当前位置:首页 >> 生产/经营管理 >>

沃尔沃卡车2011年报


the Volvo group annual report 2011

world
TOGETHER WE MOVE THE

A global group 2 4 6 8 10 12 16 20 24 28 30 34 38 40 42 44 CEO comment Vision, values and wanted position Financial targets Volvo Group new organization Global strength Development by continent – Europe Development by continent – North America Development by continent – South America Development by continent – Asia Overall challenges Challenge – Bus Rapid Transit Challenges – Intelligent Transport Solutions Brands The Volvo Group’s product offering World-class services Industrial structure

Together we

move the world
Without the products and services of the Volvo Group the societies where many of us live would not function. Like lifeblood, our trucks, buses, engines, construction equipment and aircraft components are involved in many of the functions that most of us rely on every day. For instance, one in seven meals eaten in Europe reaches the consumers thanks to trucks from the Volvo Group rolling on the roads of the continent. Buses are the most common type of public transportation in the world, helping many people to reach work, school, vacations, friends and family. And if all the Volvo buses in the world were to start at the same time, they would transport more than 10 million people. Every year, the population on earth produces billions of tons of garbage. In the US alone, the garbage removed by refuse trucks from the Volvo Group every week could form a line of full garbage cans that would reach the moon. These are just a few examples. In this Annual Report, you can learn more about the Volvo Group – Together we move the world.

Board of Directors’ report 46 52 54 56 58 60 62 64 66 68 69 Sustainable development The share Significant events Trucks Construction Equipment Buses Volvo Penta Volvo Aero Volvo Financial Services Financial strategy Risks and uncertainties

Financial information 71 Financial information 2011 72 Financial performance 72 Consolidated income statement and Other comprehensive income 76 Financial position 76 Consolidated balance sheet 78 Consolidated cash-flow statements 80 Changes in consolidated Shareholders’ equity 81 Notes to the consolidated financial statements 126 Parent Company AB Volvo 138 Proposed remuneration policy 139 Proposed disposition of unappropriated earnings 140 Audit Report for AB Volvo 141 Eleven-year summary Corporate Governance Report 150 Group Management 152 Board of Directors and Auditors 154 Corporate Governance Report Fold-out Definitions Annual General Meeting

This report contains ‘forward-looking statements’. Such statements reflect management’s current expectations with respect to certain future events and potential financial performance. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove correct. Such statements are subject to risk and uncertainties and such future events and financial performance could differ materially from those set out in the forward looking statements as a result of, among other factors, (i) changes in economic, market and competitive conditions, (ii) success of business and operating initiatives, (iii) changes in the regulatory environment and other government actions, (iv) fluctuations in exchange rates and (v) business risk management. This report does not imply that the company has undertaken to revise these forward-looking statements, beyond what is required under the company’s registration contract with OMX Nordic Exchange Stockholm if and when circumstances arise that will lead to changes compared to the date when these statements were provided. The Volvo Group’s formal financial reports are presented on pages 46–139 in the printed version and has been audited by the company’s auditors.

Volvo Group
The Volvo Group is one of the world’s leading manufacturers of trucks, buses, construction equipment, drive systems for marine and industrial applications and aerospace components. The Volvo Group also provides complete solutions for financing and service. The Group has about 100,000 employees, production facilities in 20 countries and sales in more than 190 markets.

+49%
2000 2011 40.7 60.6

North America

Global strength
Since the streamlining towards commercial vehicles was initiated more than ten years ago, the Volvo Group has grown into one of the world’s largest manufacturers of heavy-duty trucks, buses and construction equipment and is today also a leading manufacturer of heavy-duty diesel engines, marine and industrial engines as well as engine components for the aerospace industry. 10 ? More information.

+57
Share of Group’s net sales by geography
Europe, 39% North America, 19% South America, 11% Asia, 24% Rest of the world, 7%

Share of Group’s net sales
Trucks Construction Equipment Buses Volvo Penta Volvo Aero Customer Finance 64% 21% 7% 3% 2% 3%

Strong brands

By selling products under different brands, the Group can address many different customer and market segments in mature as well as growth markets.

More information.

38

?

