The oil crisis of 1973–1974 – when fuel was rationed and every second streetlight in Sweden was turned off – and the ensuing economic downturn gave L.M. Ericsson unexpected breathing room, as it led many customers to delay their orders for digital exchanges.

Another process, described by Bjurel as a “harrowing drama,” also took place during much of 1974. This involved the effective takeover of L.M. Ericsson by IBM. It was like marrying “the devil himself,” to use Bjurel’s metaphor. L.M. Ericsson’s own history mentions this only in passing, while Bjurel devotes five pages to the affair in his memoirs, which were published in 2008 four years after his death.

The story began for Bjurel when Lundvall said he would like to meet to discuss a highly confidential issue. The meeting could not take place at L.M. Ericsson or at Televerket, and the subject could not be discussed on the phone. The two men decided to meet the following Sunday morning, in July, over coffee at the City Hotel in Norrtälje. On arrival they were told that coffee was not being served, and were referred instead to another hotel. There they found too many potential eavesdroppers so they drank their coffee in silence then went to Lundvall’s car to shelter from the constant downpour. Bjurel spent the next two hours listening to Lundvall’s account.

IBM had made contact, proposing that the companies start cooperating on technology and that IBM become a part-owner of L.M. Ericsson. Lundvall and Wallenberg had met IBM’s top management and learnt that the company wanted to enter telecommunications, which it considered to be a growing sector. IBM had considered partnerships with ITT, Siemens and Philips but had concluded that L.M. Ericsson was best.

ALL DEVELOPMENT OUTSIDE SWEDEN

Bjurel heard that IBM wanted to locate all development work outside Sweden. Among other things, this meant cooperation with Televerket through Ellemtel had to be unconditionally terminated. All manufacturing, however, would take place in the factories operated by L.M. Ericsson around the world, with Televerket’s plants functioning to some extent as subcontractors.

Lundvall and Wallenberg had already met Sweden’s Minister of Finance, Gunnar Sträng, a few times in connection with this approach.

Bjurel recalls: “Sträng had tried in every way to form an opinion of what a merger of IBM and L.M. Ericsson would mean for Televerket, for Sweden as a nation and the Social Democratic Party. Sträng had attempted to convince L.M. Ericsson of the necessity of its continued cooperation with Televerket through Ellemtel. In spite of Lundvall’s and Wallenberg’s assurances that IBM would never accept this, Sträng had demanded renewed endeavors to this end. [... He] had also said that ‘it would be bloody awful’ if he had to go and tell his associates that he had sold one of Sweden’s preeminent industrial undertakings to a multinational company.”

Author: Svenolof Karlsson & Anders Lugn

© Telefonaktiebolaget LM Ericsson and Centre for Business History

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