Volvo: passing lane

It must be galling for truck drivers, driving deliberately to protect their cargos and themselves, when smaller vehicles zip past at top speed. Olof Persson, chief executive at Volvo, the Swedish truckmaker, will understand. On Wednesday his countryman Martin Lundstedt, the head of Volkswagen-owned Scania, sped around him and took his job.

Volvo has struggled through a multiyear cost-cutting programme. Unfortunately, the effects of the plan have come through too slowly for the market since Mr Persson took over as chief in late 2011. In the past three years Volvo's shares have trailed the MSCI European Auto sector index (and US competitor Paccar's shares) - by an incredible 100 percentage points.

Oddly, this personnel change came on the day of surprisingly good results for the first quarter. Operating profits beat consensus estimates by nearly 30 per cent. That surprise, and the news on Mr Lundstedt, sent Volvo's shares up 13 per cent.

Expect good things from Mr Lundstedt. A highly regarded 23-year veteran of Scania, he has run both overseas manufacturing operations and product marketing. Crucially, the latter will come in handy as selling Volvo was something Mr Persson had not done well, particularly with analysts. He struggled to set analysts' expectations. Volvo's profits have missed estimates in seven of the past eight quarters.

One issue for the new man to consider: Volvo's multi-brand approach. Since the group sold off the car business to Ford in 1999, it has expanded in trucks via acquisition. While that bolstered sales - to SKr 283bn, three times those of rival Scania's - it has left the company with four brands. This may explain why Volvo's operating margin since 2011 has averaged 5.7 per cent, half the level at Scania, which has just one brand.

Mr Lundstedt has an opportunity to move Volvo out of the repair shop and back on to the highway. Let him pass.

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