THE THIRTY-YEAR HISTORYOF VOLVO

Written by

ASSAR GABRIELSSON

founder of the Volvo

Company and its president

until 1956

Assay Gabrielsson, the founder of theVolvo Group which is one o f the largest in.Sweden's engineering industries, statesthe following interesting and occasion-ally rather unconventional viewpointsconcerning automobile manufacture ingeneral and Swedish automobile manu-facturing in particular.

Reprinted from Transbladet, house magazine of Rederi AB Transatlantic.

Jacob-the very first Volvo-on the assembly line in 1927. This car had a 28 b.h.p. four-cylinder side-valve engine.

THE THIRTY-YEAR HISTORY

OF VOLVO

It was not only a desire for adventure that ledto the founding of Volvo. All the essential require-ments for a profitable Swedish automobile manu-facturing industry existed to a reasonable extent:

Sweden was a well-developed industrial country.Swedish rates of pay were low.Swedish steel had a world-wide reputation.There was a demand for automobiles built for

Swedish roads.

At that time, Swedish industry had advancedpretty far in many fields. Names such as SKF,ASEA, Bofors, Husqvarna and many others werewellknown both in Sweden and abroad. A compli-cated thing like an automobile requires many

different manufacturing processes which, in theirturn, must have a complete series of machines es -pecially built for the purpose. These machines were

available in Sweden to a large extent. Swedishengineering skill was of a highly developed char-acter. The Swedish worker had centuries of tradi-tion behind him. Sweden had earned the reputationfor manufacturing high-quality products.

In 1901, C. E. Johansson in Eskilstuna had in-vented combination gauge blocks and thus laid thefoundation for the Swedish engineering industrywhich was essential for the series production ofautomobiles with fully deplaceable component parts.Ford, who realized the value of Johansson, per-suaded him to come to the United States in 1923but the quarter-century spent by Johansson inEskilstuna had a permanent significance. He hadtaught Swedes the art of precision measuring andhad given them the tools with with to carry out

the job.The second condition, low rates of pay, was equally

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significant. At that time in the United States, theworkers were being paid about the same in dollarsas Swedish workmen were getting in kronor. Andthe Americans were to be our first competitorssince their products dominated the Swedish auto-mobile market.

Swedish iron ore, Swedish pig-iron and Swedishsteel had a large turn-over on world markets andwere sold in large quantities even in countries withtheir own iron ore resources and steel production.All over the world people knew that Swedish steelwas better than the steel from other countries.Experts discussed the "body" of Swedish steel-a word used to describe the superiority shown byexperience but impossible to explain.

Swedish steel was good but Swedish roads werebad, particularly when compared to Americanroads. Most of the cars sold in Sweden were builtfor straight concrete roads. They had soft spring-ing and were built for highspeed driving. Neitherof these qualities were particularly suited for thetwisting, pot-holed, dirt roads of Sweden. Whatneeded was an automobile with harder suspension-an automobile that would hold the road. AllSwedish people remember the "washboard" roads.Only a really rugged automobile would escapebeing shaken to bits on such roads.

There were certainly enough essential require-ments for a Swedish automobile industry. Butthere were problems to be solved too.

The most important of these was to build aSwedish automobile so economically that it wouldbe able to complete with American automobiles.Mass production was, naturally, the solution. Butsince the market would be limited to Sweden, atleast during the first few years, the rate of massproduction possible could hardly be on the samescale as in the United States. The question waswhether the low Swedish rates of pay could com-

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The PV 4-the first Volvo sedan with a leatherette-covered wooden body.

The first buses were not exactly beautiful-but theyran well.

pensate for the labour-saving automation and thelower tool costs per manufactured part which waspossible in the larger series produced in the UnitedStates. We who founded Volvo thought that theywould.

After we personally had accepted the economicalrisks and had built a test series of ten automobilesmore or less by hand, we managed to raise enoughcapital for a preliminary series of 1,000 automo-biles. Our program was fairly ambitious: 1,000automobiles the first year, 4,000 the second yearand 8,000 the third year. Our plans did not go anyfurther than this since we were convinced thathaving manufactured 8,000 automobiles, we wouldbe running with a profit.

In reality, however, things did not quite work outthe way we had planned. We got manufacturestarted but sales during the first year-that was1927-did not exceed 300 automobiles, the secondyear 900, the third year 1,400 and so on.

