A Volvo spokesperson has denied that a rift between Volvo Car Corporation’s Chief Executive Officer and President Stefan Jacoby and company Vice Chairman Hans-Olov Olsson is disrupting the day-to-day running of the company and hampering its strategic development.
An exclusive Reuters report had claimed that Jacoby, who is currently on short-term sick leave from the company after suffering a mild stroke, and Olsson are locked in an often personal in-fight that began to develop after Zhejiang Geely Holding Group bought the company from Ford two years ago. The two are said to have clashed over a key executive appointment and have also made conflicting statements on group strategy. An unnamed ex-Volvo executive was quoted by Reuters as saying: “It’s just been a mess; Jacoby has not been able to run Volvo the way he wants to.”
According to Reuters, the two executives are meant to challenge each other under an arrangement put in place by Geely to help create internal checks and balances, but sources have said tensions between the pair have grown to become a management problem.
In response to the claims, a Volvo spokesperson was reported as saying: “There is no conflict between Stefan Jacoby and Hans-Olov Olsson. In a company undergoing such a rapid transformation it is natural – and positive – that the board has constructive discussions. The opposite would be devastating.”
According to Reuters, Volvo also says Jacoby and Olsson have a constructive relationship and, according to one of Volvo Chairman Li Shufu’s key lieutenants, Li believes his system of checks and balances is working properly and he has no immediate plans to intervene. “Chairman Li still wants somebody to closely watch Volvo’s management, and that’s Olsson’s task,” a source was quoted as saying.
Li Shufu, who is also Geely’s Chairman, is said to have brought back Olsson, a former Volvo Chief Executive, to help keep Jacoby, a German, “on his toes.” Olsson chairs Volvo’s board on behalf of Li, who doesn’t speak English.
“Chairman Li still wants somebody to closely watch Volvo’s management, and that’s Olsson’s task,” that person said.
Disagreement over the roles of the board and executive management are also reported to be an issue, with Jacoby seeing the executive management team as the core decision-making body, with the board providing oversight. In contrast, Olsson is said to take a more interventionist board approach to executive decisions.
Despite taking what Jacoby described as “a proactive approach to protect margins,” the Volvo Car Group reported a significant crash in earnings and profitability in the six months ended 30 June 2012.
Although revenue in the January-June 2012 period rose by 3.9% year-on-year to SEK 65,325m (US$9.76bn) from SEK 62,863m in H1 2011, retail vehicle sales declined 4.1% to 221,309 (230,746) and EBIT collapsed to SEK 239m (0.4% margin) from SEK 1,529m (2.4%). The net profit of SEK 1,213m reported in H1 2011 was also replaced by a loss of SEK 254m in the latest six-month period.
Jacoby commented when announcing the results in early September: “The economic uncertainties in most of our markets will remain for the rest of the year, and competition is stiff. 2012 and 2013 are transition years where our ambition will be to protect volumes and margins, while developing our future product programme and establishing China as our future second home market. We are currently taking measures on the cost side, but our strategy remains and so do our objectives.
“We are building robustness into our group and we have begun our transformation journey. Our strengths lie in dedicated employees, a clear vision and a long-term strategy that will transform our company into a truly luxury car brand that will meet the expectations of demanding Volvo customers around the world.
“The all-new V40, launched this spring, will start to support sales in the second part of 2012 and we are thrilled by the reception of the car. Another important product launch was the V60 plug-in hybrid, the first proof point of our ambition to develop Volvo Car Group into a leading actor in car electrification. Both these cars are early deliverables on the new strategy we launched in 2010. In order to reach our targets, we need to take major development steps in the areas of products, production and competence. Backed by committed owners, we are on track to deliver on the changes needed.”
Shortly after announcing the results, Jacoby acknowledged Volvo Car was struggling to build up its retail operation in China and that annual sales were unlikely to meet a target of 200,000 by 2015.
He was quoted at the time as saying: “We are underperforming in China. We are also lagging behind regarding adapting the cars to the Chinese market. There is no point sending more cars to China. I need to get my own organisation in order first.”
Volvo aimed to sell 200,000 cars a year in China in 2015 as part of a 2020 global sales target of 800,000. Jacoby confirmed the 2020 goal but acknowledged the 2015 target for China was in doubt, saying: “We probably have to realise that it may be too tough to reach 200,000 (cars) within three years. I think we have a great chance to reach the goal of 200,000 cars in 2020.”
