Word: volvo
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What went wrong? The quick answer is that Volvo's car sales in the U.S. fell from a peak of 60,338 in 1975 to 43,887 last year, a decline of 27.3%. But that drop is only a symptom of a deeper problem that afflicts not only Volvo but all Swedish industry. Essentially, the welfare-state policies of the Swedish government are pushing labor costs so high as to price Swedish products out of the international market...
...Volvo has also been hurt by a drop in its reputation for quality. Though its sales in Sweden last year hit a record 75,000, its exports have slumped so badly that the company's plants are operating at only 70% of capacity-and even so, Volvo is running out of space to store unsold cars...
Thin Profits. Volvo's high prices are largely the result of a 40% raise in Swedish labor costs in the past two years. To contain the damage to sales, Volvo has absorbed some of the cost in export markets, rather than pass on the full rise in prices charged to foreign buyers. Result: Volvo's 1976 profits of $136 million were only 3.7% of sales, v. 10% in 1972 and 1973. Profits on export sales to North America and Western Europe were a paper-thin...
...climb in labor costs is not only the result of pay. An even greater problem is absenteeism, which at Volvo's Torslanda assembly plant just outside the Gothenburg headquarters runs to 20% daily. That means Volvo in effect has to pay five employees to do the work of four. Some workers are absent an average of 65 days a year each...
...benefits so generous that it is widely abused. In addition to days when he himself is ill, a father of three children, for example, by law gets 18 paid sick days to allow him to be at home when one or more of his children is bedridden. Says Volvo President Pehr G. Gyllenhammar: "It is no longer a question of whether individual Swedes can afford to be sick and still receive pay, because this is an obvious right. It is a question of the country's ability to pay for the level of absenteeism we have reached...