This is part of a series of 20th Century reminiscences Automotive News Europe is publishing periodically throughout 1999.
When Pehr Gyllenhammar, then aged 36, took over the management of AB Volvo from his father-in-law Gunnar Engellau in 1971, he became one of the youngest-ever chief executives of a major auto company. He served the Swedish car and truck maker for over two decades, finally stepping down in 1993 when his proposed merger with Renault fell through. Gyllenhammar introduced new production processes, focused on more efficient emission controls and steered AB Volvo into areas of diversification. He was interviewed in his London office by Automotive News Europe's Wim Oude Weernink.
First and foremost, I am an industrialist. I have always been fascinated by the automotive industry - whether it be engine and chassis technology, research and development, design, or marketing and sales.
When I arrived at Volvo, Volvo stood for reliability, longevity and safety. Of course, safety goes hand-in-hand with durability. But safety needs to be designed. It does not come as a result of simply building a good car. That is why Volvo became the pioneer of the three-point safety belt, and remains at the forefront of crash-test safety.
People used to complain that Volvo cars looked like square boxes, but we softened our exterior design as time went by. When we asked people around the world what Volvo stood for, they would say: 'Safety.' That was good. For years, the industry said safety did not sell. I was convinced it would. It was always extremely gratifying when customers wrote to tell us about how they had survived accidents in a Volvo.
Changing the assembly process
I spent a lot of time on manufacturing processes. Volvo was the first to abolish the traditional assembly line, something which large manufacturers thought they could never do without. They were wrong.
We started to produce without a traditional assembly line at the Kalmar plant in 1974. Volvo never returned to conventional assembly. Elements were retained, but increasingly it became a matter of teamwork. Outsourcing, subassembling off the line, and bigger preassembled systems meant that we needed to establish close relationships with our suppliers.
We tried to remain versatile. We always made changes when we applied group assembly principles to other plants, extending our ideas to mechanical and electronic equipment and tooling. The people were my great joy in this. It was a great pleasure to go inside the factories and learn from people's experiences, so that we could use their skills more wisely.
Expansion with smaller cars
Developing strategies is, of course, one of a chief executive's core duties.
Volvo was a small truck manufacturer when I arrived. In 1972, my second year with Volvo, we devised a strategy to develop our truck business aggressively. It was a long-term effort. We decided to specialize in heavy commercial vehicles, and gradually grow the business by investing more and more in product development.
We achieved our aim by expansion. First, we established a major plant in Belgium. Then, in the late 1970s, we began production in Brazil. We acquired US truck maker White in 1981. All of which enabled Volvo to become the second-largest maker of heavy trucks in the world during the 1980s.
We acquired DAF in 1972 because we felt the trend was toward smaller cars. We wanted to offer our dealers a mid-sized model. It has been said that this acquisition always made a loss and was a bad investment. Sure, we lost money in the beginning, but it became a profitable operation after the launch of the Volvo 440 and 460 models during the 1980s.
At the end of the 1980s we realized we were still too small. So we established the NedCar joint venture with Mitsubishi. We completely refurbished the whole plant (at Born in the Netherlands), and learned from the Japanese way of producing. NedCar is now a highly productive joint venture.
Strong export markets
I was always convinced that, as a relatively small make from a country with a tiny home market, Volvo had to identify itself with other markets. In a modest way, we needed to make other markets 'ours.' We had to understand and accept standards and tastes outside Sweden. And we did that in the USA.
It was difficult, and we had to invest heavily in emission control systems. But we made it work by sheer determination. We never withdrew from the USA, and the country brought us great profits.
During the early 1980s, Volvo's major acquisitions were made outside the automotive field. We felt that the automotive industry would continue to be fiercely competitive, although we made record profits between 1981-1990. Even during recession years we never made a loss.
Our outside investments - in pharmaceuticals, medical instruments and the food sector - were heavily criticized. But all large companies diversify.
The whole idea behind Volvo's strategy was to have two separate groups. That was why the Renault merger was proposed. The idea was to have one automotive group including Renault, and one that dealt with light consumer products. Volvo sold its (diversified) assets between 1993-1997. But it is a fact that the value (of those assets) would have been equal to all of Volvo's today.
New climate for mergers
Companies are always trying to create new (industrial) combinations. But only recently have acquisitions and mergers become easy. Acquiring the almost-bankrupt DAF was a drama, because a culture of acquisitions and mergers did not exist in those days. Today, such a deal would have been made effortlessly.
Our biggest project was, of course, the Renault alliance. But when the merger proposal was finally launched, it was rejected by Volvo shareholders. Many elements affected the deal. The French state was rather slow, so it took time. Anything that takes time runs the risk of losing momentum.
Because of the time factor, Volvo started to emerge from the recession faster than Renault. Critical shareholders felt the terms of the merger favored the French, so Volvo would be the loser.
The failure of the merger was one of my major disappointments. I still think the two companies would have made a very good combination.
Now Volvo, a company that had always taken pride in its links with cars, has simply sold off the business (to Ford). In combination with Renault, Volvo would have survived. But I never had time to sit back and cry about things that did not happen.
Industry should have outsourced
In the meantime, the consolidation of the industry continues. The number of survivors is not important. What matters is the way the industry develops. In order to reduce investment, more and more work is going to suppliers. The whole supply system is changing dramatically. The large car manufacturers used to make everything in-house, and only now has General Motors decided to divest Delphi. GM has finally realized that outside suppliers can be more efficient. VW and Ford are also outsourcing. It should have happened earlier.
The need for cleaner air
There is one aspect, however, where the industry could have done better. Volvo developed an environmental policy as early as 1972. A year later, I actively tried to persuade the US automotive industry to accept the new demands in emission controls. I wanted them to cooperate with legislators, not fight them.
I am amazed the European industry is still lobbying against cleaner air, and using old, primitive, self-defeating arguments like cost and possible job losses.
I am also amazed governments have accepted that. Europe has acted against its own long-term interest. If Europe had followed the American and Japanese industries, we would have had cleaner air by now. It is pathetic that the industry has not adopted the best possible solutions.
However, improvements in safety have come more from competition in the market and less from government legislation. I am pleased to say safety is now an important aspect in customers' minds. Yes, environment and safety are very deep in my heart.