Ericsson shake-up may spell tension at the top
By Christopher Brown-Humes in Stockholm
Published: March 26 2002 18:59 | Last Updated: March 26 2002 19:15
There will no doubt be plenty of smiles and hand-shakes on Wedneday when Michael Treschow takes over as chairman of Ericsson, the world's leading maker of telecommunications infrastructure.
One man who seems less than enthusiastic about the accession, however, is Kurt Hellstrõm, Ericsson's chief executive.
Mr Treschow is suave, charming and well connected. Related by marriage to the country's powerful Wallenberg family, whose holding company, Investor, is a large Ericsson shareholder, he sports an aristocratic ring on his finger and hails from the south of the country. "He was born with a silver spoon in his mouth," says one Ericsson insider.
Mr Hellstrõm, on the other hand, is the gruff son of a farmer from the north and a self-made man. He is known for riding a Harley Davidson motorcycle and for his prowess at cross-country skiing.
The two men would make unlikely friends outside business. The question is whether they can make the relationship work as chairman and chief executive during one of the most challenging periods in the Swedish corporate flagship's 126-year existence.
Last year, the group made the biggest loss in Swedish business history, and it is facing an uphill struggle to return to the black this year as operators continue to hold back on equipment purchases. Its shares have plunged from a peak of SKr230 two years ago to about only SKr44 on Tuesday.
"I cannot imagine Mr Hellstrõm is going to get on with Mr Treschow. They are such different sorts of people," says Susan Anthony, analyst at Credit Lyonnais in London.
Mr Treschow, 58, takes over from Lars Ramqvist, who as both chairman and chief executive dominated Ericsson's development during the 1990s.
Mr Hellstrõm was brought in by Mr Ramqvist to replace Sven-Christer Nilsson as chief executive, after the latter was unceremoniously dismissed in mid-1999.
Mr Hellstrom, also 58, has done little to disguise his sensitivity over Mr Treschow's appointment, describing his new chairman pointedly as "a non-executive", while noting that he does not have a telecoms background. In an interview with Dagens Industri, the Swedish business newspaper, just after Mr Treschow's appointment was announced, he said the chairman "is not more important than other members of the board". The interview prompted Mr Treschow to phone Mr Hellstrõm to clarify matters.
Mr Treschow avoids using the word "working" to describe his chairmanship, but he promises to be "active" in the role.
That is certainly what investors want. After all, Mr Treschow is stepping down as chief executive of Electrolux, the world's leading maker of white goods, where his vigour at cutting jobs earned him the nickname "Mike the Knife".
Many analysts believe another round of cost cutting is needed to restore Ericsson to decent profitability, in spite of last year's restructuring programmes, which cut more than 22,000 jobs in a bid to save SKr20bn ($1.9bn) a year.
They suggest that with European telecoms operators still reluctant to make equipment investments, a lot more cost cutting may be the only way for Ericsson to reach its target 5 per cent operating margin this year.
Analysts believe Ericsson's owners, Investor and Industrivarden, the investment group linked to Svenska Handelsbanken, would not have appointed a corporate heavy-weight, such as Mr Treschow, nor would he have accepted the job unless there was considerable scope to influence the group's strategy.
The question is, which of the two will represent the company in public? If Mr Hellstrõm is visibly uncomfortable in the media spotlight and an uncertain performer in front of analysts, Mr Treschow is polished and has the market's confidence.
Mr Hellstrõm has worked at Ericsson since 1984 and was head of the group's Asian operations before his promotion to president and then chief executive. He is popular within the company and admired for his selling skills.
However, if significant disagreements emerge between Mr Treschow and Mr Hellstrõm, it is likely to be the latter who loses out. Some analysts believe Mr Hellstrõm could decide to step down within the next year.
Much may depend on how quickly Ericsson's recovery takes root. It could be that the combined impact of cost-cutting and a market recovery mean that recovery becomes apparent in the next few months - in which case, Mr Treschow would have timed his arrival to perfection. |
