Volvo names Martin Lundstedt from rival Scania as chief executive

Volvo Group has ousted its chief executive and replaced him with the boss of rival Scania as the truckmaker looked for somebody with "deeper experience" of the industry to help complete its turnround after a fall in profitability.

Carl-Henric Svanberg, chairman of Volvo, said he had chosen Martin Lundstedt from Scania to replace Olof Persson as the Swedish maker of commercial vehicles and construction equipment needed to move on from cost-cutting to focus more on improving its truck business.

"It is time to think: where do we go in the next phase of our development?" Mr Svanberg told the Financial Times.

He pointed to Mr Lundstedt's 25 years at Scania in roles including engine production and development, marketing and sales, and chief executive since 2012. "It's a strength for Martin. Of course, if you have spent your life in trucks you know an awful lot," Mr Svanberg added.

Mr Persson, whose experience was in Volvo's construction equipment and aerospace engine businesses, paid the price for the Swedish group's consistent decline in profitability during his four years in charge. A restructuring programme designed to reduce costs by SKr10bn and cut more than 5,000 jobs has only just started to bear fruit.

In the first quarter of this year, Volvo's operating margin jumped to 6.1 per cent from 3.9 per cent. The better than expected results, combined with the appointment of the highly-respected Mr Lundstedt, led to Volvo shares gaining 14 per cent.

However, Volvo's operating margin was 9.7 per cent when Mr Persson took over as chief executive and 7.9 per cent later that year when he announced plans in front of investors to increase profitability by 3 percentage points.

A combination of increased costs to launch its biggest product offensive in decades, difficult truck markets in Europe and Latin America, and problems in its construction business in China took their toll on the operating margin, which sank to 3 per cent last year.

By contrast, Scania has long been the leading truckmaker in the industry for profitability, making an operating margin of 9.5 per cent last year.

Mr Svanberg said Volvo and Scania, which has been fully taken over by Volkswagen in recent months, faced different issues. "Scania has been a truck company for a very long time and had the chance to optimise their business. They came to the end of the road because they were in a few markets only. We are in a different situation: we have acquired a lot but not optimised parts of our business," he said.

Mr Lundstedt, who will take over in October, will focus on how to get the best out of Volvo's stable of truck brands including Renault, Mack in the US, UD in Japan, Eicher in India, and Dongfeng in China as well as improving its production and development work, Mr Svanberg said.

Further changes at Volvo are possible: the Gothenburg-based group is looking to sell parts of its IT business while some investors are keen for it to exit from the construction equipment business that makes excavators, pavers, and backhoe loaders.

Mr Svanberg said the core of both trucks and construction equipment was diesel engines and gearboxes. "It is very logical to have a construction equipment unit. It doesn't mean we will abide by it," he added.

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