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Massive Volvo Scandal Emerges


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Dagens Industri  /  September 9, 2016

A consulting company made up of Volvo's own former management took over the truck giant’s business last year and earned millions.

Now, they continue to work for Volvo and the money is rolling in at high speed.

Already during the first few months of 2016, the former Volvo employees turned consultants have earned millions.

"We have a policy not to comment on agreements with suppliers and can not do it in this case either," says Joakim Kenndal on Volvo's press department.

It would appear that Volvo for many years had its own group of management consultants employed. According to Dagens Industri, as many as 50 people in Sweden have worked under the name Fortos. Their mission was and is to help Volvo Group's senior managers to set goals and implement restructuring programs.

The secret consulting business is completely unknown even to Volvo's major shareholders, showing the Dagens Industri's research.

"I've never heard anything so stupid," said a key figure among Volvo's institutional owners.

"Sick. Did not know," answered another major shareholder.

Dagen Industri can also reveal that the group of ex-Volvo management last year had to take over the operations of Volvo on generous terms. The workers set up a new company, Fortos Management Consulting AB, the transaction confirmed in its annual report.

The Fortos annual report states:

"The company started its operations during the year in the form of a transfer of operations from Volvo AB to Fortos Management Consulting AB in which Fortos took over the employees and services."

Dagens Industri has evidence showing that Volvo Group promised the new consulting company significant business in the years ahead.

Data indicates that the balance sheet of Fortos is not the book value of the business, and it has no assets.

Fortos Management Consulting had no greater financial muscle than Volvo in the first place.

The paid-up share capital amounted to SEK 50,000 at the end of the year, as much as its parent company DIHL Group Holding.

But in the few months of its existence, from October 2015, the turnover of Fortos Management Consulting reached SEK 12.2 million and made a profit of 1.27 million before tax. The company proposed a dividend of SEK 740,000.

At the same time there was a new share issue of SEK 400,000.

The old Volvo consultants then got right back the next double issue proceeds.

Already at the end of the year it was clear that the agreement with Volvo was a brilliant deal......for the ex-Volvo management at Fortos.

Dagens Industri contacted Fortos CEO and partner Torbjorn Loof for comment.

You were formerly a part of Volvo. How many employees are with you today?
"There are thirty," says Torbjörn Lööf.

You formed Fortos Management Consulting AB. Were you paid anything to take over operations from Volvo?
"We have no such information we can share with you."

Instead of selling to the highest bidder, Volvo has therefore commissioned a group of employees to take it over. These employees have thus undoubtedly profited at the expense of the shareholders from day one, sources claim.

In addition, the balance sheet of Fortos at year-end contained advances from Volvo Group in the millions, the annual report shows. Meanwhile, other suppliers to Volvo have to wait 100 days for payment.

According to Di task is Volvo's CFO Jan Gurander responsible for the settlement, then the group of internal consultants took over the business from the group instead of listing the unit on the open market.

One paper, the deal was supposed to reduce Volvo's human resources and achieve Volvo’s goal of reducing staff costs, but in fact it ended up spending more on another cost item.

Volvo plans to hire back its former employees from Fortos.

"At Volvo, we have projects and work that remains to be done. These projects and work are now being handled by Fortos. Thus, Volvo need’s Fortos’ human resources to complete and implement these projects and work. It will be a better solution in terms of flexibility, "says Volvo spokesperson Joakim Kenndal.

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Jan Gurander, Volvo Group Financial Director.jpg

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Volvo risks business fine

Dagens Industri  /  September 13, 2016

Volvo's transfer of its management consulting business to ex-employees violates stock market regulations and raises the prospect of fines.

The Securities Council interprets the Leo Act stricter than the courts.

"We can try Leo Act applicability outside the law. There are many examples of cases which lies on the border where we felt that Leo Act should be applied," says Rolf Skog, head of the Office of the Securities Council.

It was last Saturday that Dagens Industri revealed that a group of ex-Volvo employees had replaced the truckmaker’s internal unit of management consultants instead of searching on the open market. The former Volvo employees set up the company Fortos Management Consulting AB, and described the deal as such in its annual report:

"The company started its operations during the year in the form of a transfer of operations from Volvo Group in which Fortos Management Consulting took over the employees and service."

Thirty Fortos employees have continued to work for the truck giant's top executives, and made millions the first year for a few months of operation.

Volvo refused to comment on the terms of the settlement.

Normally, under the Leo Act, the subject of a sale or transfer of employees must be approved by the shareholders at a general meeting.

"If the deal infringes on the Leo Act, it may be declared invalid - it is so as to violate the Securities Council's recommendations usually receive a disciplinary punishment of the stock market," says Johan Munck, former justices and president of the Supreme Court.

A basic requirement from the Swedish Securities Council is that there be an independent valuation before the transaction.

Rolf Skog would not comment on the panel that is beginning an investigation of the Volvo deal.

"We look at what we in different ways will be made aware of. It is enough to say so."

 

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