+68%
2000 2011 72.1 120.8

+736%
Asia
2000 2011 8.8 73.6

Europe

The development of net sales since 2000, SEK billion

75%
2000 2011 5.2 35.1

+497%
2000 2011 3.4 20.3

South America

Rest of the world

New organization
As of 2012, the Volvo Group has implemented a new organization which better utilizes the global potential of the Groups's brands and products. For example, the sales and marketing of all of the truck companies will be organized in three regional organizational units, directly under the CEO. 8 More information.

Strong positions
One of the world’s largest manufacturers of trucks. ? No. 3 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. ?

Group Trucks Sales & Marketing EMEA

Group Trucks Sales & Marketing Americas

Group Trucks Sales & Marketing APAC

Group Trucks Operations

Group Trucks Technology

Truck Joint Ventures

Construction Equipment

Business Areas

Finance & Business Support

The Volvo group 2011

Strong earnings
 ighest net sales, operating income and operating H margin thus far Net sales rose by 17% to SEK 310.4 billion (264.7) Operating income rose to SEK 26.9 billion (18.0) Operating margin improved to 8.7% (6.8)  trong operating cash-flow in the Industrial S ?Operations of SEK 14.1 billion (19.0) Net debt in the Industrial Operations reduced to 25.2% of shareholders’ equity Proposed dividend of SEK 3.00 per share  Olof Persson assumed the position of Group CEO 
07 22.2 08 15.9 08 15,9 09 (17.0) 10 18.0 11 26.9
07 285 08 304 09 218 10 265 11 310

Net sales, SEK bn

Operating income, SEK bn

Key ratios

2011

2010

Net sales Volvo Group, SEK M Operating income Volvo Group, SEK M Operating income Industrial Operations, SEK M Operating income Customer Finance, SEK M Operating margin Volvo Group, % Income after financial items, SEK M Income for the period, SEK M Diluted earnings per share, SEK Dividend per share, SEK Return on shareholders’ equity, %
1 According to the Board’s proposal.

310,367 264,749 26,899 18,000 25,957 17,834 942 167 8.7 6.8 24,929 15,514 18,115 11,212 8.75 5.36 3.001 2.50 23.1 16.0

1

A global group 2011

CEO comment

Best year ever
A record year. That is one way of summing up 2011. We put the best year ever under our belt and I can proudly state that all the hard work of the Volvo Group’s employees to deliver the best products, services and after-sales service generated results.

For the full-year 2011, the Volvo Group generated the highest net sales, the best operating income and the highest operating margin to date. Net sales rose to SEK 310 billion (265), operating income improved to SEK 26.9 billion (18.0) and the operating margin was 8.7% (6.8). At the same time, return on operating capital in the Industrial Operations rose to 28.8% and return on shareholders’ equity in the Group to 23.1%. Success in many ways Success can be measured in numerous ways; sales, orders received or market shares. In particular, I believe market shares provide a rapid and key indication of our customers’ true opinions of our prod-

ucts and how we compare to the competition. Market shares comprise a clear acknowledgement that we are doing the right things. Let me provide a couple of examples from the past year. It is worth noting that Renault Trucks maintained its market share in Europe despite weak demand in its historic strong markets in Southern Europe. The Volvo brand reaped great success and in the heavy-duty segment in Europe increased its market share to a record 16.0%. The European market weakened somewhat towards the end of the year but after that stabilized on the new, slightly lower level. Market shares in North America also increased. In the U.S., Volvo and Mack had a combined 19.8% of the market for heavy-duty trucks. After a number of slow years, the situation is starting to appear very positive in North America where we have made breakthroughs with our own engines and transmissions, an unbeatable combination with a fuel-consumption that is praised by our customers. In Brazil, our market share rose to 17.1% for heavy-duty trucks and, for the first time, Volvo is the leader at the top of the heavy-duty truck segment. In the short-term, the Brazilian market will be impacted by the transition to new emission standards that took place at the turn of the year, but we have a positive view on the long-term development in Brazil and the other markers in South America.

“We have now taken the first steps on a journey which will be full of challenges, but I am convinced that there is potential to increase sales and improve profitability over time.”

