Is it a bird? Is it a manager?
In fact, the towering Swede was only
preparing himself to be busier than ever. He has not only retained the
chairmanship of ABB ; he has now also taken over the chairmanship of
Investor, the Wallenberg family’s holding company that has a large indirect
stake in ABB (and controls 40% of the Swedish stockmarket). Add
in the various vast firms, such as Du Pont and General Motors, on whose boards
Mr Barnevik now sits, and the peripatetic Swede is working with a total payroll
of 1.5m people and a total turnover of roughly SKr2.5 trillion ($320 billion),
half as much again as the GDP of Sweden.
Investor looks like the trickiest challenge
of Mr Barnevik’s career. In Sweden, the boss of Investor counts for almost as
much as King Carl Gustaf or the head of the ruling Social Democratic Party. But
power and glory come with several question marks attached. The management buffs
who hailed Mr Barnevik’s achievements at ABB , a tightly
organised engineering group, regard Investor as worryingly diverse. How could
any management team master a group that encompasses drugs (the company controls
Astra), telecoms (Ericsson), ball bearings ( SKF ), media ( TV 4), forestry (Stora) and even another conglomerate (it has a large
share in a sprawling empire called Incentive)? Predictably, Investor’s shares
are worth only 80% of the value of these underlying assets.
Sorting out such a muddle should on the face
of it be just the job for the energetic Mr Barnevik. He is no stranger to
acquisitions and disposals ( ABB itself was the product of a
merger of Sweden’s Asea and the Swiss Brown Boveri in 1988). He also pulled off
the rare trick of making ABB ever more global, pushing the conglomerate into Asia
and Eastern Europe, without sacrificing cohesion. He created this
“multicultural multinational” partly by living his own life in an aeroplane. He
met thousands of staff, preaching to them about his vision for the company.
This time, however, Mr Barnevik faces two
difficulties. First, Investor is just a holding company (it is remarkably
difficult to reach down into organisations if you only ever visit their
boardrooms). In addition, with 40% of it owned by the Wallenbergs, it is very
much a family business, in which it is unclear whether Mr Barnevik’s role is
more akin to that of chamberlain or king.
The Wallenbergs pride themselves on being
non-interfering shareholders at Investor. For the past 15 years, that restraint
has hardly been tested, since the chairman has been the family’s chieftain,
Peter Wallenberg. Now in his 70s, he will remain involved as head of the
foundation that holds most of the family’s shares. His nephew, Marcus, is
tipped to become Mr Barnevik’s right-hand man inside Investor; Peter’s son,
Jacob, was recently made chief executive of SE -Banken, which is
bank to the Wallenberg family—as well as 1.5m other Swedes.
Given Mr Barnevik’s record, it would be
strange if he did not want to reorganise Investor fairly drastically. So far he
is stressing continuity. But he has already decided to base himself in
London—away from the group’s notoriously political head office in Stockholm.
There are also rumours in Stockholm that Claes Dahlb
Ironically, it would have been easier for Mr
Barnevik to reorganise Investor if he had taken up his post when the
Wallenbergs were having a difficult time in the early 1990s. Recently, Investor
likes to think, it has pulled its socks up. Thanks to rising stockmarkets and
better management at the various subsidiaries, Investor’s net worth has
increased from SKr50.1 billion at the end of 1995 to SKr87.1 billion by the end
of March 1997. The company raised Skr18.8 billion a year ago when it sold 55%
of Scania, a lorry maker that had been in trouble only a few years
earlier—though Scania’s shares have since underperformed the Swedish market by
23%.
On the other hand, there is that depressing
20% discount; and a number of individual headaches at the operating companies.
Top of the list is Saab, an aerospace firm that has been spun off from the car
maker of the same name. In 1996 the firm made an operating loss of SKr1.4
billion on sales of SKr8.2 billion. Its future is gloomy, believes Johan Trocm
Stora, which is one of the world’s largest
forestry groups, has long been plagued by the boom-bust cycle in the paper
industry. SAS , an airline that serves the Nordic region, is an
inefficient muddle. Electrolux, a white-goods firm that has successfully turned
itself into a multinational, has never quite convinced the financial markets
that it is a match for its American competitors, General Electric and
Whirlpool.
Even Astra and Ericsson—Investor’s two most
successful offshoots—could do with a steadying hand. Astra’s shares have
recently been undermined by fears that the pharmaceutical firm will have
nothing to succeed Losec, its best-selling anti-ulcer drug, whose patents will
start to run out in 2001. Ericsson has problems too. Until recently it shared
the market for mobile telephones only with Nokia and Motorola. Now that
Philips, Sony and other firms are piling in, it is hard to see how margins will
not be squeezed.
As if this was not enough work for Mr
Barnevik, he has inherited many deals half-completed. The most pressing is the
merger of SE -Banken with Nordbanken, a recently privatised
domestic competitor. An earlier attempt at combining the groups was abandoned
in February. Mr Barnevik will also want to use his contacts at General Motors
to sort out Saab Automobile. Half of the loss-making firm is already owned by GM , and Investor will probably eventually sell the rest to the American
company.
Mr Barnevik admits that as chairman of
Investor he is now one step removed from the businesses. Yet he asserts that he
can still influence them in two crucial ways. One is to decide who will run the
Wallenberg companies. At ABB Mr Barnevik created a 500-strong cadre of
internationally minded managers who served as a sort of Praetorian guard. By
appointing people who think like him and act decisively, he can try to impose
his own strategies even if he is not involved with day-to-day management.
The second way is what Mr Barnevik calls
“setting the tone.” It is Investor’s job to ask difficult questions, to impose
targets and a sense of urgency on its companies. Under Mr Barnevik
profitability is likely to matter more than in the past. He plays down promises
made before his arrival—for instance, to invest more abroad, and in trendy but
unconnected industries such as multimedia. He may also be more willing to
change Investor’s portfolio.
Mr Barnevik seems least convincing when he
argues that the Wallenberg companies benefit from their Investor connection.
There are a few examples of Investor companies helping each other out on small
matters (eg, advising sister companies on how to deal with Eastern Europe’s
bureaucrats). They also have the reassurance of having a “long-termist”
parent—though that can be a weakness as well as a strength. Certainly, Europe’s
stockmarkets do not give Wallenberg companies higher ratings than their peers
in similar industries.
It is natural to wonder whether Europe’s
pre-eminent manager will do for Investor what his American equivalent, Jack
Welch, did for General Electric. Mr Welch weeded the portfolio and made the
conglomerate more manageable. But Mr Welch’s path to glory was also famously
brutal, earning him the nickname Neutron Jack. Mr Barnevik’s task looks more
subtle. He may not have to close as many factories, but Investor is far more
diffuse than GE ever was—and, unlike Mr Welch, he has to deal with
the Wallenberg family.
For all the complexities, there are two
reasons to expect considerable change. One is Mr Barnevik himself: it is hard
to believe that a man who has described business as 5% strategy and 95%
implementation will just sit still. The second one is that the Wallenberg
empire is more precarious than it looks. In many of “its” companies, the family
has a minority stake: it controls company boards more by tradition than by
right. As foreign investors, who view the family with less deference than the
Swedes, buy ever larger stakes in firms such as Astra and Ericsson, Investor
will have to start proving its worth. That will be Mr Barnevik’s task.