Exclusive: In-fighting raises concern over Volvo Car recovery - sources

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Published October 02, 2012

| Reuters

A boardroom-level conflict at Sweden-based luxury auto firm Volvo Car Corp is infecting some day-to-day decisions and threatens to hamper its Chinese owner's efforts to turn the business around, sources close to the company said.

Chief Executive Stefan Jacoby and Vice Chairman Hans-Olov Olsson are locked in an often personal in-fight that began to develop after China's Zhejiang Geely Holding Group Co bought the Swedish brand from Ford Motor Co two years ago, the sources said.

Jacoby, on medical leave after suffering a minor stroke last month, and Olsson, who effectively heads the Volvo board, have clashed over a key executive appointment and have also made conflicting statements on group strategy, added the sources, who didn't want to be named because of the sensitivity of the matter.

"It's just been a mess," an ex-Volvo executive said. "Jacoby has not been able to run Volvo the way he wants to."

Jacoby made no mention of any job pressures when announcing his stroke, saying he was keen to return to work, but Volvo insiders suspect friction with Olsson may have added to an unhealthy level of stress for the CEO.

The two men are meant to challenge each other under an arrangement put in place by Geely to help create internal checks and balances, but sources said tensions between the pair have grown to become a management problem that Volvo can ill afford. It has also thrown another spotlight on China's mixed success so far in taking over and managing major overseas consumer brands.

Geely's billionaire chairman, Li Shufu, who is also Volvo chairman, brought back Olsson, a former Volvo CEO and four-decade veteran of the firm, to help keep Jacoby, a German, on his toes. Olsson, 70, chairs Volvo's board on behalf of Li, who doesn't speak English, Volvo's main working language.

But some Volvo insiders worry about the impact of the men's soured relationship on Volvo's business turnaround plan, which aims to revive flagging sales in Europe and restore Volvo's stalled momentum as a luxury brand, the sources said.

SALES PITCH

The conflict came to a head last year when Olsson tried to persuade Jacoby to promote Olsson's son-in-law, Thomas Andersson, a vice president, to global head of sales, marketing and customer service, the sources said. Instead, Jacoby promoted a North America Volvo executive to that role.

The pair also appeared to disagree last year over whether Volvo would remain based in Sweden.

However, Volvo says Jacoby and Olsson have a constructive relationship and, according to one of the Volvo chairman's key lieutenants, Li believes his system of checks and balances is working properly and he has no immediate plans to intervene.

"Chairman Li still wants somebody to closely watch Volvo's management, and that's Olsson's task," that person said.

Volvo denied the pair's relationship had broken down.

"There is no conflict between Stefan Jacoby and Hans-Olov Olsson," spokesman Per-��ke Fr��berg said in response to questions about the relationship. "In a company undergoing such a rapid transformation it is natural - and positive - that the board has constructive discussions. The opposite would be devastating."

Volvo also said Olsson and Andersson declined invitations to comment on the story. Efforts to contact both men independently were not successful. Jacoby also declined to comment through a company spokesman. A Geely spokesman did not respond to requests for comment from Li.

HIGH STRESS

Jacoby, 54, said in a statement on September 23 that he would be off work for a month to recover from a recent stroke that left him with some limited movement in his right arm and leg. He said then that his condition was improving.

"Looked at from Jacoby's point of view, Chairman Li is the most important person on the board, and he doesn't want Olsson to act as his middleman," said a key Volvo executive. "Jacoby also thinks Olsson is old. He is getting ready to retire, and Jacoby thinks he should deal directly with Chairman Li."

The issue is also partly due to a disagreement over the roles of the board and executive management, the sources said.

Jacoby, who has spent most of his career at Volkswagen AG before he was recruited to Volvo in 2010, sees the executive management team as the core decision-making body, with the board providing oversight, the sources added. By contrast, Olsson takes a more interventionist board approach to executive decisions.

AT CROSSROADS

Since it was taken over by Geely, Volvo has been trying to nearly double its annual global sales to 800,000 cars by 2020, from 450,000 last year, and become a more viable global luxury auto brand. But Volvo last month reported a first-half net loss as the euro zone crisis dented sales in Europe.

Jacoby told a Swedish newspaper before his stroke that Volvo was unlikely to meet its goal to sell 200,000 cars a year in China by 2015. Volvo sold about 47,000 cars in China last year and is likely to sell 45,000-46,000 this year, he said.

Finance chief Jan Gurander said at last month's Paris auto show that global sales this year would likely be below last year's levels, but sales in China would increase next year. Volvo competes in China, the world's biggest auto market, against global luxury brands such as BMW, Jaguar and Volkswagen's Audi.

SON-IN-LAW

Two sources said Jacoby's relationship with Olsson hit a worrying low over the career of Andersson, who is married to Olsson's younger daughter.

In early 2011, roughly six months after Geely bought Volvo, the newly appointed CEO Jacoby met Andersson in the CEO's office at Volvo headquarters in Gothenburg to discuss Andersson's new assignment, two sources said. At the time, Andersson wanted to lead Volvo's global sales, marketing and service, which Olsson endorsed, said the two sources citing a first-hand account of the talks.

But Jacoby and Volvo's Chinese owner wanted Andersson to move to China to lead Volvo's sales activities there before promoting him, and the CEO told Andersson so in the meeting, according to this account.

Andersson replied that he would move to China if he could return to Sweden a year later and become head of Volvo's global sales and marketing. Jacoby then abruptly ended the meeting, making it clear the job talks were over.

A few days after that meeting, Olsson visited Jacoby in his office and advised him to give Andersson the top global sales and marketing job, the sources said. Shortly afterwards, Jacoby named ex-Ford executive Doug Speck as global sales and marketing chief.

Also, about a year ago, Jacoby and Olsson contradicted each other in public statements over whether Volvo would always be based in Sweden under Geely's ownership.

Jacoby told employees that Volvo would remain in Sweden. But Olsson, a couple of weeks later, told a newspaper there was a chance the firm could move out of Sweden if Volvo did not shape up. He did not say where Volvo could relocate under those circumstances.

(Additional reporting by Christiaan Hetzner in FRANKFURT and Patrick Lannin in STOCKHOLM; Editing by Mark Bendeich and Ian Geoghegan)

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