2

Volvo Construction Equipment (Volvo CE) has also strengthened its positions in several growth markets worldwide. In China our brands Volvo and SDLG gained the position as market leader within wheel loaders and excavators. SDLG recently launched new models of excavators, so we have hopes that the success in this giant market will continue. I would also like to mention our hybrid buses that are attracting an increasing amount of interest around the world. Increased profitability Good market conditions in the main and increasing market shares driven by competitive products translated into us delivering some 238,000 trucks during 2011 – an increase of 32% compared to the preceding year. Net sales in the truck operations surpassed SEK 200 billion and profit? ability improved to an operating margin of 9.1%. Volvo CE increased its deliveries by almost 30% to the new record level of 84,000 machines. The year was intense with the launch of many new products and a continued expansion in growth markets. Despite a strong headwind from the weak dollar, Volvo CE delivered an operating income of SEK 6.7 billion and an operating margin of 10.2%. From a historic perspective, Volvo Buses had a good year, both in terms of volumes and profitability. This was achieved by successful efforts to grow in emerging markets, which offset the continued weak markets in Europe and the U.S. Operating income increased to SEK 1 billion and operating margin improved to 4.6%, which is below the Group average but good when compared to competitors. Volvo Penta was impacted by a continued weak market for marine engines and towards the end of the year also for industrial engines, but despite this, achieved an operating income of almost SEK 800 M with an operating margin of 8.8%. For our Customer Finance Operations, the trend pointed in the right direction, with portfolio growth and lower credit losses. Volvo Aero also had to struggle with a significant headwind from currency. Despite this, Volvo Aero’s operating margin amounted to 5.2%. During my predecessor Leif Johansson’s 14 years as CEO, the Volvo Group established itself as one of the

world’s largest manufacturers of commercial vehicles with strong positions in mature markets and with an increasingly important presence in growth markets. As a step in further streamlining the Volvo Group towards commercial vehicles, during the year we initiated a pro? cess aimed at divesting Volvo Aero. Financially strong Group Driven by improved profitability and the good cash flow, the net financial debt in the industrial operation was down to 25% of shareholders’ equity at year-end, which means that the Group is financially strong in an environment that in the beginning of 2012 is characterized by turmoil in the financial markets and uncertain macroeconomic trends. The Board of Directors proposes a dividend of SEK 3.00 per share for 2011, up SEK 0.50 per share compared with the preceding year. Reorganization to increase sales and profitability We have a new vision – to become the world leader in sustainable transport solutions. We shall fulfill this by creating value for our customers and by pioneering the development in our industries. We have new financial targets, a new organization and a number of new management teams in place. On January 1, 2012, we introduced the new organization which was put in place to better capitalize on the global potential in our products and brands and to improve the Group’s efficiency. With the recent very positive trends in the Group’s development, we are in a favorable position. However, this does not mean that everything will run on rails. A great deal of work remains. We have now taken the first steps on a journey which will be full of challenges, but I am convinced that there is potential to increase sales and improve profitability over time. This is a journey that I am very much looking forward to.

Olof Persson President and CEO

3

A global group 2011

vision values? wanted position
4

new

?
Quality

Our vision The Volvo Group’s vision is to become the world leader in sustainable transport solutions by: ? creating value for customers in selected segments ? pioneering products and services for the transport and infrastructure industries ? driving quality, safety and environmental care ? working with energy, passion and respect for the individual.

Our values The Volvo Group views its corporate culture as a unique asset, since it is difficult for competitors to copy. By applying and strengthening the expertise and culture we have built up over the years, we can achieve our vision. Quality, safety and environmental care are the values that form the Volvo Group’s common base and are important components of our corporate culture. The values have a long tradition and permeate our organization, our products and our way of working. Our goal is to maintain a leading position in these areas.

Safety
Safety pertains to how our products are used in society. We have had a leading position in issues regarding safety for a long time; our goal is to maintain this position. A focus on safety is an integral part of our product development work. Our employees are highly aware of safety issues, and the knowledge gained from our internal crash investigations is applied in product development. Our goal is to reduce the risk of accidents and mitigate the consequences of any accidents that may occur as well as to improve the personal safety and the work environment of the drivers of our vehicles and equipment. Our long-term vision is zero accidents.

Environmental care
We believe that it is self-evident that our products and our operations shall have the lowest possible adverse impact on the environment. We are working to further improve energy efficiency and to reduce emissions in all aspects of our business, with particular focus on the use of our products. Our goal is for the Volvo Group to be ranked as a leader in environmental care within our industry. To achieve this goal, we strive for a holistic view, continuous improvement, technical development and efficient resource utilization.

