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By Pehr Gyllenhammar

Friday October 9, 2020

Seeking justice will bring you backlash, but we must be persistent.


Pehr Gyllenhammar

I was honored to be a guest in Nelson Mandela's family box at the opening session of the new South African Parliment in 1994.

The movements of this past summer remind me of the arrest of Nelson Mandela in August of 1962 and his subsequent imprisonment, as well as the joy so many of us felt upon his release 28 years later in 1990. In 1994, I was privileged to be a guest in the Mandela family box at the opening session of the newly democratically elected South African Parliament.

Nelson Mandela's legacy brings home the power of both individuals and corporations to force change inside a reluctant nation. In the wake of George Floyd's death, the spotlight on hate speech and misinformation on social media, and the recognition that environmental and economic priorities are not mutually exclusive, Mandela's personification of how human persistence can overcome the greatest adversities continues to be an inspiration.

Justice is a difficult path

Taking a stand for justice will almost certainly bring you backlash. Justice often represents change, and oppressors typically like how things already are.

Consider what's happened in the United States in just the past few months. Less than a year ago, professional basketball and football players were vilified for kneeling in support of the Black Lives Matter movement; this year, US sports leagues are encouraging these protests. The NBA is allowing players to wear social justice messages on the back of their jerseys.

Last year, social media sites were citing First Amendment excuses for allowing distortions and hate-filled rhetoric to go unchecked; today, the world's most powerful social networking sites are being pressured into acknowledging they have a responsibility to call out posts that promote lies or hate.

None of this has happened in a vacuum. It rose from the ground up, beginning with tens of thousands of street protests supporting the Blacks Live Matter movement, which became a clarion call not only to sports leagues, but also politicians, police departments, and corporate executives.

In recent months, social media sites have finally begun to flag hate speech and disinformation on their platforms, but only after a civil rights coalition led by the Anti-Defamation League (ADL) and the NAACP launched a #StopHateforProfit campaign calling on major corporations to put a pause on advertising on Facebook. Within days, the outdoor apparel brands Patagonia, North Face, and REI, followed by giants like Adidas, Clorox, and Starbucks, announced they would join the advertiser boycott.

By taking a stand, these companies will no doubt take some heat, just as I did when in 1976, as CEO of Volvo, I decided there were no circumstances under which continuing to do business with South Africa's brutally repressive governmental system could be justified. My actions in divesting Volvo were not without consequences, raising the ire of my colleagues and Volvo shareholders, since our operations at the Durban plant were quite profitable. More troublesome was that for our South African workers, the closing of the plant meant the loss of hard-to-come-by employment.

I was painfully aware that the long-term gamble of creating pressure on the apartheid regime meant imposing hardship in the short term on the very people I wished to support. I also worried that with so few other companies taking similar action, my divestment decision might be merely a drop in a very large bucket, without real impact. In the ensuing decade, however, attitudes changed greatly. By the mid-1980s, there was a global movement to topple apartheid, and by 1988, both GM and Ford had divested from South Africa.

History has borne out that divestment was a successful weapon against apartheid. Inherent in that success was the scope of the movement, a collaborative effort that spanned politics, industry, and educational institutions. Today's climate is reminiscent of those achievements.

In addition to advertising boycotts and a groundswell to reform police departments, divestment proponents, like their anti-apartheid predecessors, have organized to create pressure on investors to divest from the largest oil and gas firms, and to invest instead in sources of renewable energy.

As with the move against apartheid, some of the most significant divestment actions are taking place at colleges and universities, as students pressure their institutions to sell off their holdings in fossil fuel companies and instead make investments based on environmental, social, and governance (ESG) principles.

ESG investing has increased in the US by almost 40% in the last three years. Just this month, London-based BP announced it will transform itself by halting oil and gas exploration in new countries, slashing oil and gas production by 40%, lowering carbon emissions by about a third, and boosting capital spending on low-carbon energy tenfold, to $5 billion a year.

