Volvo doubles its investment in USA

Volvo Cars is doubling its investment in its plant in the USA. According to reports in South Carolina, Volvo is increasing its investment from USD 500 million to USD 1 billion. It will also more than double its workforce, from 2,000 to 4,500.

According to the original plans, the plant is to manufacture the S60. The capacity is said to be 100,000 although to begin with 60,000 cars will be built per year, of which 60% will be exported worldwide, except China.

Nordea demand still applies

The Financial Supervisory Authority (FSA) intends to ensure that Nordea’s capital requirement remains as high as it is currently, even after the bank moves its headquarters to Finland.

In an interview with Dagens Industri (DI), the head of the FSA, Erik Thedéen, says that the Finland is move is “completely unique”. “It is also the first time a large bank, with exposure to the whole of the Nordic region comes under the jurisdiction of the European Central Bank (ECB),” he adds.

He does not believe Nordea’s move is a sign that Swedish regulation has gone too far. “When you say that our requirements are too demanding, then you are forgetting that these requirements are made in an environment typical to Sweden, which is concentrated and interlinked.”

When the move is made, the FSA no longer has responsibility for supervising Nordea and it could mean a lower capital requirement for Nordea. The FSA has already started talks with the ECB and Erik Thedéen wants to push for the ECB to ensure the current capital levels are maintained.

Experts want new reforms

Several of the country’s leading economists consider there to be a desperate need for new structural reforms, but the government is showing no sign of dealing with the problems. The last real political structural reform was the employment tax deduction brought in by the alliance government in 2006.

In particular economists are worried about the housing and labour markets. Annika Winsth is head economist at Nordea and describes a generation of politicians that are incapable of taking on the major challenges that Sweden is facing just now. She is unimpressed with Finance Minister Magdalena Andersson’s autumn budget. “I think it is inappropriate to push forward with extensive stimulation when we already have the tendency to overheating. Furthermore, becoming bound to permanent increases in spending when you know that worse times lie ahead is risky. Long-term structural reforms would have been desirable,” she says.

Nordea: we have not negotiated

On Thursday Nordea held a press conference at its Helsinki, which will next year host key employees who will be moved from Stockholm.

When asked why it was not enough that the Swedish government backed down over the resolution reserve fee, CEO Casper von Koskull said, “Nordea is a bank with four domestic markets. We are also a very large bank. It is therefore difficult to exist under one regulation that is based on one country.” For him it is a natural step to become part of the European banking union and be regulated by the Single Supervisory Mechanism, SSM.

He also comments that there never was any negotiation. “We have not been shopping around.” Instead the bank has carried out a thorough analysis.

Meanwhile Swedbank is in a good position to take over dissatisfied customers who leave Nordea, says Swedbank’s head of press Josefine Uppling.

Prime Minister Stefan Löfven understands that many Swedes are upset. “Here we have a bank that has twice received significant help. The whole reason the bank exists is because of Swedish taxpayers and the thanks for that is: we are moving the head office,” he says.

Ambitious goals lift Volvo’s shares

AB Volvo’s shares gained over 7% on Friday after the vehicle giant presented a new aggressive target for its operating margin. The operating margins are to be ten per cent over an economic cycle.

When asked whether this is a realistic goal, head of investor relations, Christer Johansson, said, “This is a long-term goal and not a vision. At our capital market day earlier this year we presented a number of priority areas for gradually improving profitability.”

Government opens its purse

Finance Minister Magdalena Andersson promised a record election budget when she met journalists yesterday prior to budget negotiations in Harpsund. The investments so far presented for welfare, the police and defence amount to around SEK 10 billion, and she is willing to consider more reforms.

However, the National Institute of Economic Research’s (NIER) Ylva Hedén Westerdahl commented: “We are surprised that the government has so much room for reform. In our forecast, it would mean that they are moving away from the new surplus target.” She points out the government views the underlying potential of the economy more positively.

The Liberals’ economic spokesperson Mats Persson focused on what he sees as a lack of job reforms, which means new arrivals will not get into employment. “It is remarkable that a Social Democrat government is allowing a new underclass to develop,” he says.

Gothenburg losing out

Container volumes at the Port of Gothenburg collapsed by 22% during the first half of the year and in June fell by 60%. The catastrophic figures are due to the conflict between the union and APM Terminals. Magnus Kårestedt, the CEO of the Port of Gothenburg, is warning that the conflict will affect Swedish business and jobs.

“This is a tragedy. Volumes which gradually and arduously have been built up over more than a decade and a half have disappeared in a very short space of time,” says Kårestedt. He adds that the conflict is affecting business throughout Sweden since the Port of Gothenburg is Sweden’s largest port and is linked to vital markets.

The Port of Gothenburg considers the Swedish Dockworkers’ Union to bear the brunt of the blame for the damaging conflict as the union will not accept members’ proposals for a solution.

Two-front attack

One of the welfare sector’s heavyweights has attacked both the government and the alliance for the political handling of profits in welfare.

“This type of reform must have support in reality. We are talking about hundreds of thousands of children, thousands of health centres and elderly care homes. It is a very important part of the Swedish model,” says education giant AcadeMedia’s CEO Marcus Strömberg.

“Of course the government has the ultimate responsibility but I also think that the alliance parties have contributed to this polarisation,” he adds. He believes the threat of a vote of no confidence has damaged the climate for discussion and he defends compromising across the political divide.

He adds that one way of creating margins in the case of a profit cap on welfare would be to increase operating capital by buying school premises but “we do not want to be a property company. We are experts at education but since they have put forward the proposal we have to take a stance on how we go forward.”

Haldex conflict escalates

On Thursday an extraordinary meeting of Haldex’s shareholders ordered the board to fully comply with the bidder, German Knorr-Bremse. The board withdrew its support for the bid in June as it believed the European Commission would likely turn down the deal. Since then Haldex has chosen to break off all collaboration with Knorr-Bremse over the bid.

After the meeting CEO Jörgen Durban kept his stance to ignore the board’s order. “We cannot implement the decision as it would benefit one owner, but damage Haldex.”

Temporary factors help push inflation over 2%

The Consumer Price Index (CPI) rose by 0.5% in July. The 12-month rate was 2.2%. Price increases on package holidays contributed 0.3 percentage point to the change, while increased prices on international flights and electricity contributed 0.2 percentage points each.  The underlying inflation rate (CPIF) rose from 1.9% in June to 2.4% in July, its highest level since December 2010.

The Swedish krona strengthened on the news while the stock market fell. The reaction is justifiable given that the inflation rate is over the 2.0% target set by the Riksbank, which could bring forward plans to raise the benchmark repo rate, argues DI.

But, even if the July data may lift the mood at the central bank, it is too early to celebrate. A number of temporary factors contributed to the increase, as did a new way of measuring inflation and tax hikes on electricity.