Swedish corporations comment on cost-management in China

As the Chinese slowdown is gaining strength in 2015 many Western companies are forced to take a hard look at their businesses there, leading many to reduce investments, costs and product lines and to tackle increasing bad debts. A recent equities market rout has dashed hopes China will, in the coming years, return to the robust growth it saw in the past.

Several Swedish comments give their view in a news article by Businessinsider.my.

Jan-Gurander-Volvo

Jan Gurander, Volvo

Strategies vary across companies and sectors. Some have focused on cost reductions. Acting CEO of Sweden’s Volvo AB Jan Gurander said this was easier to achieve in China than in Europe, where workers enjoy more protections and factory shutdowns can be politically sensitive.

The deteriorating Chinese environment is also forcing companies to think harder about credit risks.

Swedish lockmaker Assa Abloy AB’s Chinese unit is heavily exposed to the hard-hit construction industry. Chief Financial Officer Carolina Happe said the time it took for Assa’s Chinese customers to pay had increased by a month in the past year, to 99 days. That compares to a group average of 55 days. The change could lead to increased bad debt provisions, she said.

Volvo issued a warning to investors last year that it would have to take a 650 million Swedish Crown ($75 million) charge for expected credit losses in China. Gurander told investors in mid July his company was having tough discussions with dealers about outstanding debts but it was hard to know if the situation was stabilizing or not.

Will Hallyer, partner with Strategy Consultants OC&C, said the toughening conditions were prompting companies to shift their focus from boosting market share to ensuring their operations were profitable or at least reducing any losses.

“It had been more of a land grab mentality — buy a position, invest heavily in growth and have confidence that at some point you’ll be able to make money,” he said.

“As the market slows down, it accelerates the shift towards people thinking hard about making sure they have a business that makes money,” he added.

digital-keyless-door-Assa-Abloy

But even as they moderate their ambitions in China, companies retain an eye for growth opportunities. Some are hoping the stock market drop could help them snap up local companies cheaply.

But with many Chinese companies still supported by government interventions like cheap credit, bargains are few, executives said.

“There are many, many companies for sale, and we are looking to many of those. Still they haven’t felt the heat of the downturn in full yet. That means that they (the owners) expect to get paid,” Assa Abloy CEO Johan Molin told investors.

Full story on Businessinsider.my

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