The paradigm of anti-apartheid divestment reminds us how the collective push of dedicated individuals and select institutions over time can result in a tipping point of the global mindset. Once that tipping point occurred, the system of apartheid—a force that had once seemed unstoppable—was categorically dismantled within a matter of years. The same can be true of the most important issues of our time.

Protests and boycotts are as old as America itself. The Boston Tea Party, when American Patriots protested taxation without representation by dumping chests of tea into the Boston Harbor, soon escalated into the American Revolution. As those early Americans knew then, as South Africa's Nelson Mandela understood 200 years later, and as Sweden's young Greta Thunberg seems so adroitly to recognize today, extraordinary accomplishments on the global scale depend not on individual or corporate efforts alone, but on combined and coordinated action undertaken by parties who are in the best sense disinterested in any partisan or nationalistic sense. 

Whether determining how to invest or disinvest, choosing to protest or boycott, or minimizing one's own environmental impact, no drop in the bucket is too small or inconsequential. Intelligent idealists the world over can avert disaster by combining forces, despite the powerful forces against them, in the knowledge that they are on the right side of history.

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By Pehr Gyllenhammar for CNN Business Perspectives

Updated 1:26 PM ET, Wed September 23, 2020

Former Volvo CEO: Give employees more satisfying work. You'll see morale soar

Pehr Gyllenhammar

In my recent piece on CNN Business, I explain how companies can start showing employees that their well-being comes first — both during the pandemic and beyond.

Editor's Note: Pehr Gyllenhammar was the CEO of Volvo for 24 years. He has also worked with or served on the board of such institutions as Lazard, Reuters, Rothschild, Chase Manhattan Bank, the Aspen Institute, The Rockefeller University and the London Philharmonic Orchestra. His memoir, Character is Destiny, was published by Morgan James Publishing on September 8, 2020. The opinions expressed in this commentary are his own.

Grocery store clerks, delivery personnel, truckers and health care and factory workers have kept the US economy from collapsing entirely during the pandemic. Yet many of these workers feel they aren't getting the pay or respect they deserve. They can't make a living wage or take paid leave when they get sick.

Unfortunately, these aspects of work life have become the norm for much of Corporate America. For too long, workers have watched executives rake in seven-figure salaries while they struggled to pay that month's rent. This sort of profit-first thinking can be detrimental to a company's culture, turnover and eventually, the bottom line.

Here's how companies can start showing employees that their well-being comes first — both during the pandemic and beyond:

Provide meaning to their work

Making sure all employees have a living wage is a good place to start, but salary is only part of the equation, of course. As CEO of Volvo for a quarter of a century, I worked hard not only to give our employees a living wage, but also to make their work more meaningful. Worker salaries were at the top of the union pay scale and were standard, so more important to them were our efforts to give them additional training so they could perform more complex, more interesting work.
One of the first actions I took at Volvo was to change the way we assembled cars. I wanted plants to be designed around the supposition that employees should be able to find meaning and satisfaction in their work, without sacrificing either efficiency or profitability.
Beginning with our new assembly plant in Kalmar, Sweden, we changed the way cars had been assembled for decades at automobile companies around the world. We nixed the traditional assembly line method, and instead, electrically-driven platforms carry the chassis to a work station made up of a team of eight to 10 workers, who spend 20 minutes performing their team's task, whether it's installing the engine or transmission, securing the seats or wiring the electronics. Once that team completes its task, the platform moves silently across the factory floor to the next team.
Employees work at the production line at Swedish auto maker Volvo Cars's Torslanda production plant in Gothenburg, Sweden on August 25, 2020.
Replacing the assembly line with a work-batch system enabled us to move workers away from single-repetitive tasks toward small teams, with each team responsible for the assembly of a single system in each car. This worked wonders. The change in cycle time — the time it takes to complete a specific task — increased from 90 seconds to 20 minutes, which made a remarkable difference in the health and attitude of our line workers. They enthusiastically embraced performing different kinds of jobs within the overall task assigned to the team. This not only enabled them to escape the monotony and pain that came with a lifetime of three- to four-second repetitions, but also allowed them to fill in for sick or vacationing workers. Volvo became a workplace in which human-centered designs and concepts created better, more interesting jobs, which led to improved worker well-being and profitability.