One problem which caused us a good deal ofworry from the beginning was how to spread oursales out evenly during each year. After all wewere building automobiles and in Sweden theseare mostly sold during the spring and summermonths. In order to maintain the same productionlevel all the year round, we had to find some way todispose of the surplus automobiles during the falland winter. We decided to favour the Argentine andother countries south of the Equator with thissurplus and of the thousand built during the firstyear we had reckoned on exporting 400. In pointof fact not one was exported during the first twoyears and export was not essential either since wecould not produce as many automobiles as we hadplanned and there was no difficulty in disposingof them in Sweden. We managed to even out sea-sonal variations during truck production whichwas begun during the second year. We found thattruck sales were fairly even all the year round

with a slight tendency to increase at the end ofthe year.

When I said that we managed to raise enoughcapital for the first series of one thousand units,this did not mean that we were able to equip fac-tories to produce these automobiles either com-pletely or partially. Even the American factoriesbought certain units for their cars from firmswhich specialised in certain branches. Volvo tookthings even further and ordered all parts, all ma-terial and all units from various industries inSweden. Design and assembly work was done byus. We used the expression "Building the Volvoway" to cover this type of working.

The advantage of this system, apart from thefact that it did not require so much capital invest-ment, was that we could exploit the long manufac-turing experience of the firms from which we hadordered the component parts. In a publicity cam-paign we ran during the first years, we underlinedhow old-established and experienced these variousindustries were. Bofors had been established in1646, Svenska Stalpressningsaktiebolaget (SwedishPressed Steel Company), Olofstrom in 1735, Hus-

q varna Vapenfabrik in 1689 etc. This, we found,great success. There was, undoubtedly, a greatdeal of truth in our statement that the inheritedskill and traditional quality of the foremen andworkers in these industries was incorporated inVolvo automobiles.

Without in any way detracting from the salesproblems during the first years, it is true to saythat manufacturing problems were the greatest.These were divided into two groups:

1. How to reduce the costs of the component partsmanufactured by our sub-contractors so that ourautomobiles were really competitive.

2. How to plan, in Sweden, the production of spe-cial automobile units for which we had none ofthe specialised machines required and no expe-rience and which in many cases demandedlarge-scale production to make the work pay.

Work on the second of these problems soon cameto our help as far as solving the first problems wasconcerned. We were forced to a certain extent toobtain certain specific technical automobile unitsfrom abroad-I am thinking of electrical equip-ment, various instruments, carburetors etc. In thisway we made contacts abroad which graduallydeveloped and gave us possibilities to set up foreigncompetition against our Swedish sub-contractors.

We were also fighting against competition of allsorts ourselves. This competition became the Da-mocles sword we had hanging over the heads ofour sub-contractors. If we could not find other

Swedish firms to compete in the manufacture ofvarious component parts, we could always findforeign firms. The result of this was that Swedishsub-contractors often accepted the price we offer-ed. Otherwise, if he did not accept it, the orderwent abroad. Due to the fact that we were awareto the possibilities of purchasing abroad, we had acertain advantage over our own foreign compe-titors. The large industrial countries in which ourcompetitors work can be regarded as sealed units.A British car manufacturer would never think ofbuying a carburetor in Germany or France evenif it was better. The American automobile industrylimit itself exclusively to the United States in thesame way as German and French manufacturersrestrict their manufacturing activities to withintheir own frontiers. But when we at Volvo boughtabroad we did not favour any particular country.We bought where we found the best product. Ourpurchasing field became larger and more variedsince we did not need to have any considerationfor nationalist feelings.

In 1928 when we produced our first sedan typeautomobile, neither the body factory at Olofstromnor any other firm in Sweden could series producecomplete metal bodies and we were forced to pro-duce the automobile with a wooden body coveredwith leatherette-a system that was very popularin France. Gradually we managed to get bodieswhich were metal from the waistline downwards,the upper section consisting of wood with leather-ette covering. The next phase as a metal bodyon which only the roof itself was covered withleatherette and in 1936 we had advanced to thepoint where we introduced all-welded steel bodies.

A significant phase in our development waswhen we persuaded our Swedish sub-contractorsto send technicians to foreign countries, primarily

This truck from 1928 had a payload of 800 kg. (1,760 lb.)

