Sweden to boost auto industry

Auto industry

To boost Sweden's struggling auto industry, a venture-capital firm created by the Swedish government is aiming to make at least a dozen investments this year as it becomes hard to secure financing from private-equity groups.

More than 50 companies have now come to Fouriertransform AB looking for money, Chief Executive Officer Per Nordberg said to Business Week. Fouriertransform made its first investment in October and wants to buy stakes in one or two companies a month, he said.

Fouriertransform received three billion kronor last year and has used a total of 260 million kronor to four private companies and NovaCast Technologies AB, a publicly traded manufacturer of tool and die products for car parts.

"The Swedish auto industry is facing a serious crisis," Nordberg said. "Many companies have great ideas but are basically at a standstill."

According to Aleksandar Zuza, an auto analyst at IF Metall, the industry's main union in Sweden, as many as 40,000 automotive workers out of a pre-crisis 140,000 have lost their jobs. About half the losses have been at suppliers, he said. Truckmaker Volvo AB has cut positions, so have Volvo Cars and Saab Automobile.

"Everyone is very hesitant about the auto sector because of how it has been hit by the crisis," said Katarina Vestlund, a spokeswoman for Nordic Capital.

Considering opportinities

While Nordic Capital considers all opportunities, Vestlund said that it hasn't made automotive investments since late 2008, when global car sales plunged and credit became more difficult to obtain.

Fouriertransform seeks an average annual minimum investment return of 15 percent to 18 percent, Nordberg said.

Fouriertransform's goal is reasonable because it targets "the most attractive, interesting companies," Investment Director Christian Zeuchner said.

NovaCast, based in Tyringe in southern Sweden, is offering two board seats and 33 percent of the shares to Fouriertransform in return for a 40 million-krona investment, pending approval at the 22 April annual general meeting.

"We think they will contribute a lot with their auto industry expertise and contacts," NovaCast Chief Executive Officer Hans Svensson said.

NovaCast's net loss almost doubled last year to 43.2 million kronor. Its stock has trailed the OMX index of major Swedish stocks in the last 12 months, rising 30 percent compared with a 52 percent surge in the index. The company signed an agreement with the government firm this month.

"Strengthen our capital base"

"Last year was tough for everybody in this industry, and it's no secret we needed to strengthen our capital base," Svensson said. "This is a good capital injection that allows us to move forward with bigger projects."

Fouriertransform may get more money to invest, though current government plans don't include additional funding. Investments will typically have a five-to-eight-year span, with little or no return the first few years, Nordberg said.

Other companies receiving money include Effpower AB, which develops battery technology and is partly owned by a unit of truckmaker Volvo. Norstel AB, a developer of components for hybrid vehicles, also is getting funding.

"We're happy that suppliers are getting capital, and it's even better if it comes with competence," said Zuza, the union analyst.

Jodie Humphries

Jodie Humphries graduated from Bath Spa University with a BA Hons in Creative Writing in 2008. She has worked for GDS Publishing for the digital group since July 2009. She has previous experience with writing for the web, running her own website since April 2007.

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