The Volvo Group Annual Report 2010

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EN A GLOBAL global GROUP koncern 2010 2010 Str ategY Profitable Growth In an industry characterized by economies of scale and which is undergoing consolidation, profitable growth is a necessary condition in order to continue to strengthen competitiveness and to develop as a close partner to customers with high demands. There is particularly strong growth potential in supplemental business relating to service and to services in which significant effort is invested to give the customer a more complete offering. Profitability is essential to ensure investments in the development of new products and services and a favorable return to the shareholders. The Group’s brands shall increase customer satisfaction by offering environmentally and cost-efficient products and services. Required scale achieved During the past ten years, the Volvo Group has grown on average 7.4% per year, both organically and through acquisitions. The acquisitions have been carried out in order to establish the Group in new markets and in new product segments, as well as to achieve economies of scale through size. The average operating margin during the period has been 3.9%. Through its growth, the Group has achieved sufficient size in mature markets with satisfactory market shares. The size facilitates good economies of scale in most product segments. Strong positions The Volvo Group has strong positions from which further to develop: • No. 2 among Western manufacturers of heavyduty trucks • No. 4 in construction equipment • One of the world’s largest manufacturers of heavy-duty diesel engines • Strong positions also in the other business areas • Good market presence globally. Future direction Within the strategic area Profitable Growth the future direction is: • Continued organic growth in mature markets. • Focus on increased sales of services and aftermarket products. • Products in market segments that open up possibilities to capture the rapid growth in Asia and other growth markets. • Realizing further synergies from acquired companies. • Increased cooperation with business partners. Net sales SEK bn 400 300 200 100 0 Net sales 01 02 03 04 05 06 07 08 09 10 The Volvo Group’s acquisitions and divestments 2008 Joint venture with Eicher Motors of India within trucks and buses. 2007 Acquisition of Igersoll Rand’s road development division. 2007 Acquisition of Ingersoll Rand’s road development division. 2006 Acquisition of Japanese Nissan Diesel (Now UD Trucks). Completed in 2007. 2005 Sale of the service company Celero Support. 2004 Acquisition of remaining 50% of the Canadian bus manufacturer Prévost. 2004 Sale of axle-manufacturing operations to ArvinMeritor. 2003 Acquisition of the truck and construction equipment dealers from Bilia. 2001 Acquisition of the truck manufacturers Mack and Renault VI. 1999 Sale of Volvo Cars to Ford. 1998 Acquisition of the excavator operations of Samsung Heavy industries. 12
Str ategY Operational Excellence Operational excellence is an important factor for securing a sustainable profitability for the Group. The work with operational excellence includes lowering the manufacturing costs and the cost of sales and administration as well as making product development and other processes more efficient. Volvo Production System (VPS) is an important tool in the effort to increase operational excellence. It contains methods to make operations more efficient and reduce productivity losses. Competence development is a key part of VPS. Great effort is placed on developing employees in new, future technological competencies. Substantial cost savings In 2009 as well as 2010, substantial measures were implemented to lower the Group’s costs on a permanent basis. Short-term, they have been focused on quickly changing over the Group to a new, lower cost base while at the same time securing the Group’s long-term competitiveness. All parts of the Group have been subject to cost savings in a number of areas. The measures have produced results and substantially lowered the total costs for, among others, sales and adminstration as well as for research and development. As the Group now grows again, it is of vital importance that costs increase at a slower pace through increased efficiency and productivity and thus assist in raising profitability. Future direction Within the strategic area of Operational Excellence the future direction is: • Lowering the product cost. • Utilizing the global production capacity with regional support. • Productivity increase in the industrial system to strengthen competitiveness. • Focus on closer and more long-term cooperation with well-performing suppliers and take further advantage of large purchasing volumes. • Reduce administration by fully utilizing the business units. • Increase productivity in product development. • Increase flexibility to be able to rapidly adapt the cost structure to changes in demand. • Increase competency and diversity with strong employee commitment. Improved profitability through cost control Industrial Operations 80 60 +25% 40 20 0 09Q4 10Q1 10Q2 10Q3 10Q4 Net sales Selling, administrative, reserach and development expenses +3% 13
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AB Volvo, Investor Relations
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The Volvo Group Annual Report 2010

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