Volvo cars, which were traditionally designed to withstand the rigours of Sweden’s rugged roads and freezing weather, are in many people’s eyes representative of the Nordic nation’s psyche: modest, safe, and not too flashy.
Yet this most emblematic of Swedish brands has been subject to sweeping changes in recent years that reflect far-reaching global shifts in power.
Until 15 years ago, foreign companies were not allowed to own more than 20% of the shares of any Swedish company. This rule, of course, did not hold back Volvo’s quest for world domination.
The carmaker’s iconic 200 series – including its famous hatchback estate – sold more than 2.8 million vehicles between 1974 and 1993.
However, after Sweden joined the European Union in 1995, the country’s economy opened up. Ford bought Volvo in 1999 (although the American car giant opted to keep manufacturing in Gothenburg).
But in the last few years, in common with carmakers around the world, Volvo has been losing money.
This year – in a potent illustration of how economic power is shifting from west to east – Volvo was sold again. In March, Chinese carmaker Geely agreed to purchase Volvo for $1.8 billion, in a deal that is due to complete in the third quarter.
“It’s the transaction of the decade,” says Stefan Brocker, managing partner at Mannheimer Swartling, whose firm advised Ford on the sale.
“We are beginning to see capital come into the Nordic countries from the east. It’s certainly the first time China Inc has bought a premium brand here.
“It’s hoped the new Chinese owners will herald a brighter future for Volvo. However, a lot of people think that the production facilities will leave Sweden and go to China, so maybe it’s both good and bad. It could affect many people.”
Sweden’s other iconic carmaker, Saab, teetered on the brink of closure until the start of this year. But then General Motors, its troubled parent company, found a buyer. Saab was sold to Holland’s Spyker Cars for $400 million.
Stockholm-based Hammarskiöld & Co represented GM in the sale.
“The Swedish business environment has changed a lot,” says Claes Langenius, managing partner at Hammarskiöld & Co. “As a country we used to have a very big manufacturing industry. But globalisation, and the possibilities to move production internationally, has had a serious impact.”
On balance, the financial crisis that has wrecked havoc on the global economy has not ravaged Sweden as much as other European countries. Last year, the country’s economy did shrink by a hefty 4.6%. But this year its central bank forecasts GDP growth of 2%.
Sweden’s banking system had its own mini-crisis in the early 1990s, plunging the country into a deep recession. Some observers argue that the regulations put in place afterwards insulated Sweden from the worst of the recent financialturmoil.
Mannheimer Swartling’s Stefan Brocker, however, has a more novel explanation for why the country has escaped the worst of the crisis: the Swedish lagom mentality.
A single word, lagom, is said to describe the basis of the Swedish national psyche, one of consensus and equality. The Lexin Swedish-English dictionary defines lagom as “enough, sufficient, adequate, just right.” It is traditionally considered ideal to be modest, avoid extremes and seek optimal solutions.
Volvo cars – modest, safe and not too flashy – could be described as classically lagom in manufacture, attitude and design.
“Our financial sector tends to lag behind what is going on in the US and the UK and as a result when it comes to taking risks we tend not to be too excessive. I put this down to the Swedish lagom mentality,” Brocker explains.
The better-than-expected results Sweden’s major banks produced in the first quarter this year certainly support Brocker’s theory. For example, Nordea, the biggest Nordic-region bank, increased net profit to €642 million, from €626 million in the same period last year.
Handelsbanken, another major Swedish lender, posted net profits of €298 million, up from €289 million a year ago.
In light of the problems facing the euro, many Swedes express relief that the country has opted to stick with its national currency, the Swedish krona. The country rejected the single currency in a 2003 referendum. “Of course, the Greek debt crisis will affect us as well, but not as much,” says Hammarskiöld’s Claes Langenius.
However, the financial crisis has had an impact on the Swedish legal profession in other ways, says Mannheimer Swartling’s Stefan Brocker. “New fee pressures require law firms to be more efficient,” he says. “Our clients are working under constant pressure to reduce costs.
Therefore, they are questioning the models law firms use a lot more: the way we are organised, and how effective we are. They ask more questions about leverage and partner-associate ratios.
They are more demanding. These issues have been there for many years but the crisis has made them far more topical.”
Brocker continues: “Law firms need to get more power out of the existing engines rather than increase the size of the engine. They need to think differently on how to price matters and how to charge our clients. These are fundamental issues that need to be addressed in order for law firms to run as profitable businesses in the future. The price pressure that we have seen is not something that will just fly away because the crisis is over. It has been easy to make money in our industry, but not any more.”