Quality is an expression of our goal to offer reliable products and services. In all aspects of our operations, from product development and production to delivery and customer support, the focus shall be on customers’ needs and expectations. Our goal is to meet or exceed their expectations. With a customer focus based on everyone’s commitment and participation, our aim is to be number one in customer satisfaction. This is based on a culture in which all employees are responsive and aware of what must be accomplished to be the best business partner.

new

?

Volvo Group wanted position 2020 We are among the most profitable in our industry We are our customers’ closest business partners We have captured profitable growth opportunities We are proven innovators of energy-efficient transport solutions We are a global team of high performing people

5

A global group 2011

Financial targets

until

2011
Net sales growth, %
Target: above 10%

The Volvo Group’s previous financial goals were established by the Board in September 2006. The Board focused on three goals comprising growth, operating margin and capital structure for the Group’s Industrial Operations.

Financial goals for Industrial Operations

Financial goals for Customer Finance Operations

1 2 3 4

Growth The growth target was that net sales should increase by a minimum of 10% annually. During 2007–2011, the average growth rate was 2.1% annually.

10 0

(30) 07 10 08 6 09 (28) 10 21 11 18

Operating margin, %
Operating margin The Volvo Group’s profitability target was that operating margin for the Industrial operations was to exceed an average of 7% annually over a business cycle. The average annual operating margin for the Volvo Group’s Industrial Operations was 4.1% from 2007 to 2011.

10

Target: above 7%

0

(10)

07 7.8

08 5.2

09 (7.8)

10 6.9

11 8.6

07 08 09 10 11 5.7 39.7 70.9 37.4 25.2

Return on shareholders’ equity, %
Target: 12–15% The target for Customer Finance is a return on shareholders’ equity of 12–15% and an equity ratio above 8%. The average annual return on shareholders’ equity for 2007–2011 amounted to 6%. At year end 2011 the equity ratio was 9.1%. 15 10 5 0 (5) (10)

07 15.9

08 12.6

09 (6.2)

10 0.4

11 7.3

6

Net cash

Capital structure The capital structure target is set to a net debt including provisions for post-employment benefits for the Industrial operations of a maximum of 40% of shareholders’ equity under normal conditions. As of December 31, 2011, the Volvo Group’s Industrial operations had a net financial debt position corresponding to 25.2% of shareholders’ equity.

Net financial debt as percentage of shareholders’ equity, %
80 60 40 20 0 (20) (40)
Net debt

Target: below 40%

New targets from

2012
Transparent comparison with competitors Volvo’s financial targets have included a focus on growth since the end of the 1990s and the Board of Directors expects growth to remain important in the future, but is now adding a continuous benchmarking of the growth and profitability of the various operations against a number of selected competitors. To facilitate comparisons, the truck operations will be measured jointly with the bus operations and the construction equipment operations will be measured jointly with Volvo Penta. In 2012, the comparisons will be made in accordance with the table below:
Trucks and buses Daimler Iveco MAN Navistar Paccar Scania Sinotruk Volvo CE and Volvo Penta Brunswick CAT CNH Cummins Deere Hitachi Komatsu Terex

In September 2011 the Board of Directors of AB Volvo decided to implement new financial targets for the Volvo Group starting in 2012. The new targets have been set in order to enable the growth and profitability of the various operations to be measured and benchmarked annually against competitors.

The targets are followed up annually ? The annual organic sales growth for the truck, bus and construction equipment operations, as well as Volvo Penta, shall be equal to or exceed a weighted-average for comparable competitors. ? Each year, the operating margin for the truck, bus and construction equipment operations, as well as Volvo Penta, shall be ranked among the top two companies when benchmarked against relevant competitors. ? For Customer Finance Operations, the existing targets of 12–15% return of equity (ROE) and an equity ratio exceeding 8% stand firm. ? Volvo Aero has an ROE target of 15–25%. When calculating the ROE, Volvo Aero will be assigned the same equity ratio as that for the Group’s Industrial ?Operations. ? The capital structure target is set to a net debt, including provisions for post-employment benefits, for the Industrial Operations of a maximum of 40% of shareholders’ equity under normal conditions.

“Following the Group’s successful geographic and volume expansion, we have the prerequisites in place to compete successfully in our various product segments and it is ? with this in mind that the Board has now decided to introduce new financial targets.”

