The north-south European economic divide gets ever bigger, if my recent trip to Sweden is anything to go by. I went to Trollhättan, north of Gothenburg, to look at the fallout of Saab's demise. The company's closure was a blow, of course. It was the town's largest private employer. But most employees — especially the engineers — would soon find other jobs, the mayor and local businesspeople told me. Such confidence in downbeat Europe was gratifying to hear. No wonder The Economist last year called Sweden the 'North Star'.
Sweden, like Germany, is a big manufacturing exporter. When the chips are down, nothing puts kronor in pockets like export-led businesses that engineer, design and make high-value goods. The Germans know this. Britain is rediscovering it. As with many other Swedish manufacturers, Volvo — the sole surviving Swedish carmaker — is doing rather well right now. Sales have jumped by a third in the past two years and it's back in profit after a few lean years under old owner Ford.
Volvo was sold to the Chinese in 2010, its third ownership change in just over a decade. But Geely is not your usual Chinese carmaker. Whereas the 'big four' Chinese auto players are all either state-owned or go back to hardline Communist times, Geely is very much New China, founded by charismatic entrepreneur Li Shufu and now listed on the Hong Kong stock exchange. Visit the vast Volvo factory and corporate global HQ in Torslanda, 30 minutes' drive from central Gothenburg, and it's hard to find a harsh word said about Geely.
Ford's ownership proved divisive. While driving dynamics, design quality and production efficiencies all improved, the flipside was that 10,000 people lost their jobs. Plus Ford was a domineering owner. Geely, conversely, has reinforced Volvo's independence and its stand-alone Swedishness. While Ford put its own people into key management roles, Geely has inserted none. It hired ex-Volkswagen USA boss Stefan Jacoby as CEO and he has since shaken up senior management, changing all but one of the 12 members of his executive team. A company once renowned for safety and functionality has morphed into one that still sees safety at its crux, but has added rakish design and decent driving dynamics — qualities alien to Volvos of a generation or two ago.
If the S60 saloon was the first evidence of the swing, the new V40 is a more seismic shift. This is Volvo's first small five-door premium hatch. It competes with the Audi A3 and BMW 1-series — plus more upmarket versions of the Focus and Golf. It looks sportier and more coupe-like than either the BMW or the Audi and, on the evidence of a drive in northern Italy, handles just as sweetly. Naturally, since it is a Volvo, there is a safety innovation: a pedestrian airbag that cushions anyone that happens to be hit.
The vast majority of V40 buyers will be new to Volvo, and the bullish Swedes see this car as a key weapon in their drive to boost sales to 800,000 cars a year by 2020 — up from 449,000 last year. That still makes them much smaller than BMW or Audi — both makers outsell Volvo globally by almost three-to-one. Yet smallness is not a hindrance to profitability, insists Jacoby. "If it was only about size, we'd still live in the world of the dinosaurs," he says.
Upcoming initiatives include manufacturing in China, which makes perfect sense when you have a Chinese owner. Sweden, however, will remain the engineering and manufacturing hub. Which should help to ensure that those savvy Swedes continue to prosper.
Gavin Green is a motoring journalist and consultant.
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