CMME catches up with the Volvo Group CFO Anders Osberg at the Volvo Ocean Race to get his impressions of the CV sector.
The weathered and soaked sailors of the Volvo Ocean Race cruised into the sun-kissed coast of Abu Dhabi in January. The occasion was momentous for a number of reasons. The stage from South Africa to the Gulf had seen the global race make a number of firsts.
Not least the fact that the stage had seen the race take its first ever mid-ocean break. Racing to a secret location deep in the Indian Ocean the fleet of streamlined boats were craned out of the water and onto freighters – the crews watched with their hands over their eyes.
Even the world’s most famous circumnavigation can’t avoid the pirates that terrorise the huge expanse of water. Especially when their position is trackable to the metre by an iphone (another first).
The boats were shipped and carefully dropped back into the water at Sharjah where the crews got back onboard and took a final sprint to Abu Dhabi (incidentally won by the crew onboard the Telefonica) bringing the race to the Middle East for the first time.
Their arrival sparked two weeks of celebration for sailing fans who journeyed to Abu Dhabi to see the surprisingly slight craft, but beyond the ice cream and music, the more serious and shadowy show of corporate hospitality was underway.
Make no mistake the Volvo Ocean Race is a huge priority and opportunity for its many corporate sponsors such as Telefonica and Camper. Much more flexible in its stops than, say, the Formula One competition that visits the Yas Island complex a few kilometres down the coast. F1 needs expensive purpose-built tracks, the Volvo Ocean Race is a global junket of brand names and merchandise designed to carry companies into new ground – or rather waters.
Race owner Volvo says the millions it spends on the race opens up new markets and territories for the company.
Anders Osberg, CFO, Volvo CE tells CMME that every stop, rest and hospitality tent is a carefully planned exercise to maximise the dollars spent.
“This year we stop in South America, the Middle East, China, South Africa,” says Osberg. “These are important markets for us. Yes it’s deliberate.”
“This year we stop in South America, the Middle East, China, South Africa,” says Osberg. “These are important markets for us. Yes it’s deliberate.”
The temporary building in which we meet has an array of Volvo product outside trucks, machinery and cars. Osberg is keen to differentiate
his own concern, the Volvo Group’s trucks and Construction Equipment with the conventional four wheeled S60 sitting on the decking.
“We’re here representing Volvo Group, but as you know the two companies separated a few years ago. A move that has enabled us to grow even in the last few years.”
“When we sold Volvo to Ford, we made the decision to make Volvo a company for commercial vehicles. Turning out new product is quite
capital intensive and we thought this would be the way to change the company. However even after ten years people still have an emotional attachment to the name.”
Volvo Group is now much larger than when it had the cars, he explains.
“Today we are about 300 million SEK we were nowhere near that when we were all together.”
Volvo’s trucks have been vital in that growth as has its ever-stronger presence in the Chinese market. Both Volvos have been making progress in the market.
With the steps from car to truck, especially as they are seen so often together on roads not a big one in the consumer’s eyes, it’s no surprise that the next stop will be Sanya on the China’s East coast and equally it’s no shock that the construction equipment business will be in the mood to push product: “The awareness of the brand name Volvo is never a disadvantage for us.”
He continues: “We were discussing this previously with Chinese media. In China, because of the passenger car, it is easier for people to put their hands on a car and say it’s a Volvo. We will be working to promote the Volvo Group. The Volvo race is a chance to show all our products together for customers and the people. The success of the passenger gives all sorts of opportunities for the Volvo brand.”
“I think you expect a little bit to have the market on the radar screen so that every thing is compliant with their inflationary goals and objectives,” he explains. “They are quite direct on that. I think that the government has been working hard to make the market.”
At an event that celebrated elan, excitement and man’s ultimate victory in the ancient battle against the sea, Volvo’s CFO assessment of the global economy swung dangerously close to being a damp squib.
“In Europe growth will be flat for this year. In 2012 we won’t see growth in Europe,” Osberg says.
“In Europe growth will be flat for this year. In 2012 we won’t see growth in Europe,” Osberg says.
“We see a much more balanced picture and this is how we would like to be in the future,” he said. “In an economic downturn it is good not to have to rely on a single market… The first six months of 2012 will be very much guiding where we are heading in these different key markets. I think we’re coming into a situation where it is very hard to make any kind of economic forecast.”
The stopover in Abu Dhabi is the centrepiece of Volvo’s – and Osberg reminds me its other truck brand Renault’s – push in a region that has brought solace to an industry that has seen sales fall off elsewhere.
The company was instrumental in bringing its key supplier in the Gulf, Famco and its key distributor Al-Rehab together.
A move that makes sense to the company’s aspirations in the Kingdom, he says.
“We have been working with FAMCO for a long time, which has been a successful relationship. This is a fantastic market.”