7

A global group 2011

Volvo Group

new organization
The Volvo Group has a new organization which better utilizes the global potential of the brands and products within the truck operations. For example, the sales and marketing of all of the truck companies is organized in three regional organizational units, directly under the CEO.

Group Trucks Sales & Marketing EMEA

Group Trucks Sales & Marketing Americas

Group Trucks Sales & Marketing APAC

Group Trucks Operations

Group Trucks Technology

Truck Joint Ventures

Construction Equipment

Business Areas

Finance & Business Support

In the same manner, all product development and production of trucks and engines are placed in two new central organizational units under the CEO. The new organization was presented on October 4, 2011 and was set in place on January 1, 2012. Background to the change The Volvo Group has grown significantly since the end of the 1990s when the realignment toward commercial vehicles began, and today the Group is one of the world’s largest actors in heavy trucks, construction equipment, buses and heavy diesel engines. The past ten years have been characterized by major acquisitions and efforts to integrate the acquired companies and create economies of scale. However, companies are never done and the reorganization now taking place is a natural next step for becoming even better at assimilating the full potential of our brands and the benefits of being a large global player; we will acquire a clearer focus on our customers and their needs. Going forward we need an organization that supports us in fulfilling our financial targets and our new vision: to become the world leader in sustainable transport solutions.

Aim of the new organization The new Volvo Group organization aims to create an even more competitive company by: ? increased customer focus ? strengthening the brands ? clearer responsibilities and mandates ? a more agile organization ? speed in execution of strategies and decisions ? improved efficiency.

8

New organization FAQ 1. What will the new organization bring that is
so much better? Governance will become clearer and more efficient with a clearer focus on brands and customers. Branded companies in the truck business previously operated as both independent units and part of a wider Group structure. The branded companies’ operations, product planning, product development and manufacturing are now coordinated centrally, directly under the CEO, with a clear division of responsibilities and minimum overlaps.

4. W  hat happens with Volvo Buses, Volvo Penta
and Volvo Aero? The companies are organized under Business Areas, headed by H?kan Karlsson. Per Carlsson has assumed the position as new Head of Volvo Buses. G?ran Gummeson remains Head of Volvo Penta until April 1, 2012 when he is succeeded by Bj?rn Ingemansson, but he no longer reports directly to the CEO. Staffan Zachrisson remains Head of Volvo Aero but does not any longer report directly to the CEO. With respect to financial external reporting, there is no change – the business areas report their results as in the past.

2. What happens to Volvo Trucks, Renault
Trucks, Mack and UD Trucks? Sales and marketing of all of the truck companies is organized in three regional organizational units. Group Trucks Sales and Marketing Americas (comprising all of North and South America) with global responsibility for the Mack brand, under the leadership of Dennis Slagle. Group Trucks Sales and Marketing EMEA (comprising Europe, the Middle East and Africa) with global responsibility for the Volvo and Renault brands, under the leadership of Peter Karlsten. Group Trucks Sales & Marketing APAC (comprising Asia and Pacific) with global responsibility for the UD Trucks brand, UD, under the leadership of Joachim Rosenberg. All product development and production of trucks and engines is organized in two new central units: Group Trucks Technology and Group Trucks Operations. There are no changes to the financial external reporting – truck companies report their earnings combined as ? previously.

5. What happens with Volvo Financial Services?
The company is organized under Finance and Business Support headed by the new CFO Anders Osberg. Martin Weissburg continues to head Volvo Financial Services but does not any longer report directly to the CEO. With respect to financial external reporting, there is no change – the business areas report their results as in the past.

6.  What happens with the different ?
business units? Production is organized under Group Trucks Operations headed by Mikael Bratt, while product development is under Group Trucks Technology headed by Torbj?rn Holmstr?m. Volvo Parts has been divided into various units based on their specific operations. The logistics portion of Parts, as well as Remanufacturing, falls under Group Trucks Operations. Purchasing is organized under Group Trucks Technology, where all other purchasing activities are collected. Volvo Logistics falls under Group Operations, where all logistics are handled. Volvo Business Services, Volvo IT and Volvo Group Real Estate are organized under Finance and Business Support. Volvo Technology and Non-automotive Purchasing (NAP) are organized under Group Trucks Technology.