Challenge them

In my experience, giving people more responsibility and expecting more technical know-how from them reduced turnover and absenteeism, while at the same time increased morale and productivity. This new way of working in teams to assemble a system was soon adopted not only at our other Volvo plants, but at many other companies around the world. Much of the effort was based on simple common sense. What person wants to stand in an assembly line for 40 years repeating the same 90-second cycle over and over again without self-improvement, encouragement to do better or the opportunity to learn new skills?
The philosophy is simple: Give employees more responsibility, more training, more satisfying work, and absenteeism decreases, productivity increases and worker morale soars. These lessons can be applied in virtually every industry, not just with the production of large machines. Every worker, whether it's at the grocery checkout or in the emergency room, thrives with more responsibility, more creativity and more flexibility. By giving people an opportunity to improve their skills and understand how their team can work more efficiently, team members work together to achieve a common goal — not like mindless robots. It may take more effort than the American way of training workers as cheaply as possible and firing them without a second thought, but with buy-in from employees comes loyal employees, new ideas, less absenteeism and more productivity — and all of that translates directly to the bottom line.

Put their health first

Another action we took with an eye toward improving both efficiencies and worker health was, with the help of an ergonomic expert, the introduction of a completely new set of tools adapted for the smaller hands of women. It was absurd that women had to use the same size tools as men, which was causing stress not only in their hands, but also in their shoulders, resulting in more pain, less productivity and more absenteeism. The solution was so simple, and the new tools caused an almost immediate improvement in morale.
Every type of company would do well to listen to those on the front lines. Adapting a task to a particular demographic is often as easy as raising or lowering a desk chair, or rotating jobs at a grocery store or making certain everyone can reach the gas pedal of a 35,000-pound truck. In the same way, stretching everyone's knowledge and skills is a win-win for company and workers alike.
The pandemic has shown all of us the value of our hourly workers. Let's respond by showing them our gratitude by closing the wage gap, respecting their contributions and paying attention to their higher-order psychological needs of safety, creativity, satisfaction and comradery.
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6/23/2020

Longtime Volvo CEO Pehr Gyllenhammar was pushing radical environmental and social changes at the carmaker long before they became fashionable. One of Sweden’s most admired businessmen argues why CEOs should be paid less and how it felt to become a father again at 81.
Pehr’s interview with Reuters’ The Exchange

 


5/27/2020

Pehr Gyllenhammar, the former 24-year CEO of Volvo AB and author of the new book Character is Destiny, talks about the role of the CEO in leading during a crisis. Interview

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June 6, 2020

Gary talks with former Volvo CEO Pehr Gyllehammer, as they look back at the company's history and its efforts to produce environmentally-friendly cars before it was fashionable. They also look into the future of electric cars as the nation recovers from the pandemic-related shutdowns.

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Bloomberg
May 27, 2020 — 12:50 PM EDT

Pehr Gyllenhammar, Former CEO of Volvo, discusses the importance of leadership and character amid a global crisis. He says good employees equal good productivity. Hosts: Carol Massar and Jason Kelly. Producer: Doni Holloway.

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Wharton Business Daily – May 18, 2020: Interview

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By Jacob Morgan

May 25, 2020

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PEHR GYLLENHAMMAR TRANSCRIPT

Companies are going through difficult times right now with the current pandemic, and while Pehr is not currently the CEO of a company, he is no stranger to leading during challenging circumstances, including recessions. When asked how current leaders are handling organizations during this tough time, Pehr says there is one critical thing that leaders are not doing a good enough job with.

