So the rights issue was accomplished. But what did it mean for Ericsson?
“We did not know how long the market would take to get back on its feet,” says board chairman Michael Treschow. “All we could say was ‘so far, so good’. We still had to revise the organization drastically. It was not enough just to go to plans B and C; we needed plan D as well.
“Of course the turning point came when customers and suppliers were able to do business with us again and morale had been restored internally. And this depended on the shareholders showing that at least they had faith in us. But we could not simply celebrate when we completed the rights issue. We knew that there was still work left to do.”
As the end of 2002 approached, it was clear that Ericsson was going to survive, but that further measures would be needed. During the first half of 2003, a third savings package was implemented; this time costs were cut by SEK 10 billion.
“We saved the company,” Treschow says. “It could all have gone wrong. It gives me pleasure but it is a mixed feeling. I kept my job but a lot of others lost theirs and many suffered. It was tough for all of Ericsson’s employees who were able to keep their jobs but had to watch their workmates get the sack. And it was difficult for the trade unions. They really deserve credit for all they did."
“It is always important to treat people with respect. And there was the nagging feeling that we might have drained the organization of its lifeblood. Not much attention has been paid to this aspect. How much can you cut away without harming the patient? Talk about relying on instinct!”
Treschow considers that Ericsson’s management did a good job in an extreme situation.
ERICSSON SPIRIT
“Kurt thought the cutbacks were hard work and kept asking all the time if they were needed. Per-Arne was to a large extent the engineer behind the implementation. You had to be unsentimental, to ask logically: ‘Where are the things we can get rid of without causing too much harm?’. My belief was that much of this was linked to an Ericsson spirit. We are going to fix this. We will help each other.”
The board put a lot of pressure on Hellström, Treschow says. “But we struck a reasonable balance. I do not remember a lot of conflict. We made slow progress. This gave us insights and new energy.”
Treschow says it is important to remember that a solution had been found for telephones. “We tied two stones to each other and made them float: part of Sony’s loss-making consumer product division and Ericsson’s loss-making telephone operation. It is not often that kind of thing works.”
Author: Svenolof Karlsson & Anders Lugn