3. What happens with Volvo CE?
The organization remains intact. The Head of Volvo CE, Pat Olney, continues to report directly to the CEO, Olof Persson. With respect to financial external reporting, there is no change – the business areas report their results as in the past.

9

A global group 2011

Global strength

IN A CHANGING WORLD
Since the streamlining towards commercial vehicles was initiated more than ten years ago, the Volvo Group has grown into one of the world’s largest manufacturers of heavy-duty trucks, buses and construction equipment and ? is today also a leading manufacturer of heavy-duty diesel engines, marine and industrial engines as well as engine components for the aerospace industry.

During this time, a number of acquisitions have been made, which have brought economies of scale and increased geographical reach. Volvo Group has during this time also successfully established itself outside its historical markets of Europe and North America and gained a strong foothold in the growing markets of Eastern Europe, South America and Asia. During 2011, the markets outside of Western Europe and North America accounted for for 49% of the Industrial Operations’ total sales, compared to 17% in 2000. On the following pages there is more information about the development on important markets and on some of the Volvo Group’s investments and successes on them.

Long-term growth The recovery that started in the Group’s mature markets in 2010 continued in Western Europe and North America during 2011, with some tendencies towards a weakening in Europe towards the end of the year. Overall, demand in the Group’s growth markets continued its strong development, but also here demand weakened somewhat towards the end of the year. In the long-term, demand for freight capacity, and thus many of the Group’s products, is closely linked to the GDP trend. The extent of investment in infrastructure, which drives demand for building and construction equipment, is also closely linked to the GDP trend. In the somewhat shorter-term, demand is affected by a number of factors including fuel prices, the implementation of new emission regulations, interest rates, etc.

 cquisition of the excavator A operations of Samsung Heavy Industries. The Volvo Group’s acquisitions and divestments ?

1998

2001

Acquisition of the truck manu- A  cquisition of Bilia’s Eurofacturers Mack and Renault VI. pean truck and construction equipment dealers.

2003

1999

Sale of Volvo Cars to Ford.

2004

Sale of axle-manufacturing operations to ArvinMeritor.

2004

Acquisition of remaining 50% of the Canadian bus manufacturer Prévost.

10

Economic growth in the U.S., Europe and Brazil Annual GDP-growth, %

Source: Consensus Economics

07 6.1 3.1 1.9

08 5.2 0.6 (0.3)

09 (0.3) (4.1) (3.5)

10 7.5 1.9 3.0

11 2.9 1.6 1.7

Brazil EU USA

Economic growth in Asia, % Annual GDP-growth, %

According to Consensus Economics, global GDP grew by 2.9% during 2011 compared with 4.3% in 2010. GDP in the EU grew by 1.6% (1.9%), in the US by 1.7% (3.0%). Japan’s GDP fell by 0.9% after having risen by 4.5% in 2010. Growth in countries such as Brazil, India and China was dampened compared to the high levels of 2010. For 2012, global GDP is expected to grow by 2.6%. The fast-growing economies primarily in Asia and Latin America continue to be the primary growth engines.

Strong positions One of the world’s largest manufacturers of trucks. ? No. 3 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. ?

Source: Consensus Economics

07 14.2 9.0 7.2 2.3

08 9.6 6.8 3.8 (1.1)

09 9.2 8.0 1.9 (5.5)

10 10.4 8.5 7.1 4.5

11 9.2 7.0 4.4 (0.9)

China India Asia/Paci?c* Japan

* China, Hong Kong, South Korea, Taiwan, Indonesia, Malaysia, Singapore, Thailand, Phillippines, Vietnam, Australia, New Zealand, India, Japan, Sri Lanka

GROWTH
2005
Sale of the service company Celero Support.

2008

2006

Joint venture with Eicher Motors of India within trucks and buses.

Volvo Group net sales, SEK bn
300 225 150 75 0 02 03 04 05 06 07 08 09 10 11

Acquisition of Japanese Nissan Diesel (Now 2007 Acquisition of Chinese wheel UD Trucks). Comloader manufacturer Lingong. pleted in 2007.

2007

 cquisition of Ingersoll Rand’s A road development division.

11

A global group 2011

Development by continent

Europe – THE LARGEST MARKET
During 2011, the European market accounted for SEK 121 billion, corresponding to 39%, of Group net sales. Europe is the historical home market for both Volvo and Renault Trucks. In Europe, the Group has a considerable industrial structure with a relatively large share of its manufacturing and sizeable exports.

