Word: volvos
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Volkswagen late last week suddenly gained a potent new rival. In a surprise move, Sweden's two automakers-Volvo and Saab-Scania-announced their decision to unite in a new company, to be called Volvo-Saab-Scania. By any measure, the triple-hyphenated outfit will be a giant: with sales of $5.8 billion, it will rank as Europe's fourth largest automaker (after Daimler-Benz, Renault and Volkswagen), turn out a line of vehicles ranging from compacts to huge Scania rigs, and employ nearly 104,000 workers...
...sense. Because of rocketing wage costs (up 40% in two years to $6.33 per hour) and excessive absenteeism rates (as high as 20% on any given day), Sweden's cars are being priced out of the world market. The merger will strengthen the Swedish auto industry by combining Volvo and Saab sales forces, distribution setups and parts supplies abroad. It will also enable Saab and Volvo to bring out a hew line of models, presumably based on a synthesis of Saab's sporty front-wheel drive design and Volvo's vaunted safety features...
...larger company (1976 sales: $3.6 billion), Volvo will be the main partner, with 66% of the voting shares. Volvo's dynamic Pehr Gyllenhammar will be president, and Saab-Scania's Curt Mileikowsky will be executive vice chairman. Saabs aircraft division, which makes the Viggen jetfighter, will be part of the new company...
Like its Socialist predecessor, the new coalition government of Prime Minister Thorbjorn Falldin is fully committed to the welfare state. That means keeping unemployment at its present low rate of 1.5%, even if employers must pay workers who show up only sporadically. Volvo has pioneered new ideas to keep workers interested, including a novel assembly line that allows employees to set their own pace (TIME, Sept. 16, 1974). That has cut absenteeism in a new plant outside Kalmar to 15%-still high by almost any standards outside Sweden. Even shutting down is no answer; on each of the days that...
Ironically, opening the U.S. plant could have helped. American workers presumably would have been absent less often than Swedes, and the labor cost of Volvos sold in the U.S. would have been reduced. "The advantages of manufacturing in the States are still there," says Volvo Senior Vice President Robert Dethorey, "but first it is a matter of utilizing the capacity we have." So long as the government insists that employees be paid for not working, Volvo's prospects are anything but bright...