Putting people ahead of profits

There are very few leaders today who are actively putting the well-being of their people ahead of profits. Pehr says, “I put people before profits in the sense that if I don’t have good people, we could not have productivity, we could not go to have our aspirations come true unless we have good people. So I have people before profits and it’s not declining profits. I think that profits are very important for any shareholder company and that the shareholder should have their part of course, but that the people will create it.”

He says companies today are not only laying people off, but they are doing it brutally. And that’s not the way to lead. During the recessions Pehr went through as a CEO he made it a priority to take care of his people and to protect the most vulnerable. Because of that his employees trusted him, they were more motivated, and they felt safe.

Creating meaning and purpose for employees

The backbone of any organization is it’s people, if you want to succeed your people have to be happy, motivated, engaged, etc… Pehr did a lot at Volvo to prioritize the well-being and purpose of his employees. He actually got rid of the whole assembly line in order to keep employees from getting injured.

Instead of having employees work on a small piece of a part that was moving down the line they were able to work on a whole part of the car while it was stationary. “That made them save, first of all, their hands and their body, so they were never injured, they didn’t have to run after a product or walk with a product. And they could also do a whole part of a car, which is something that is satisfaction, that if you do the whole body, if you do the interior, if you do the mounting of the engine and the transmission, that is a full cycle of work, and it’s meaningful, compared to having a simple tool and just mounting something that you know what it would become, but it was meaningless.”

Pehr understood that employees completing a mundane, partial job would cause frustration and boredom. And when people are bored quality declines.

Another thing Pehr made sure to do as a CEO was to have a presence with his employees. He didn’t hide away in a corner office, he walked through the factory and talked with individuals. And he says this is important not only for factory settings, but for a CEO in any industry. Take the time to get to know your people.

Advice for leaders of the future

In his upcoming book, Pehr reflects on what he learned as CEO of Volvo. He says, “In reflecting on what has been formative in my own life, I consider the consequential parts, not to be things or titles, but people. When a company or an organization has been the most rewarding, it has always been due to the people that the company or organization brought into my sphere, people I had the privilege of getting to know.” This quote really speaks volumes to who Pehr is as a leader and his belief in putting people first.

When asked for advice on how to implement this way of leading, Pehr said he thinks a lot of it has to do with a person’s upbringing and attitude about life. It’s not something that can easily be taught, but more so something you have to have from within.

He says leaders have to have sympathy with their whole team, regardless of what role they have. You can’t play favorites. He also believes it is a mistake to hire only people who think and act like you do, even if you get along with them best. “If you don’t have people that are unlike you and that bring something to you, then it won’t work well. To have pals around you is not the way to run a business and the people who are underneath the top management, they will see it very quickly.”

 

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By Pehr Gyllenhammar for CNN Business Perspectives

Updated 8:41 AM ET, Thu May 14, 2020

Former Volvo CEO: American businesses are letting down their workers

Pehr Gyllenhammar

Editor'sNote: Pehr Gyllenhammar was the CEO of Volvo for 24 years. He has also worked with or served on the board of such institutions as Lazard, Reuters, Rothschild, Chase Manhattan Bank, the Aspen Institute, The Rockefeller University and the London Philharmonic Orchestra. His upcoming memoir, Character is Destiny, will be published by Morgan James Publishing in May of 2020. The opinions expressed in this commentary are his own.


EAs the coronavirus pandemic continues, the United States finds itself in uncharted waters, facing social and economic challenges that have shut down the country and forced some 36.5 million people to file for unemployment. Many workers cannot pay their rent or mortgages, cannot afford health insurance and have no guarantee of reemployment when the country reopens.

The US government has been slow to respond to the pandemic and has failed to protect essential workers that communities cannot survive without. Never before has it been so imperative for American businesses to demonstrate social responsibility by prioritizing their workers. In the immediate future, this will entail both the protection of essential workers on the front lines and providing support to those who have been furloughed or laid off. In the long term, many American business owners will have to fundamentally rethink the ways and conditions in which they expect employees to work.