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the United States, where they could learn themost modern manufacturing technique and use itin Sweden.

We had started as an assembly plant which was,however, not of the same type which was then inoperation in the United States mainly engaged onthe assembly of standard parts. Ours was an as-sembly plant with full control of design. It becamequickly obvious to us, however, that if our pro-duction was to increase from year to year and ifwe were to follow ultra-modern manufacturingmethods, it was essential that we ourselves startedto make some of the parts.

The first item in the program was the engine, orrather engines, since we had begun to use severaldifferent types of engine. In 1931 we took overthe majority of the shares in Aktiebolaget Penta-verken in Skovde. This is where Volvo engines hadbeen made from the very start. In 1934 Penta-verken was completely incorporated in Aktiebo-laget Volvo.

Our capital had gradually increased to 4 millionSwedish kronor. It now increased again in onestep up to 13 million kronor. Earlier the firm hadbelonged to SKF. It was now independent.

During the years up to the outbreak of WorldWar II, development work and modernisation ofthe Penta factory and our own assembly plant was

The first streamlined car-the PV 51 Carioca-made its appearance in 1936.

carried out parallel with work of the same typecarried out by our sub-contractors.

The struggle to reduce production costs of thepart made by our sub-contractors took many forms.In many cases, the risks involved were carefullyweighed up against the advantages. I shall mentionan example. In 1933 we were ready with the designof an overhead valve engine for use in heaviertrucks. The crankshaft in this engine was worldnews in automotive construction as it had integralcounterweights, i.e. the complete crankshaft wasforged in one unit while the motor industry, evenin the United States, had used separate counter-weights which were attached to the cranks. Wecontacted several American crankshaft manufac-turers and our own crankshaft sub-contractor,Bofors. The Americans were not able to undertakemanufacture of a crankshaft that was so compli-cated. The price stated by Bofors was very highif it was to be based on the quantity of one thou-sand engines needed for the following year. We

were forced to take the risk and order 10,000 crank-shafts with delivery over a certain period of timeon the assumption that this engine would be manu-factured for some year and even if the enginedesign was to be modernised in any other respects,the crankshaft must remain unchanged. At thispoint I should like to add that this engine remained

practically unchanged with exactly the same crank-shaft for such a long time that it was in produc-tion for some years after World War II.

We started in a period of trade depression andfound ourselves in the rather strange situation thatwhile other industries and tradesman waitedimpatiently for a period of prosperity, we wereworried about the period of prosperity. Amongthose who lacked faith when we started Volvo,there were many who thought that it would bequite possible to buy cheaply from Swedish sub-contractors as long as there was a trade depres-sion and the various industries had little to do butwhen prosperity returned, they would no longerhave any interest in Volvo and the small marginof profit derived from work for Volvo.

Things did not work out that way at all. Whenprosperity gradually returned, the demand for ourproducts increased. We could plan larger produc-tion series which meant lower production costs forthe manufacturers and thus prevent any price in-crease in excess of the average increase for all thecomponents.

Many people who showed friendly interest inVolvo during the first few years seemed to havethe idea that the various large sub-contractorsshould be share-holders in the company. In otherwords, Volvo would be a collective concern ofvarious Swedish industrial interests who saw inVolvo an addition to, and an equalising factor in,their own production. I am glad now that I did notaccept that suggestion. It would have eliminatedcompetition, the possibility for various manufac-turers in the same branch to compete with eachother - and foreign competitors - for the mostfavourable tender and it would have made Volvothe pawn in a game of interests which did notalways concern Volvo. My action in this case wasa practical application of the principle of nationaleconomy which I learned during my CommercialCollege days from Prof. Heckscher. This principlewas that co-operative consumption could be a verygood thing but co-operative production was com-pletely hopeless.

Even if purchasing and manufacturing problemswere most complex during the first ten years, the

Assembling the Volvo PV 544. The car is ready to drive away one and a half hours from the time that the bodyfrom the spraying plant has been lifted onto the assembly line. The main line is supplied with complete sub-assemblies such as front and rear suspension units, balanced wheels, doors and the complete bonnet with frontfenders, radiator, grill and headlights from separate feeder lines.

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The Volvo Sport a plastic body which is now out of production.

sales side was not completely free from difficulties.It took a great deal of very hard work to create asales organization for the excellent, robust butrather rural-looking automobiles-the first sedanwe built described as likening a pregnant cow.

