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Cevian taking control of Volvo


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Gustaf Tapper, Dagens Industri  /  March 10, 2017

The demand for Volvo's voting shares has increased recently. Cevian Capital has purchased over 1 million A shares and actively continues to look for more.

This means the multibillion-dollar activist hedge fund will any day now have over 15 percent of the votes in Volvo Group.

Volvo’s share price has risen after the strong financial statements in February. On Friday, both classes of shares set a new high for the year of over 125 kronor.

Cevian on Friday acquired 1 million A shares, and is actively looking for more blocks of Class A shares.

Cevian owned 8.01 percent of the capital shares and 14.60 percent of the voting shares in Volvo as of January 31. With the new purchases, Cevian now holds close to 15 percent of Class A voting shares.

Cevian last made a major purchase of Volvo shares in the fall of 2014, also then in silence. Only a few months later, in February 2015, Cevian Partner Christer Gardell confirmed the new holding of over 8 percent of the capital and thus was Volvo’s largest shareholder. Shortly thereafter, Cevian received a seat on the board.

So the question right now is, why is Cevian vacuuming the market for Volvo Class A voting shares?

The only reasonable explanation is that Christer Gardell want to put pressure on Volvo's management and board to take the next step toward creating a dedicated trucking companies. It is well known that he sees Scania as a role model.

Volvo still has a bushy structure. Construction machines in Volvo CE, with sales of 51 billion have nothing with trucks to do without brakes instead of group management by requiring time and focus, resources needed to overtake competitors in the truck.

Cevian has for years pushed for a sale or spin-off of Volvo CE.

Christer Gardell told Dagens Industri in January 2014

"I think that Scania has had a huge advantage of being so focused, while Volvo has a complexity in which the board and management work has simply been more complicated."

The board's recognition of the fundamental problems came three years later in connection with the interim report in February, but the solution was to add a "Volvo CE Committee". The wording of the minutes from the board meeting immediately brings to mind the world of politics:

"For the Board of AB Volvo in a more effective way to follow up and support the positive development of Volvo CE, while having full focus on the development of the Group's truck operations, the Board has decided to set up a Volvo CE committee."

"In order to create simplicity, transparency and flexibility, the intention is to increase Volvo CE's structural independence within the Volvo Group."

Meanwhile Gardell told Volvo CEO Martin Lundstedt that Volvo CE was expected "over time contribute positively to the Group operating margin", a formulation that clearly signaled that he wants to keep the construction equipment unit.

It is clear that the wording of the financial statements a few weeks ago that Volvo is not in line with Cevian's strategy on how Volvo can become the world's most profitable truck manufacturer.

To date, Eckhard Cordes, Cevian's representative on the board, has not managed to persuade the rest of the Volvo board. Now, Cevian has increased its influence by increasing its ownership.

Money is no problem with capital of 140 billion kronor. Cevian flagged down at Danske Bank in November and freed money.

Eleven years with Volvo

It was the summer of 2006 when Cevian took a stake in Volvo and proposed a series of measures to deal with the low valuation of shares and trim profitability.

Christer Gardell was met by a solid resistance. Now 11 years later, it is a fact that many of his proposals have been implemented:

  • The sale of Volvo Aero.
  • The change of CEO of Volvo CE in 2008
  • The margin target in November 2011 to 11.7 percent
  • Two big savings program totaling 10 billion in 2015
  • The change of CEOs to Martin Lundstedt
  • Dismantling and outsourcing of Volvo IT.
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10 minutes ago, Red Horse said:

I think first thing they should do is get a better translator for their press releases.:rolleyes:

Bob, it's not a press release, rather an article from Sweden's foremost business journal, Dagens Industri. I'm the bad translator, from Swedish to English......it's early morning and I'm in a rush.

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12 minutes ago, kscarbel2 said:

Bob, it's not a press release, rather an article from Sweden's foremost business journal, Dagens Industri. I'm the bad translator, from Swedish to English......it's early morning and I'm in a rush.

Wow- I stand corrected- I would say for an American then from PA you are doing quite well-always thought it was a tough language.

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