Fourth round of cuts
On April 28, 2003, Ericsson’s board had its first meeting with Svanberg as CEO – and at which he was a new board member. For at least some of the members, it came as a shock to hear the new CEO’s unexpected proposal of a major savings package with numerous redundancies.
Customer orders were continuing to decline. Ericsson still needed to slim down. Svanberg declared that he was determined to make a profit during 2003. The disappointing invoicing during the first quarter could admittedly be expected to be the lowest for the year but he wanted the company to make a profit even if sales did not rise above that level.
Svanberg proposed further measures to cut costs by a further SEK 13 billion annually. A further 7,000 people would have to leave the company. The savings package would cost SEK 11 billion but this could be recovered relatively quickly thanks to improved liquidity.
This was a difficult discussion for the board. They had already cut deeper than they had ever imagined in even the gloomiest scenarios when the process began. Could the patient really survive such a major operation? After a protracted meeting, Svanberg got his way.
In the press statement published after the meeting, he put it like this: “A lot more can be done to simplify our working methods and to cut our costs even more … We already have a leading position in the market, the most advanced technology and world-class expertise, but now we have to get our internal efficiency to the same high standards.”
Not unexpectedly the front page of Dagens Industri was dominated next day by a picture of three resolute men: Ericsson’s CFO Karl-Henrik Sundström, CEO and president Carl-Henric Svanberg and head of Operations Per-Arne Sandström.
The editorial page followed up with this headline:
CARL-HENRIC SVANBERG’S BRIEF
HONEYMOON HAS BEGUN
The three former rounds of cuts had not been welcomed on the stock exchange. This time the share price rose by 25 percent.
Author: Svenolof Karlsson & Anders Lugn
Cutbacks over: Wednesday, April 30, 2003.