo's management team and board.

However, a Volvo spokesman denied there was any high-level disagreement within the automaker.

David Ibison, Volvo's head of media relations, said: “Volvo does not recognise the claims being made by these unnamed sources.

“There is no disagreement between the board and executive management of Volvo over which models we should produce. Instead, we see a company that is demonstrably performing well under Chinese ownership; Volvo is profitable and sales are growing.

INJECTING BMW-LIKE FLAIR

Hakan Samuelsson, Volvo's second CEO since the change to Chinese ownership, said Li would get the car he wanted in the next-generation S80 sedan, which was being redesigned.

“There is no difference in opinion between Chairman Li and me,” he said at the Detroit motor show this week.

Asked to comment on perceptions that Li's frustrations were reaching boiling point and that he and his advisers were now questioning who the real boss was, Samuelsson said: “I don't have a comment on that. He is of course chairman of the board and knows exactly our plans and is fully supporting that.”

A Geely spokesman declined to comment.

Li, an entrepreneur who built Geely from the ground up, says he is happy with the progress Geely and Volvo have made: the new styling and technologies now being packed into the redesigned XC90 crossover utility vehicle and other key vehicles Volvo will unveil starting this year.

Li, in fact, considers the new direction reflected in those cars a great step forward in making the sober Swedish brand fancier by injecting a BMW-like flair. That direction was reflected in a “concept” or demonstration vehicle unveiled at the Detroit auto show on Monday - a three-door hatchback called the Volvo Coupe XC Concept.

Still, that does not mean Li is satisfied.

Insiders say he thinks Volvo management is meeting his desire for a big plush sedan only halfway

Particularly resistant to Li's vision are Samuelsson and vice-chairman Hans-Olov Olsson, they say. Samuelsson, 62, runs the company day-to-day, while Olsson, 72, runs its board as vice-chairman on Li's behalf.

A board member, who aske not to be named, said: “Both Hakan and Hans-Olov, they're both very good at manipulating Chairman Li in order not to follow his ideas.

Samuelsson insists Li should be happy with Volvo's upcoming S80 sedan.

It’s not clear when the redesigned S80 will hit the market, but Samuelsson said at Detroit this week that Volvo had been working to make the current version, the most luxurious car in Volvo's range, bigger and more upsmarket, and to come up with an even bigger, longer-wheelbase version just for China.

Samuelsson, who replaced Stefan Jacoby as Volvo's global chief in 2012, admits that the new S80 is not as big as the BMW 7 Series, but thinks that it should be the car that Li is able to live with.

“Volvo has to be focused on its core value and we should not be a copycat,” Samuelsson said. “We will never have cars with V8 or V12 engines like the BMW 7 Series and so on. It would not be in line with our brand reputation.”

Samuelsson said Li had expressed himself as “fully on board” with Volvo's plans for the S80 sedan.

“I think Chairman Li is self-confident enough to tell me if he is not happy. He knows exactly what's coming and he is full in support of that.”

DIPLOMACY

According to insiders Li has chosen to be diplomatic so far and has advocated his vision gingerly with Volvo management because he and Hangzhou-based Geely are new to the game of acquiring and operating an established global entity such as Volvo.

Geely's acquisition of Volvo is one of the rare high-profile acquisitions of global consumer brands by a Chinese company and has been under close public scrutiny in China.

Apparently Li feels the long-wheelbase version of the redesigned S80 sedan is not big or flashy enough to give Volvo the BMW-like status he wants, and he’s continuing to press Volvo managers to fulfill his vision.

“Volvo management doesn't seem to know who the boss is at Volvo.”

One Volvo board member said if Li wanted to appoint people who agreed with his vision to senior executive roles, he might bring in Carl-Peter Forster, a seasoned auto executive who headed General Motors’ European operations from 2004 to 2009, joined Tata as group CEO in 2010 and then became chief adviser to Geely in 2012.

Li's persistence stems in part from the view that being able to tap burgeoning demand for luxury cars in China, where more than 1.2 million premium cars were sold in 2012, is critical to Volvo. The market is likely to displace the United States as the world's biggest market for premium cars by 2020, and Volvo is aiming to use some of this momentum to help achieve a target of doubling its annual global sales to 800 000 vehicles by 2020.

In 2013 Volvo sold 427 840 vehicles globally, up only 1.4 percent - but year-on-year sales in China shot up 45.6 percent to 61 146 vehicles, and insiders say Li is “looking for the right timing to put pressure on Volvo management”.

Reuters


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