The pressure from Ford has begun to irritate Volvo
By Bradford Wernle
Automotive News Europe / February 24, 2003
Ford Motor Co.'s demanding style as it pushes for more profit from the Premier Automotive Group is making some of PAG's luxury brands - Volvo, in particular - uneasy.
Senior management in Dearborn expects Volvo to share sacrifices being made company-wide as Ford strives to return to financial health. Ford faces a delicate balancing act: respecting Volvo's culture and preserving what is best in the Swedish company while at the same time getting Volvo to make a bigger contribution to Ford profits.
The entire Premier Automotive Group, including Aston Martin, Jaguar, Land Rover and Volvo, has lagged behind Ford's expectations. The parent company wants it to account for 30 percent of profits by the middle of the decade.
"We're starting to lean on Volvo to be more integrated into Ford and they don't like it," said a Ford official who declined to be identified. "They don't want to be more integrated."
After its failed merger with Renault in the mid-1990s, Volvo sought other partners to give it financial muscle. Ford acquired Volvo in 1999 and the marriage has been basically happy so far. Volvo has been profitable, while Jaguar and Land Rover have not. But Ford expects Volvo to contribute more.
"In staffing terms, they're unbelievably overstaffed compared with Ford," said the source. "They are making money, but it's not a very good return on investment."
But sources say the demands of the Ford bureaucracy in Dearborn for information are straining Volvo's much smaller organization.
"We just don't have enough people to feed them," said one frustrated Volvo official. "They may know how to run a Ford company, but they don't know how to run a Volvo company."
Ford involvement in Volvo's affairs has been increasing, he said, and Volvo executives are often impatient with the numerous meetings that are part of Ford's corporate culture.
Volvo department heads in many areas have matrix-reporting relationships to people inside Ford in addition to their regular Volvo reports. Maintaining those relationships takes time, said the executive.
Earlier this month, Ford also increased its control over its other Premier luxury brands, Jaguar and Land Rover, with restructuring.
Mike Beasley, the last member of the Jaguar executive committee who was around when Ford bought Jaguar in 1989, announced his retirement as managing director of Jaguar, effective this spring.
A senior Jaguar official agrees with the need for restructuring but worries that the execution could be detrimental to Jaguar and its proud heritage.
"I find it difficult to believe you couldn't find a Jaguar person to run Jaguar," said the source.
The new Jaguar managing director, Mike Wright, is an experienced executive with many years at British Leyland, Rover and Land Rover. But he has not spent much time at Jaguar. He was most recently managing director of Land Rover UK. He joined Jaguar when he was named sales director of Jaguar and Land Rover in late 2001.
The Jaguar insider is also concerned that the restructuring will add an extra layer of bureaucracy.
Besides Wright, 49, other changes include the appointment of Matthew Taylor, 42, who has been director of marketing sales and service for Jaguar and Land Rover, as managing director of Land Rover.
Bennie Fowler, 46, who has been executive director of North American product development, will become chief operating officer of Jaguar and Land Rover. Fowler will run all technical operations for the two British brands including product development and manufacturing. Hans Gustavsson and David Hudson, who are in charge of Jaguar and Land Rover product development and manufacturing respectively, report to Fowler.
Fowler, Taylor and Wright report to Bob Dover, chairman and CEO of Jaguar Land Rover. Dover reports to Premier Chairman Mark Fields, who must deliver on Ford's goal of having Premier account for 30 percent of Ford profits.
"For Ford, PAG and trucks are two parts of the business that just have to produce," said David Cole of the Center for Automotive Transpor-tation in Ann Arbor, Michigan, USA.
John Casesa, auto analyst for Merrill Lynch in New York City, agreed that Ford has a delicate balancing act to perform with Premier.
"To create value, the cost structure of these brands has to come down, they all need more product and they must remain distinctive enough to earn high revenue per unit," he said. "If they'd been left on their own they'd have remained distinctive but maybe they would have died.
"PAG is at the point where it has to execute," he added. "It's past the conceptual stage. Execution means launching new products on time at low cost and high quality."
The Volvo cultural issue shows the difficulty of managing PAG's diverse brands. Since Ford bought Volvo Car Corp. from AB Volvo in 1999, Volvo officials have said openly they were happy to end up with an American company after their flirtation with Renault in the mid-1990s.
But Volvo's Swedish culture is still very different from Ford's. After World War II, Ford's Whiz Kids executive team built a hierarchical culture based on the ideals of the American military, where many of them had served. Reporting relationships are clearly defined all the way up to the top. Little has changed.
"We have a different business climate in Sweden," said a former Volvo official. "It's not so hierarchic. People are more open to debate and question things a lot further down the line and deeper into the organization.
"There's a very strong empowerment of the way people act, take decisions and implement decisions," the ex-Volvo executive added. "They [employees] actually safeguard a company against bad decisions from owners or from managers. There is an individual commitment to the product and the way things are carried out. That means you may get things done faster in some American companies because they just obey orders. In Swedish companies there has to be a process. You have to have a buy-in [from employees]."
Said Merrill Lynch's Casesa: "Ford could screw it up. Ford could take a good thing and destroy it if they're not careful. If done right, Volvo will get product and technology it would not otherwise have. Ford offers Volvo a chance for meaningful growth."
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My next Ford.....