"The situation in Sweden is bleak, in Europe it is only worse in Greece than in Sweden," wrote the leading business newspaper in Sweden, Dagens Industri, a few days ago. Is it because of the long, cold and dark Swedish winter that darkens the mind, or is the situation really that bleak?
It is certain, it rumbles in Sweden. A few days ago in Gothenburg lorry drivers demonstrated against social exploitation. It was just a small demonstration of just 36 trucks, and it was very civil. But actually an event that we would have expected in Greece or Spain, not in prosperous Sweden.
Where in Europe is the problem of youth unemployment highest? Spain, Greece? The answer is surprising, but you almost guessed it. It is Sweden, and the problem is not new. Youth unemployment averaged just 25% during the previous boom years, and in 2012 in October it was 23% with an overall unemployment rate of 7.7%.
Young Swedes between the ages of 18 and 24 are four times more likely to be unemployed than in the rest of the EU. According to the statistics agency Eurostat, Sweden is at the top. The statistics are not entirely correct. This is because young Swedes who are studying are usually registered as jobseekers and the majority are dependent on part-time jobs. But this does not put the problem into perspective.
Because of the strong unions, the entry hurdles into the labor market are higher than anywhere else in Europe, and the share of manufacturing is continuously decreasing. In Sweden, one speaks of an emerging “zombie economy” and means the labor markets in England and the USA, where the share of the financial sector in the gross national product has been excessively high for years.
Trollhättan, our favorite city in Västragötland, has become a kind of huge open-air laboratory. There you can study what happens when you forego industrial production and rely on pure service. Unemployment at 16% beats the national average and is approaching southern European conditions. There is no improvement in sight in 2013, and the local authorities obviously no longer hope for a wave of recruits from NEVS. Instead, you praise the little bright spots. Service is in demand in Trollhättan. Elderly and nursing care has growth rates like everywhere in “old” Europe.
If Trollhättan wants to get out of unemployment in this generation without becoming a ghost town, then something has to change. In order to be able to dream only of the fact that automobiles run off the assembly line in the Stallbacka, the further fate of the other Swedish brand is decisive.
The Gothenburgers are in rough seas. Even China, currently a safe haven for European manufacturers, is a problem for Volvo. The sales decrease as the competitor increases. Volvo, according to my analysts, has failed to present itself clearly as a European premium supplier. In China, Volvo is perceived as a Chinese company, which does not go down well. The Chinese love European products, and those who can afford it choose the original and buy BMW, Mercedes or Audi. Even Lexus is on the rise, showing growth rates that can bring tears to Volvo's eyes.
Volvo owner Geely also has his problems - despite the brilliant sales figures of their own domestic labels. The company is heavily indebted and, according to the Chinese press, completely in the favor of the banks.
Back to Sweden! In the last four months, the Volvo PKW Group has left 1.000 employees. Temporary workers and external consultants had to vacate their seats not only in Scandinavia but also at the Gent plant. At Christmas, the Torslanda plant will be completely closed for two weeks to compensate for falling demand. A leading Volvo manager, who refused to mention his name, told Dagens Industri of a decline in production comparable to the year 2008.
Another problem is the condition of the product range. The most important model, the Volvo V70, is now grayed out. The successor not within reach. The well-running small Volvos can show good numbers, but too little yield. And Volvo is plagued by another problem that we know from Saab. For every new Volvo, license fees go into the pockets of the former owner, Ford, because everything is based on its technology. In contrast to the fees that GM has agreed with Saab, ( please be careful, we are writing something positive about Detroit ) Ford according to insiders vigorously.
What is Volvo doing in the face of the crisis? The choice is between saving, saving, saving and attacking. Volvo CEO Håkan Samuelsson has decided to attack. Over the next few years, the manufacturer plans to invest 70 billion in its plants and product range. So Samuelsson puts a little on the original investment plan on it, which sounds good at first. About half of the funds are to flow to Sweden. The Torslanda plant is to be modernized, long overdue. For well 20 years flowed no large amounts more in the main plant, which brought a grotesque situation.
A few kilometers from Torslanda, a state-of-the-art, flexible car plant stands empty and still. The systems need expensive entertainment and only cost. In Torslanda, on the other hand, the paint shop is old and prone to failure, the whole factory is crying out for investment. This fact has fueled speculation over the last few months as to whether Volvo would not take over the Saab factory for a small fee. Not a few in Trollhättan saw this as very likely, but as we know, it did not happen.
In addition to Torslanda, the Skövde engine plant and the body shop in Olofström are to be included in the investment. A new 4 cylinder engine generation is to emerge and a new car platform. The first new model will be the XC2014 successor expected for the end of 90. Currently, the Gothenburg want to keep their market shares, defense is the motto. But until 2020 is still the ambitious target of 800.000 produced units in the year. Ambitious targets and the Torslanda plant, designed for 300.000 units, could then switch from two-shift operation to three-shift mode.
So everything is not so bad in Sweden and considering the situation is only an early winter depression? Samuelsson's plan, basically good, has a catch. The new Volvo boss is still working on the problem that his predecessor also had. The ambitious investments depend on the lack of credit approval from the China Development Bank. Since April there has only been a “Letter of Intent”, but you are close. However, the predecessor said this in the summer.
Why are we so interested in Volvo history? Volvo is important for the Swedish economy and for the automotive industry in the country. If the Gothenburgers stumble or fall, this would be fatal for all small suppliers in the country. For these companies, the situation after the departure of Saab is already precarious, and the falling production at Volvo does not make the situation any better ...
The Chinese in Trollhättan could finally put their ambitions to build cars in Sweden to the record. The leading minds, the ingenious Swedish engineers, would leave the country and find new jobs in Ingolstadt, Munich, Stuttgart or Shanghai. Therefore, Volvo must come as well as possible through the Swedish Ice Age. We keep our fingers crossed!