 

I have had to practice this sort of rethinking in my own career. In 1971, after being appointed Volvo's chairman and CEO, I visited all our factories and was amazed to see that the assembly line remained basically unchanged since the 1930s. The workers functioned like robots, performing the same task over and over again. Women suffered from muscle strains and injuries from using tools that were designed for larger male hands. Employees were bored with the work and unvested in the company. Job turnover and absenteeism rates were high. It was apparent to me that the work system itself had to be changed to implement a more humanistic manufacturing model. I ordered toolmakers to start building tools for women's hands. Once they did, all their injuries disappeared. I replaced the assembly line with a batch work system in which teams of workers labored together to assemble each car, which allowed them to develop multiple skill sets and perform varying tasks each day. As a result, turnover and absentee rates fell, and worker productivity increased.

 

My production philosophy had nothing to do with good times or bad times. It had to do with the productivity of people who are motivated and who labor in a healthy and sustainable workplace. I was able to achieve that at Volvo largely because I took the time to communicate with our workers directly to ascertain their needs, and to learn what obstacles stood in the way of their well-being.

 

The obstacle currently facing America's essential workers is that they must risk their own safety every day, but often do not see their efforts reflected with bonuses or hazard pay. Employers should be offering such incentives by correlating bonuses to existing salaries, to the number of hours worked or to the rate of exposure to the public. If smaller businesses struggling to survive can't afford these cash incentives, they can accommodate workers by increasing flex time or offering work share programs. And for workers who have been furloughed or laid off, employers should maintain their benefits and keep quarantined workers on the payroll.

 

But financial incentives such as hazard pay are short-term solutions and do nothing to mitigate the real crisis in American industry: the lack of basic job security in a time of upheaval. When the world economy was roiled by global recession in the early 1970s, I made a conscious decision that all of Volvo's workers would be kept on in their positions at full salary in Sweden. This was absolutely invaluable to them, and far more impactful over the long term than any bonuses or premiums. The same holds true today. If CEOs keep people in their jobs even when the economy is disrupted, they will have something that hazard pay cannot buy — a content and loyal workforce. When a business owner demonstrates a commitment to the well-being of their employees year after year, employees demonstrate a commitment to the company, even in the face of disaster.

 

Business owners will have to reassess old habits and implement socially responsible change to meet the needs of the post-pandemic workforce. And most importantly, the work itself will need to be reorganized to suit the needs of workers.

 

Reconceiving the workplace does not come without expense; neither does maintaining benefits for furloughed employees and keeping quarantined workers on the payroll while they convalesce. But business leaders should be less concerned with what the cost will be if they support and protect their employees voluntarily, and more concerned with what the cost will be if they don't.

There can be no economic recovery in a system in which the labor force is treated as disposable — and that is exactly how workers in the United States are being treated right now. If a second wave of the coronavirus hits the world in the fall as some predict, which companies will protect those same stalwart laborers who worked the factory floors, packed groceries and cared for elders through the first wave? And which employers are now ready to restructure jobs and rethink their own relationships with workers to ensure that when this crisis has passed, there will still be capable men and women willing to perform those jobs?

 

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By Pehr Gyllenhammar for CNN Business Perspectives

Updated 11:26 AM ET, Wed January 22, 2020

I brought socially conscious change to Volvo without hurting profits. Other CEOs can do the same

Pehr Gyllenhammar

Editor'sNote: Pehr Gyllenhammar was the CEO of Volvo for 24 years. He has also worked with or served on the board of such institutions as Lazard, Reuters, Rothschild, Chase Manhattan Bank, the Aspen Institute, The Rockefeller University and the London Philharmonic Orchestra. His upcoming memoir, Character is Destiny, will be published by Morgan James Publishing in May of 2020. The opinions expressed in this commentary are his own.


Ever since the Business Roundtable issued a Statement on the Purpose of a Corporation last summer recommending a shift to a stakeholder capitalism business model, it has become a popular topic of conversation. It's even a central theme in this year's Davos conference.