Growing markets In 2011 the heavy-duty truck market in Europe 29 (EU’s 27 member states, Norway and Switzerland) increased by 35% to 242,400 trucks compared to 179,200 in the preceding year. In 2012, the total market for heavy-duty trucks in Europe 29 is expected to experience a moderate decline to a level of about 220,000 trucks. The start of the year is expected to be slow with a gradual pick-up in demand as customers start to renew their fleets ahead of the new emission regulation in 2014. The construction equipment market increased substantially in 2011 compared to the weak 2010. When measured in number of units, the total market increased by 31%. Despite the strong increase, the market is far from the record levels of 2007. The European market for construction equipment is expected to grow by 10–20% during 2012. The European bus market was weak during the year with fierce competition. Demand for marine engines was characterized by a wait-and-see approach among boat buyers and the development was augmented by the global turmoil in financial markets. The financial concern also impacted the market for industrial engines, where demand declined from high levels. Increased market shares in Europe The Group’s truck business gained market share in many markets during the year. In Europe 29 the Group’s combined market share increased to 26.3% (24.4), primarily driven by the Volvo brand.

New city bus given global premiere At the end of October, Volvo Buses’ new city bus, the Volvo 7900, was given its world premiere, when it was presented at the large international bus fair, Busworld, in Kortrijk in Belgium. Busworld is a large and important fair for the bus industry and attracts visitors from all over the world. The Volvo 7900 is a lowfloor bus that has been designed to be lighter, more fuel efficient and to take more passengers. At the fair Volvo Buses also presented its hybrid version of the Volvo 7900. The already very low fuel consumption in Volvo’s hybrid bus will be even lower. Fuel consumption will be up to 37% lower than a diesel bus, compared with up to 35% in current hybrid buses. However, the hybrid version is only one of the options with respect to the new Volvo 7900. The bus is offered with engines for diesel/biodiesel and natural gas/biogas. It is available as 12-meter bus or 18-meter articulated bus. Environmentally-adapted products In May, Volvo Trucks launched the new Volvo FM Methane? Diesel truck, a gas-powered truck for long-haul operations enhancing its focus on alternative fuels. This truck can be powered by up to 75% gas and if run on biogas, emissions of carbon dioxide from fossil fuel could be cut by up to 70% compared with a conventional diesel engine.

12

Bus that lowers fuel consumption by as much as

37%

Market development, heavy-duty trucks, Europe Thousands

242

The world’s most powerful hybrid truck was launched by Volvo Trucks in the first quarter. The Volvo FE Hybrid, the first parallel hybrid from Volvo Trucks, uses techniques able to reduce fuel consumption and carbon dioxide emiss? ions by up to 20%, and it makes the truck much more silent. This is a very competitive solution for heavy distribution and waste disposal in urban areas. Renault Truck has delivered the first serial Renault Premium Distribution hybrid truck (Hybrys Tech). Renault Trucks also continued to extend its offering of fully-electric vehicles, and in October a fully-electric 16-ton Renault Midlum was delivered to the French retail chain Carrefour. The truck is to be used for deliveries to supermarkets in downtown Lyon, France. Renault Trucks also launched a system called Optiroll for the Renault Premium Route Optifuel truck. Optiroll reduces fuel consumption even further. Volvo has taken the lead in introducing environmentally friendly Tier 4 Interim/Stage IIIB-compliant products in North America and Europe, with the successful launch of complete new generations of machines affected by the legislation. The company’s new V-ACT engine systems have the hallmarks of lower emissions, better performance, improved operational economy and higher quality. As well as advanced engine monitoring and control, the new Volvo system uses an advanced exhaust after-treatment system that reduces particulate matter by 90% compared to the previous machine series.

07 328

08 319

09 165

10 179

11 242

Market development, construction equipment, Europe Thousands

124

07 217

08 173

09 76

10 94

11 124

Market shares in Europe, heavy-duty trucks %

10 14.2

11 16.0

10 10.2

11 10.3

Volvo

Renault

VOLVO FM METHANEDIESEL
Volvo Group in Europe
? Net sales: SEK 120,828 M (102,947) ?  Share of Group sales: 39% ? Number of employees: 55,121 ? Share of Group employees: 56% ? L  argest markets: France, Sweden, Great Britain, Germany and Russia.

