Thriving Swedish automakers keep an eye on rising competition

As most of the European auto industry is pushed by Japanese competition further and further into the mire, Sweden,a nation of just 8.5 million people, located inconveniently at the northern extremities of the continent, manages to support two major automotive firms.

Indeed, Saab and Volvo models actually sell at a profit and still maintain a reputation for quality and durability.

The Saab Turbo, for example, competes with Mercedes and BMW as a prestige car for Chinese businessmen in Singapore. Across the water in the "enemy" heartland of Japan, the Turbo also sells on its prestige value.

In July this year, Volvo sold a record 6,697 cars on the United States market , a 29 percent increase over July 1980. In the first seven months of 1981, 32.2 percent more Volvos were sold in the US than in the same period last year.

None of this should imply that the Swedish auto industry is not worried about the future and especially the Japanese challenge.

Hans Thornqvist, public relations officer for Saab, says, "We notice that some Japanese manufacturers are improving the standard of their models and are leaning toward a larger, more exclusively European-style car. This is a disturbing trend which we are following very closely."

Mats Kling, public relations officer for Volvo, says: "We make top-quality, rather expensive cars which appeal to a certain category of the buying public. For that reason we fell that there will always be a sufficient market out there for our cars, regardless of what the competition is doing. Of course we are concerned about some of the Japanese initiatives in Europe, but we feel the best way to compete with them is to maintain our quality standards and to continue to improve our cars in line with the latest technology."

But both companies are aware of the perilous swings of the automobile market.

Saab has always been a diversified company. Its Scania trucks and buses are a major reason for the company's success. And the aircraft and weapons divisions make up for adverse winds in the world auto market.

The company is also active in joint ventures. A collaboration with the US company, Fairchild Industries Inc., a producer of aircraft, aims at developing a new, small passenger plane. Also, it has a deal with Fiat/Lancia of Italy to develop a new generation of cars for the late 1980s and early 1990s.

Volvo, perilously dependent upon the auto market despite the success of its trucks and buses, diversified in spectacular fashion last year. The company merged with Beijerinvest, a major Swedish trading firm, to form Sweden's largest company with an annual turnover of 40 billion Kroner ($9.3 billion) and 75,000 employees.

Volvo's auto activities were thus complemented by Beijer's dealings in the world of high finance and energy via its subsidiary company, Scandinavian Trading Company.

The new Volvo-Beijer company notched up an important first as being the only Swedish company with shares quoted on the New York Stock Exchange.

Other Volvo efforts at diversification, however, have proved less successful.

The first such -- a proposed merger with Saab -- never got off the ground. The second -- a plan to sell a major chunk of the company to oil-rich Norway -- was vetoed by Swedish shareholders.

Both Saab and Volvo are afflicted by what has now become a familiar Swedish industrial problem: high labor costs. The companies aim to meet this with increased automation.

There is also great uncertainty as to the future after the 1982 general election, which is expected to sweep the Social Democrats under Olof Palme back to power in Sweden, along with plans for the takeover of private industry via so-called "wage-earner funds."

In Sweden itself Japanese car sales have risen at an alarming rate. In 1980 Japanese auto sales accounted for 14 percent of the Swedish market, a 4 percent rise over 1979.

The sun shines on the Swedish auto industry at the moment but there are ominous storm clouds on the horizon.