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February
2000
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Volvo Sweden to Take Over in South Africa
This assurance was given to FleetWatch by no less a person than Lennart Jeansson, executive vice president and deputy CEO of AB Volvo in an exclusive interview conducted during his recent visit to South Africa where he headed a top level negotiating team liaising with the liquidator of Swedish Truck Distributors. If you picture AB Volvo as a Christmas tree, Jeansson is the guy placed just under the guy on top of the tree so this news is solid. "Ideally we would like to take over the existing branches and valued assets of the liquidated company but if an agreement is not reached with the liquidators, we are prepared to go it alone. It will be more expensive to set up from scratch but we are prepared to do so if necessary," said Jeansson. And we are not talking peanuts here. According to Jeansson, the ball-park figure involved is around the $35-million mark (R210-million) which includes the branches, assembly plant in Botswana, the bus production facility and the body building plant. "In fact, everything that is in liquidation and belongs to the business."
This determination to take over the operations and market formerly serviced by Swedish Truck Distributors is based on two factors. The first, according to Jeansson, is to provide on-going service to existing Volvo customers. The second is to capitalise on what he regards as a strong growth market. "This is a huge market and since there is not a good rail system, the sales of trucks and buses has to expand. We are building our business in Asia, North and South America and we need to improve in South Africa and Africa. So we will be paying a lot of attention to this area," he said. Proof of serious intent Proof of AB Volvo's serious intent is provided via the fact that even while negotiations with the liquidator were in progress, a new company - Volvo (Southern Africa) Pty Ltd - had been formed. The company is registered, a Board of Directors - with Jeansson as chairman - has been appointed and the first board meeting has been held.
"We were left with a lot of difficulties, one of which was to ensure parts availability for our customers. We have, however, once again started servicing our customers using skeleton staff operating from branches in Johannesburg, Cape Town, Durban, Bloemfontein, Middelburg, Port Elizabeth, Benoni and Gaborone. And this activity will now be stepped up," he said. At the time of writing, the liquidator was still running the business so there were irritants such as customers having to pay cash for parts. However, an interim warehouse had been set up by AB Volvo where some R2-million of basic parts were being made available. The company was also flying in some R4-million of parts to enhance the service offerings and prevent customers suffering further inconveniences. By the time you read this, those parts would have arrived in South Africa. "We are also scheduling more product for the South Africa market and in fact, already have full kits as well as cabs waiting in Durban for release for assembly. We are coming right and will reinforce our efforts and put more and more activity in the field as we move forward," Jeansson told FleetWatch. Maintenance contracts Staying on the customer service side, I asked whether or not AB Volvo would honour the maintenance contracts operators had entered into with STD. It is a well known fact that STD pushed hard for maintenance contracts - and were highly successful in converting many operators to this form of modus operandi. This then, is a vitally important area of consideration as many operators have used the maintenance contract rates agreed to by the former STD in structuring their own transport rates to their customers. To highlight this point, I publish - in full and unedited - a fax sent to Mr K Trogen, President of Volvo Trucks, Sweden on January 24th this year. It was sent to him by Liam Hickey, director of Driver Entrepreneurs and although it deals with owner-drivers, the content serves to underline the concerns of many. Dear Sir I am writing to you in connection with the state of affairs concerning Swedish Truck Distributors and the general lack of back-up now available in South Africa for Volvo trucks, especially with the maintenance contracts which used to be in place now having fallen away. Driver Entrepreneurs is an owner-driver management company, specialising in the management of owner-driver schemes contracted to supply a service to various companies. When we were awarded these contracts, our rates were based in part on the maintenance contract rates. These are now no longer valid and the owner-driver must now pay cash for the maintenance of his truck. This is causing the owner-drivers to run at a continuous loss and they cannot keep this up. The owner-driver schemes with which we are involved are essentially empowerment projects for previously disadvantaged communities and it was hoped that they could make a better life for themselves through our scheme, in that they would - after a certain period - have their truck paid off and could then branch out and start their own businesses. This is our eventual goal of the empowerment process - to teach these owners-drivers to become businessmen in their own right. However, with the latest developments as mentioned above, these owner-drivers could very well land up in a situation which is far worse than the one they were in to begin with. If they do generate a profit and cannot afford to make their truck payments, then the bank could very well repossess the vehicle leaving the owner-driver with a large outstanding debt and nothing with which to generate the necessary income. This obviously was not the intention when the scheme was introduced. We urgently require some kind of feed-back from you as to what action Volvo will be taking to ensure that people like these owner-drivers do not lose their opportunity to develop their own business and empower themselves. They will, in these circumstances, not be in a position to do so unless some kind of arrangement is make quickly with regards to the maintenance contracts issue. Most of these owner-drivers have been in operation since 1996 and it would be catastrophic for the empowerment process in the new South Africa if this whole scheme should fail. This whole matter is causing a negative feeling towards Volvo in general in South Africa and a determined effort by Volvo is required on an urgent basis. I trust that we will be able to solve this matter in an amicable fashion and I look forward to your most urgent response. So what is AB Volvo's stance on the subject of honoring maintenance contracts? Over to Jeansson… "Our ambition is to honour all contracts but there are some that have not been paid regularly and others which are far too low to carry on with. There are also some where the operator stopped paying from as long ago as August last year. It is obvious to me that we will have to deal with each contract on an individual basis. "The most important point, however, is for us to go to the customer and find a good solution for him. And we are not talking about short-term solutions here. We have given our customers certain commitments and we are here to service those commitments. Volvo will not let its customers down and this is the spirit under which all negotiations will be entered into," said Jeansson. This is good news and FleetWatch's advice to all operators is to haul out those contracts and prepare to discuss them with Volvo in a spirit of win-win negotiations. And if any operator out there feels he is being genuinely hard done by, please let us know. Keeping former STD staff And here's further goods news, this time directed at the former staff of STD who, at the time of writing, were living under a cloud as to their future. Jeansson's intentions are to keep as many former STD staff as possible as he realises there is a tremendous amount of local skill and competency encompassed in these people "It is important that we find a good CEO for the new operation - a man who knows the Volvo product and operations (implying that this will no doubt be someone from overseas). However, under him should be a large component of existing staff because there is a lot of local knowledge in those ranks. It is also important to keep them because they have been interfacing with our customers. They know our customers." Given the uncertainty that followed STD's closure, one could be forgiven for viewing all this 'good news' with a certain degree of scepticism. However, having come face-to-face with this top man from Volvo's international headoffice, I walked away with the feeling that AB Volvo is genuine about its commitment to its customers in this market. It is genuine about getting it right. Look, let's be honest. It can’t afford not to. South Africa is now very much a part of the global business community and if word gets out that the giant and highly respected AB Volvo group dropped a set of customers in this part of the world due to the downfall of its former distributor, it would certainly do the company's reputation no good in other markets. FleetWatch, for one, would feed that type of information out to the widest possible world trucking audience - and I don't think truck operators in other parts of the world would take kindly to that news. However, I don't see that day arriving because I believe Lennart Jeansson when he says "it is coming right". FootNote: By the time you read this, agreement with the liquidators may well have been reached and if so, you will no doubt know this through newspaper reports. However, we will keep you up to date with developments as they come to hand bearing in mind the 'newsworthy' constraints of a monthly magazine as opposed to daily newspapers. |
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At
the time of writing, agreement had still not been reached but Jeansson
was confident of a satisfactory outcome.
That's
for the long term. To address the short-term problems that have arisen
as a result of the demise of STD, AB Volvo is focussing its attention
on keeping the service lines open for operators until agreement is reached
with the liquidators. This, says Jeansson, has been easier said that
done.