People in the automobile branch were certainlyinterested but this interest was purely out ofpoliteness. They would not risk investing money ingetting this Swedish automobiles sold. There wereothers who knew less about cars but were pre-pared to risk more. The owner of a general store inVarmland specialising in bilberries, a soldier fromVastergotland, a coal merchant from Skane and abank manager in Smaland were among those whohad courage enough to take part in this great adven-tures. Naturally, we had real automobile dealers aswell in Gothenburg and Stockholm among otherplaces. We had thought of export right from thestart. As early as the beginning of 1928 we haddecided to try and build up sales in Finlandmainly because there were many Swedes in Fin-land and that Sweden and Finland had been as-sociated by historic bonds. We did not manage tofind anybody willing to assume responsibility forour sales there so we were obliged to start our

own sales organization. We still have this daughtercompany there-the only one on the sales side-since it has always run extremely well. As earlyas 1939, we had advanced so far in Finland thatwe sold a large percentage of trucks and about50 % of all the buses used.

As the years went by and our vehicles got agood reputation, it became easier to get hold ofdealers in Sweden. Gradually the large and influen-tial dealers switched to Volvo but it is also apleasure to note that many who had started with-out knowing much about automobiles at all arestill with us.

We had started out activities with the manu-facture of automobiles and, during the secondyear, had commenced truck manufacture to sup-plement sales. In point of fact it turned out thattrucks (and buses in later years) became the lar-gest and most profitable vehicles. There were se-veral explanations for this:

Due to the extremely high cost of tooling up forthe manufacture of automobile bodies and the rela-tively limited productive capacity at that time atthe Olofstrom body builders, we could not affordto have more than one model for several years in

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order to amortize the tools at a reasonable rate.Our competitors produced new models every year.Sometimes the newness was limited to the appear-ance of the automobile but even that was irritat-ing enough. Opinions concerning the points thatare esthetically attractive vary as much concern-ing automobiles as they do concerning women'shats and clothes on the whole. Even though wewere in constant contact, particularly in the UnitedStates, with the tendencies and probable develop-ments in the future concerning automobile designand styling, we could only follow model variationswithin very limited ranges. This placed us at a dis-advantage as far as the greater part of the auto-mobile-buying public was concerned.

As far as trucks and buses were concerned therewere other viewpoints to be considered. A longreliable lifetime and fuel economy were the im-portant factors here. The quality factor was thedecisive factor to a greater degree than whereautomobiles were concerned. In our sales, trucksand buses dominated almost one hundred per cent.We had managed to build up a considerable exportmarket, first in the other Scandinavian countriesand later in Holland, Belgium, certain of the Medi-terranean countries and the larger markets inSouth America. The devaluation of the Swedishkrona in 1932 helped us considerably.

In 1939 we had developed so much that ourmanufacturing program consisted of 9,000 units ofwhich 5,000 were trucks and buses and 4,000 auto-mobiles. At that time about 35 % of the trucks andbuses we manufactured were exported but only anegligible number of automobiles. It was stillmainly the possibility of manufacturing in Swedenthat limited our turn-over since during the pre-war years we only had sporadic difficulties con-cerning the sale of certain models. About 15 % ofthe material used in our vehicles was foreign, thisfigure varying slightly from model to model.

Our capital had increased to 18.2 million kronor.Then came World War II and the whole situa-

tion changed immediately. Sales ceased almostcompletely and those who had been keenest forearly delivery began to cancel their orders. As amatter of fact when the war started we had alreadymanaged to manufacture and sell so much that1939 was a record year but total sales figures were7,500 units instead of the 9,000 we had reckoned on.

While we were still worried as to how to keepour factory busy, our engine plant had begun towork, together with Svenska Flygmotoraktiebola-get (The Swedish Aero-Engine Company) inTrollhattan to a certain extent, as sub-contractormanufacturing certain components. This co-opera-tion developed and during the war when Volvo had

enough capital available, the share majority inFlygmotoraktiebolaget was purchased, partially toavoid the depreciation in the value of money cau-sed by continual price increases and partially toincorporate this extremely high-precision Swedishindustry in the Volvo concern.

