Trimmed Swedish Motors rolls into profit
SWEDISH Motors Corporation Plc will begin to see profits shortly thanks to a drastic reorganisation to focus business on the sale of Volvo cars in Bangkok.
"Our forecast for the first quarter of this year is that we will begin to see profits which come much earlier than the original restructuring plan," said Geoffrey Rowe, the managing director.
Swedish Motors has undergone a complete revamp after a successful Bt3.5 billion debt restructuring deal struck with its creditors last November. Its creditors agreed to convert debt into equity, and it no longer carries any US dollar debt.
As a result, Swedish Motors is now 60 per cent controlled by creditors, 13 per cent by bond holders, 15 per cent by Volvo Group and 2 per cent by the Bonython family. The Bonython family experienced a significant dilution of its stake and is now becoming a passive shareholder.
The company has eliminated all other businesses, manufacturing and upcountry retailing, to focus on the retailing of Volvo cars in the Bangkok market, where it now commands a 75-80 per cent share.
Under Rowe's leadership, Swedish Motors has embarked on making the company competitive again through operational restructuring. One of his first moves was to drastically reduce the size of the company's headquarters.
Before the reduction, overheads at its headquarters accounted for 40 per cent of total operating costs. This has now been reduced to 15 per cent.
"We used to have one head office staff to 10 retailers. Now we have changed that to one head office staff to 40 retailers," Rowe said.
The operational restructuring plan has been clearly laid out. If Swedish Motors can sell 50 Volvo cars a month, it will break even. Before, just to break even, the company had to sell 150 units a month.
"However, we aim to sell 1,000 units this year," said Rowe. The company is operating with 10 outlets in Bangkok, with Volvo Group taking over the provincial outlets.
The arrangement with Volvo Group is driving Swedish Motors to constantly upgrade its performance. The Bangkok market has been divided into five areas. If sales of Volvo cars in each area fail to meet the projections, Volvo Group will have the right to set up its own outlets to compete.
Swedish Motors has also strengthened its after-sales service for customers. For every Bt1 in labour revenue, it makes Bt3 in parts sales.
Rowe said that with Swedish Motors running on a leaner and meaner business plan it would be able to survive any difficulties should the economy slip back again.
Between January and February this year, Volvo cars had a 25 per cent of the European brand market with 229 units sold. This was up 94 per cent from the 118 units sold in the same period in 1999.
BMW sold 358 units, for a 38 per cent share of the European car market in the first two months of 2000. This compared with 295 units, or 32 per cent, for Mercedes Benz, 46 units, or 5 per cent, for Audi, and just 2 units, or about zero per cent, for Saab.
BY THANONG KHANTHONG