Stakeholder capitalism is a significant departure from the prevailing business model of maximizing shareholder value, which seeks to enrich shareholders and maximize profits. Instead it focuses on enriching the lives of all the people a company touches, including its customers, employees, suppliers, communities and shareholders. A number of influential CEOs have pledged to shift their company's purpose to stakeholder capitalism. But to prove they are really committed to change — and not just affixing their signature to a statement of lofty aspirations — they must embrace a system where they are held accountable for their stewardship. And they must get shareholders on board to keep them in check.

 

Of course, the challenge lies in convincing shareholders to effectively level a playing field that has historically prioritized their own profits. A corporate culture of maximizing shareholder value is fairly deeply entrenched in companies around the world today, and bloated industries have given rise to outsized expectations from shareholders. In an era in which corporate America is arguably more swollen and self-serving than it has ever been, the change to a paradigm such as stakeholder governance is imperative. With existing companies that have been focusing exclusively on boosting shareholder value for decades, shareholders must understand and accept that such a changeover can happen without an unduly negative effect on profits.

 

I know from personal experience that it is possible to bring socially conscious change to a large corporation without sacrificing profit. When I became Volvo's CEO in 1971, I completely redesigned our plants and assembly methods to prioritize the health and wellbeing of the workers. I addressed the first global environmental convocation — the 1972 UN environmental conference — and made a public commitment to make Volvo more environmentally friendly. And to protest the regime of apartheid, I closed Volvo's Durban plant in South Africa in 1976, one of the first CEOs to divest. 

 

These were bold initiatives but were never designed to come at the expense of shareholders or profits. My intention was to develop work systems to both increase productivity and make people at large happier with the company. It was my job as CEO to communicate that effectively, which I did by going out and talking to people, whether they were Volvo workers, shareholders or members of the public. I was clear and consistent in communicating my intention to pursue programs and policy that were right for the future, for the people and for Volvo, and the wide base of shareholders accepted that. And over time, it became clear that my actions as CEO always aligned with my publicly stated intentions, which engendered trust and enabled me to continue innovating policy while keeping the company profitable.

 

To ensure that real change occurs, shareholders must hold corporate leaders accountable for breaching public trust when they do not align corporate governance with their publicly stated goals and intentions. As in political governance, it is necessary to have a substantive system of checks and balances that prevent the consolidation of power in the elite inner circle. Creating those checks and balances requires moving away from one-person leadership. The United States is one of only a few countries in which many corporate chiefs also serve as chairman of the board. The positions of CEO and chair were conceived as separate jobs so that one could serve as a counterbalance for the other. One of the first changes shareholders should make to improve governance is to disentangle the roles of CEO and board chairman in corporations where those positions are held by a single individual.

 

Shareholders also must regularly scrutinize the company's remuneration programs, and commit to giving workers better terms, better training and better working standards. And they must be willing to reject any business practice that is needlessly harmful, whether to individuals or to the environment. All of that will require putting bold initiatives on the corporate ballot and voting in support of them.

 

One avenue that can help keep companies accountable is by using the ESG (environmental, social, and governance) investing model. ESG investors will not put their money into a company with a poor track record in reducing carbon emissions, demonstrating diversity in hiring or perpetuating an outsized CEO-worker income gap, to name just a few. The ESG model operates in an equation that corporate shareholders can understand — one that directly correlates to profitability. A good ESG rating makes that company more attractive to investors and drives the stock price up. 

The ESG movement is growing in the United States, and it is putting increasing pressure on management teams to adopt the stakeholder capitalism concept. In 2018, Larry Fink, the CEO of BlackRock — one of the largest investment managers in the world — publicly stated his belief that ESG will be a major component in how everyone looks at investing. And just last week, Fink released his annual letter, in which he stated that climate change is an urgent issue for investors, and that BlackRock will drop investments in organizations with poor sustainability records, including thermal coal. 