In the same way our co-operation with KopingsMekaniska Verkstad (Koping Engineering Works),our transmission manufacturer, developed and, inconnection with an increase in capital, we boughtthis company, too, in 1943.

The shortage of rubber had caused us grave con-cern even during the first years of the war so wedecided to start the manufacture of agriculturaltractors which could, to a certain extent, be runwith iron wheels instead of rubber tires. A greatdeal of work was carried out in conjunction withBolinder-Munktell. Increase in production due todeliveries to the Swedish army and the manufac-ture of special vehicles meant that the tractor workdeveloped relatively slowly and the actual manu-facture of tractors was not commenced until afterthe end of the war.

When the war started we were one single com-pany with an assembly plant and an engine factory.By the time the war ended, we had become a con-cern with greatly developed production and in-creased capacity, we had experience from the solv-ing of vastly differing problems which we shouldnever have encountered earlier, a consolidated po-sition and a share capital of 37.5 million kronor.

But what was even more important was that ourdesigning departments had been able to devotetheir attention to planning a post-war programwhich was to be a decisive factor in the future ofVolvo. We had the advantage as far as competi-tion was concerned. The countries engaged in thewar had been so occupied with their war effortsthat they had not had the opportunity to devoteany attention to their peacetime production. Volvo,on the other hand, had had the opportunity toprepare.

Two main lines had been followed, the designof a small automobile and the construction andtesting of a Diesel engine.

During the last two years before the war wehad seen how small automobiles, particularly theGerman Opel and DKW, had begun to dominatethe Swedish market and it seemed obvious withthe gradual improvement of the state of the Swe-dish roads, small automobiles were to be more ofa success on Swedish roads than I had earlierthought possible.

I shall never forget the success of our smallautomobile, the PV 444, both in the big exhibitionwe arranged in Stockholm in September 1944 and

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The PV 544 is in great demand in the United States.

later as people in general and experts in particularhad an opportunity to see this automobile and-even more important-to drive it.

I cannot deny that luck played a certain part inthe design and construction of this automobile butis is not altogether surprising that this youthfulteam of engineers should have luck on their sidewhen they worked as they did.

Several new constructional principles were in-corporated in the design of this car: short-strokeengine, integral construction body, independentsuspension, self-adjusting brakes, "direct steering"-decreased ratio in the steering box, advancedstreamline design and so on.

Both our own opinion and the opinions of othersmade us exceptionally optimistic but we never be-lieved that by the time 1956 arrived we shouldhave built a total of 125,000 of this model alonewhich had certainly been modified and modernisedin many ways but was still basically the same asin 1944. The demand for this car today is such thatwe hope to manufacture at least another 125,000.We never dreamed that we should present thismodel in the United States in 1956 where, unlessall the signs are completely wrong, it is a success,

The Diesel engine was just as significant. We hadtwo alternative constructions, one of the pr ecom-bustion chamber type which runs more quietly andthe other with direct-injection which has betterfuel economy. We chose the former for buses but

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continued our experiments to obtain quieter opera-tion with the direct-injection type. The idea wasto produce an engine combining quiet operationwith fuel economy.

For those who are not so familiar with suchthings perhaps I should mention that a Diesel en-gine is run on fuel oil instead of gasoline and sincein most countries the tax on fuel oil is lower thanthat on gasoline, making fuel oil cheaper to buy,the Diesel engine, though more expensive to buy,has been used more and more after the war.

Our Diesel experiments led to the three types ofDiesel engine on our manufacturing program to-day. All three are of the direct-injection type, thusdiffering fundamentally from the German Dieselengines. It is difficult for me, when discussing ourDiesel engines, to assume the virtue of modestywhich is so becoming. Volvo Diesel engines havevirtually pursued a course of victorious progressround the world or at least the parts of the worldwhere we operate and today all Volvo buses arefitted with Diesel engines and 70 % of our trucks.Only the lighter trucks we manufacture are stillfitted with gasoline engines.

The situation after the war was characterised byshortages everywhere of material and goods andan exceptionally great demand in the countriesthat had been directly engaged in the war, a de-mand inspired by the necessity of building up whatthe war had ruined and filling the gaps caused by

the fact that war efforts had utilized power at theexpense of the normal levels of the actual resour-ces of the countries in question.

