| Abstrakt: |
This article deals with the strategy of Pehr G. Gyllenhammar, chairman of Swedish carmaker Volvo, in diversifying the company into less cynical or high-margin businesses to guard against a downturn in automobiles. Diversification is not new to the company because it is already an immensely profitable maker of heavy trucks, Europe's biggest busmaker, and a dominant force in small inboard boat motors in the U.S. and Europe. While Gyllenhammar's move into trucks and buses have been paying of, some wonder whether he has found the correct balance. Volvo's other earnings, the food strategy is questionable at best. There is almost always inherent risk in acquisitions and margins in the food business are weak. The return on capital for the group so far has been below the company average. In 1988 operating profits from food dropped by an estimated 20 percent, to $67 million, for an operating margin of 3.8 percent versus Volvo's overall margin of 7.6 percent. But Gyllenhammar has been right more often than wrong in the past, and he is certainly wise to diversify. While autos accounted for all Volvo's profits just five years ago, half of the company's earnings are now from trucks, buses, aerospace parts, marine motors and food. Indeed, Gyllenhammar has conceived a master plan for Volvo that is working so far. |