 

To survive and thrive in business requires the ability to adapt to a changing environment. The Business Roundtable's rethinking of corporate purpose is a signal of precisely that. It's not important to know how many of the CEOs who support it are doing so for political or public relations purposes, or what motives an investment giant like BlackRock might have for dropping climate-unfriendly investments. What is important is to acknowledge is the trend at play here, of outside pressure forcing business leaders to align their actions with their stated ethics. The reality is that this paradigm shift toward a value-based sustainable culture does not require altruism, just pragmatism. It doesn't matter how each of these corporate horses are led to the water — it only matters that they drink.

 

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After losing its way, Volvo has clear vision

Pehr Gyllenhammar
CEO of Volvo from 1971 to 1990

This month, Volvo released sketches of its first fully electric vehicle. This follows its 2017 announcement that all new models beginning in 2019 would be either hybrid-electric or fully electric. This strategy makes Volvo the first mainstream car manufacturer to entirely dispense with internal combustion engines.

This is an ambitious step on Volvo's part, to say the least, and is indicative of just how vastly the automotive industry has changed since I ended my tenure at Volvo in 1993. During my 24 years at Volvo, I prioritized strategies that would be of long-term benefit to the Volvo brand and to factory workers.

My successors made the regrettable decision to sell Volvo's passenger car division to Ford Motor Co. in 1999. A simple look at the financial history of the sale will demonstrate how disastrous the decision turned out to be: Ford purchased the company for $6.5 billion, and 11 years later sold the money-losing Volvo unit to China's Geely Automotive Holdings for $1.8 billion — a loss of well over 70 percent. In my perception, the company and brand that I had worked so hard to safeguard and grow were gone.

Future-focused

Will Volvo's decision to be the first mainstream car manufacturer to focus on electric vehicles restore their reputation? Only time will tell.

I do believe that the business strategy inherent to this decision is notable, and reflects a clear vision — what Henry Ford II once called "building for the future." As a comprehensive all-or-nothing transition, it lacks the air of the public relations-fueled rehabilitation of Volkswagen necessitated by their emissions scandal. I have always felt it imperative for business leaders to be willing to go against the status quo and champion the kind of aggressive change that can pay off in the long term. To date, no other traditional automobile manufacturer has been willing to take on the gamble of entirely forsaking the internal combustion engine for battery-electric technology, as the risk of financial loss is substantial. Nine years after its IPO, Tesla is still losing money, though its stock market value has, at times, exceeded that of Ford and General Motors. Producing a commercially affordable EV remains a challenge, as does the lack of widely available charging stations.

The trend toward electric vehicles will also invariably encounter increased political and industrial opposition. EVs are more modular, with fewer components than their internal combustible engine counterparts, requiring less labor to produce. The UAW has estimated a transition to EVs would cost approximately 35,000 jobs among its members, and it is likely that unions will continue to push for the preservation of these jobs.

The price of oil is also a big factor. Over the last 10 or 15 years, the U.S. has gone from being a major importer of foreign oil to a major exporter, and the resultant lower gasoline prices may be delaying the transition to electric vehicles. The unabashedly pro-fossil fuel Trump administration has plans for auto emissions rollbacks and to ease the existing corporate average fuel economy standards that have previously served as incentives for car manufacturers to market EVs, which will likely delay any substantial move to electrify by U.S. companies. Yet there continue to be signs in Europe and Asia that a more substantial momentum for an EV transition is building.

Back on track

I've been candid in the past about my feeling that the prestige of the Volvo brand was lost once the passenger car division was squandered by Ford, and that the sale itself was a mistake. I continue to feel that the sale of Volvo was a real loss for Sweden, where today only Volvo's heavy-truck division remains — they are now No. 2 in the world, and I do take pride in that. Whether Volvo's gamble in electrifying will ultimately serve as a further redemption of sorts for the brand remains to be seen. It can be said, however, that the company is demonstrating the kind of strategic thinking that is necessary to establish long-term viability in a challenging and changing market, and to capitalize on industry disrupters to the benefit of both shareholders and consumers alike.

 

 

Copyright 2019 PEHR GYLLENHAMMAR