These shortages had two consequences for Volvoduring the years immediately after the war:

On one side there was a shortage of vehiclespartly in Sweden but particularly in the war-ravaged countries and, with the difficulties asso-ciated with a return to peacetime production andactual manufacturing difficulties experienced inthe large industrial countries, this demand couldby no means be satisfied during the years imme-diately after the war.

On the other hand we had considerable difficul-ties in obtaining material for our production anddue to such a reason as shortage of sheet steel,we could not commence production of the smallautomobile until 1947 and then only on a limitedscale. The available supply of material in variousconnections limited for some years the develop-ment which lay within our reach and which led usto set a primary target of 20,000 units per yearafter the war. We approached this figure first in1950 when we sold 18,833 units including 8,715automobiles.

Shortages in various countries caused limitedexport possibilities and the subsequent currencydeficiencies reduced their possibility to import. Forseveral years the export department at Volvo wasstruggling with license and currency problems morethan with purely sales problems. From 1946 to1950, currency difficulties were least marked inthe Argentine and Brazil and these countries beganto dominate our export market to a greater extentthan earlier.

Currency difficulties in various countries forcedthem into bilateral trade agreements. It was notpossible to buy more in a country than what it waspossible to pay for by means of goods exported tothat country. The formation of the European Pay-ment Union went a long way towards multilateraltrade agreements. Parallel with this was the de-mand for "free-listing" in connection with Ame-rican assistance measures in Europe and else-where. Today truck and bus markets at least arefree in most of the countries to which we exportand the automobile market is free in many of them.

EPU solved the currency problem between theEuropean countries. The dollar problem remainsfor most countries. This has naturally to a greatextent eliminated American competition on theautomobile markets in many countries and wherethis competition exists, it is much less troublesomethan it was during the pre-war years dependingon the high dollar rate of exchange.

Earlier, foreign markets had always been the

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field in which we could try out our competitivequalities since we operated under the same con-ditions from a customs point of view as our com-petitors. The conditions which, during a number ofthe post-war years, eliminated the competitive fac-tor, made it difficult to judge exactly how compe-titive we really were. Some markets were able togradually introduce free trade without the neces-sity of excluding dollar goods. Among these wasBelgium, a country in which we have carefullyfollowed our sales figures and our position relativeto our competitors more than on other foreignmarkets. It has been great pleasure for me to notehow our sales figures in Belgium during the lastfive years-since free competition was re-intro-duced-have shown a steady climb. This has con-cerned our Diesel trucks in particular, in whichfield we have surpassed our competitors withoutexception. Progress as far as automobiles is con-cerned has also been good.

In Sweden, a period of well-being has been re-flected in an increase in car sales to an extent thatnobody had dared to dream about. When Volvostarted in 1927, there was one car for every 55inhabitants in Sweden. At the end of 1954 therewas one car for every 11 inhabitants and the ten-dency continues. Today Sweden lies in third placein the world after the United States and Canadaas far as the number of cars relative to the popula-tion is concerned. In England there is one car forevery 15 inhabitants, in Denmark one for every 22,in Norway one for every 31 to mention a fewexamples.

The almost explosive development of primarilythe automobile market in Sweden followed by anincreased demand for buses and trucks both inSweden and abroad resulting from our advancesin the Diesel field meant that we were forced toexpand our productive capacity. Even before wehad attained our first post-war production targetof 20,000 units per year, we had already set our-selves higher targets which we gradually attained.In 1955 we delivered a total of 46,261 units and in1956 the total passed the 50,000 mark. Our sharecapital has grown to 90 million kronor.

During my life as a businessman, I have beenactive in many different fields: eggs, ball bearings,matches and automobiles, to mention the most im-portant. The automobile business has been the mostdifficult (with the possible exception of the eggbusiness-but I was young then and inexperienced).