One of his objectives in Abu Dhabi is to raise money that he says will be used to fund more exports.
“This is the first time for me to be here but it is an attractive place to be, we are of course looking for opportunities to build relationships with banks to sell our products even further. It was especially important for me to be here because our banks are here, our customers are here and we can explore export solutions. Without the financing we can’t sell.
He continues: “Financing is much easier now than a couple of years ago as we’re stronger financially in the group. The European banking sector is under pressure, we are trying to push for them here.
He adds: “For them to come into new areas, and for today as they are under more pressure. However we can help them create business partnerships here.
Volvo’s Middle East effort is concentrated down the road in Dubai and Osberg says the company is using the race as a staging point to push into other markets.
“There are other markets that we haven’t been so active before. Saudi Arabia is a market that has been identified for the trucks as one of the biggest single markets. One of the reasons we have the race here is to meet customers from those markets.
Unpredictable markets
Looking at the year ahead he says the volatility in the economic markets is making it difficult to predict which will be the stronger commercial vehicles and construction equipment markets
“Coming into 2012 I think we’re coming into a situation where it is very difficult to make any predictions. Trend-wise the emerging markets have becoming more important over the last ten years and depending on what happens in the US and Europe I can see the other markets have proven that they can grow independently of the Western World.
“In terms of the Middle East and Africa, we’ve been trying to identify where are we, where can we go and where are the potential areas we can grow. I think from the write ups of Volvo Trucks they are giving many more opportunities than ten years ago.
With Renault Trucks strong across North Africa, Osberg says that the company is currently planning where best it can place it trucks brands.
“Traditionally it’s been a case of Renault stronger in the French-speaking countries of course. But today, it’s a multibrand approach. Within the EMEA, it is getting easier to get organised and work out what we can do in this region working multi-brand wise,” he says.
“Traditionally it’s been a case of Renault stronger in the French-speaking countries of course. But today, it’s a multibrand approach. Within the EMEA, it is getting easier to get organised and work out what we can do in this region working multi-brand wise,” he says.
He adds that that despite Europe and the Middle East increasingly looking like very different markets in terms of their economic outlook, the company has no plan to open a split dedicated Middle East and Africa division. Volvo is also well-established in India, a country with good links to the region for supply and demand.
“Obviously if you look at the competition they tend to have different ways of doing it,” he explains.
“But for us it makes sense because of the time zones. We think this is a good way to do it. You have to make a decision one way or another.”
Osberg adds that other important markets are Qatar because of the World Cup and Iraq.
“We are a quality producer with quality engines. We can’t always compete on price as a single component. We have seen a tendancy to buy cheaper products, but we are seeing people more interested in durability here. The cost of the lifecycle of the truck is becoming more important. Does the cost of the truck work out better in the long term versus the durability is a question the customer has to ask itself.”
Having integrated Renault into the company Volvo can now look on the potential merger of Scania, MAN and VW satisfied that it doesn’t have to go through a painful merger.
While he accepts it as an opportunity he points to the changing picture of global players and says that the market is now a highly competitive and dynamic sector.
“There is constant consolidation in the business. It’s the same thing with Daimler (and Mercedes), you have to accept that will happen in the traditional markets.
“But it is also the same in the Chinese market with their local producers that are coming close together. We have to recognise that there are big producers there that haven’t been there before. The world is changing, it’s very much a global picture now.”
Upswing in fortunes
Since Osberg step into the position of CFO for Volvo Group, the company has seen an upswing of its fortunes. The Swede’s modesty dictates that he sees the growth as a result of its new multi-brand approach.
“It’s very important for me to be able to operated cross-functionally within the group. When we had the brands separated as Volvo Trucks, Renault trucks and so on as seperate companies, it was very difficult to do that.
“My role is to make sure that we have the balance sheet that is strong enough to promote the brands. Since the financial crisis started we have learnt a lot about the neccesity of maintaining a stronghold, that we have a good credit rating and so on. That is a pre-requisite of maintaining a good brand image, you know.”
While revealing that Volvo Group made $45 billion at the end of Q3 2011, he is shy on revealing any forecasts for the upcoming and crucial final year results (“nice try, we can’t comment on those at this time”) he says that he is unable to make any predictions on the race too.
“I told you I am not allowed to make any forecasts,” he laughs. “But we’ve been following it on the ipad and it’s a close one.
He continues: “The fun part is that with the tracker even if you don’t know too much about racing you can follow it.
“And my kids have been playing games on it and using the tracker too. And they know I’ve been down here so they’re following it on that.”
After the interview, Osberg joined the crowds outside to watch the crews re-join the race. By the time they re-boarded with hundreds watching on and the fanfares playing you could see by the smiles under the suntans that the racers were happy to get back to the proper work of racing.