Work with automobiles demands, to a greaterextent than most other branches, a continual mo-dernisation, the maintenance of a never-endingprogress in this field, a process of continually keep-

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The four-door, five-seater Volvo 122 S.

ing abreast where manufacturing methods andstyling are concerned. Opposed to this, or perhapsjust because of it, the work is intensely stimulat-ing. When we started and reckoned out that weshould manufacture 8,000 vehicles the third yearto ensure a profit-marking organization, we showedourselves to be too naive as far as the rate ofdevelopment was concerned but unnecessarily pes-simistic concerning the volume required in orderto show a profit. In spite of this, for my own part,I have always considered through the years thatthe really important thing was to strive for in-creased productive volume while increased profits,or rather immediate profits, are of secondary im-portance. It seemed to me that through increasedvolume, the profit side would gradually be lookedafter. That is why when various occasions haverisen causing conflict between a desire for profitand chances for increased production volume, mydecision has usually been to the advantage of pro-duction volume. The more vehicles we had on theroads the easier they were to sell or, as one of ouroverseas agents expressed it: One customer wonis ten customers won, one customer lost is ten lost.One absolutely clear subsidiary speculation in thisargument is spare parts sales which were reckonedto follow in the track of vehicle sales and which,

gradually, would become the permanent part of thebusiness transacted which would be maintainedcomparatively unchanged even in a trade depres-sion. To use a particular similarity one can saythat the automobile manufacturer and the dealerin the spare parts shop have a small possibility toobtain tax-free profit adjustment. They can sellautomobiles for the lowest possible profit in orderto attain maximum production volume and makethe profit instead later in the sales of spare parts.

Another side of the picture, the importance ofwhich I only realized gradually, was the serviceside. As a matter of fact in the motor vehiclebranch in general there has been a slight variationof definition: Earlier it was vehicles that were sold,today it is transport units. This is true, naturally,primarily from the point of view of the vehiclemanufacture but also, as far as trucks and busesare concerned, from that of the customer.

For me, this variation became reality dining thewar years. Foreign makes had a particularly handtime during these years to supply the necessaryspare parts for their models in Sweden while Volvoowners could run their vehicles as usual withouthaving to wait a long time for spares.

A French industrialist put it this way: "Theprice of a commodity is a one-time worry as is

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also delay in delivery but the quality of the com-modity in question concerns me all the time".

This concerns automobiles perhaps to a greaterdegree than anything else.

For this reason, during the war years greaterstress was placed on Volvo's efforts to extend itsservice so that the performance of the vehiclesduring their whole lifetime would satisfy the cus-tomers. In the first place this meant that our dea-lers were persuaded to build practical, modernworkshops with a capacity large enough to ensurethat the customers would never have to wait tohave their vehicles serviced. On top of this, stricterand more regular checks were carried out to en-sure that the customers would never have to waitto have their vehicles serviced. On top of this,stricter and more regular checks were carried outto ensure that all dealers carried a complete stockof spares. We, ourselves, started to pay more atten-tion to the production of service literature, servicemanuals, instruction books and so on as well asthe production of special tools to simplify repairwork aiming towards both lower repair costs andshorter repair time.

Finally, when designing new models, we placedmore in the foreground than earlier the questionof accessibility, easy replacement and simplifiedrepair procedure on the whole.

The PV 444 guarantee, which is so well-knownin Sweden and was introduced a few years ago,covers collision damage and other forms of damage.This guarantee is the end product of our serviceefforts. As far as this automobile-which is mass-produced to a high degree-is concerned, we havemanaged to reduce repair costs to such a low levelthat we were able to relieve the customer of thesecosts within certain limits and, thanks to the kee-ner competition we could offer, we sold so many

more automobiles that the profit from these couldbalance and even exceed the total value of repaircosts involved through the guarantee.

Finally a reflection concerning the general feel-ing in the company. When we at Volvo, at the be-ginning of our activities, began to have contactwith the automobile industries in the United Statesfrom a purchasing and study point of view, wewere surprised by their unreserved attitude andtheir readiness to impart information concerningtheir work, both from designing and manufactur-ing viewpoints. We were allowed to see all wewanted to see. We asked question about all sortsof things and received detailed answers. Thisfrankness was not limited to us as foreigners butseemed to apply just as much internally in theUnited States as a whole. I found this franknessextremely appealing. I had arranged things atVolvo so that we all sat in one large office whereeach one of us could follow everything that hap-pened and everything that was said and I made apractice of openly discussing Volvo business withanyone who was interested. Later I made a ruleof giving as detailed information as possible con-cerning the activities of the company in the AnnualCompany Report and attempted to train Volvoemployees to have the same point of view.

I am convinced that the frankness and sincerityof Americans has been an important factor in therapid progress maintained in the United States andI believe that co-operation and relationship be-tween individuals would be better, more produc-tive and more pleasant if this mentality becamemore general.