13

A global group 2011

Focus

Russia
After a considerable drop in connection with the financial crisis, the Russian market has recovered.

Russia back on the growth track During 2011, the total market for trucks over 12 tons was approximately 106,200 vehicles in Russia, considerably more than the 61,500 that were sold during 2010 and a vast increase compared to the bottom in 2009 when the total market amounted to 37,100 trucks. Volvo is the biggest imported brand in Russia with a total population of more than 55,000 heavy-duty trucks in the country. A population that has been built-up during a long period of time. The population of Renault trucks is approximately 20,000 heavy-duty trucks. During 2011, Volvo delivered 5,300 trucks (2,800) and Renault trucks delivered 1,300 trucks (800) in Russia. In January 2009, the Group opened a factory for the assembly of trucks in Kaluga, approximately 200 kilo? meters south of the capital Moscow. A long-term con? fidence in the Russian market’s growth prospects and to

come inside the duties and fees that apply to imported trucks were important reasons for the establishment. There are a number of other foreign truck and auto makers established in Kaluga. At maximum capacity, the plant in Kaluga can assemble 10,000 Volvo and 5,000 Renault trucks annually. In 2011, 3,800 Volvo and 1,400 Renault trucks were manufactured in the plant. Volvo Construction Equipment invests in Russia Volvo Construction Equipment will invest SEK 350 M to build a 20,660 m2 excavator plant in Kaluga, Russia, highlighting the company’s continued commitment to the Russian market. The new factory is part of the on-going expansion in developing markets. The plant will be built on the 15 hectares of land that Volvo acquired in 2007. The Kaluga plant will initially manufacture five models of Volvo excavators

14

The market for trucks over 12 tons in Russia No. of trucks, thousands
106

00
44

01
51

02
46

03
52

04
58

05
67

06
90

07
116

08
110

09
37

10
62

11
106

Volvo Group net sales in Russia, SEK bn 8.9

including the Volvo EC210, EC240, EC290, EC360 and EC460, with production planned to begin in the first quarter of 2013. “The new investment in Russia is part of our strategy to build machines where they are sold and thanks to a strong partnership with our Russian dealer, Ferronordic, our customer base is growing significantly in the country,” says Head of Volvo Construction Equipment, Pat Olney. At the same time, the distributor Ferronordic Machines is implementing substantial investments in the distribution network in the vast country. Ferronordic Machines plans to invest in the region of EUR 100 M in the expansion of its regional distribution network and will open as many as 60 new branches in the country by the end of 2015. This will provide for a presence in all of Russia – from the Baltic Sea to the Pacific Ocean.

0.2

00

11

141.8 million inhabi? tants

Volvo Group in Russia
? Number of employees: 1,644 ? P  roduction: Truck factory in Kaluga. Excavator factory under construction in the same city ? Net sales: SEK 8,895 M, 3% of Group sales ? V  olvo – the largest fleet of Western trucks consisting of more than 55,000 vehicles

Russia
?  Area: 17,075,000 km2 (the largest country in the world) ? Population: 141.8 million ?  C apital: Moscow with 10.2 million inhabitants (2008) ? O  ther big cities: St Petersburg (4.6), Novosibirisk (1.4), Jekaterinburg (1.3), Nizjnij Novogorod (1.3) ? GDP per capita: USD 10,522 (2010)

15

A global group 2011

Development by continent

SUCCESS IN NORTH AMERICA
North America is the Group’s third largest market and its overall development was very positive in 2011.

Growing truck market In 2011, the total market for heavy-duty trucks in North America increased by 52% to 216,100 trucks compared to 142,100 in the previous year. Demand was strong throughout the year, driven primarily by the need to replace the industry’s aging highway tractor population. In 2012, the total market for heavy-duty trucks in North America is expected to grow to a level of about 250,000 trucks. Following a number of years with weak market conditions, the market for construction equipment rose by 37% in 2011 compared to 2010. For 2012, the market is expected to grow by 15–25% compared to 2011. The North American market for city buses declined due to the budget cuts still in effect in many cities. The coach market was also weak. Increased market shares thanks to good products During 2011, Volvo Group captured market shares in North America. In the U.S. the Group’s combined market share in the heavy-duty segment rose from 18.0% in 2010 to 19.8% in 2011. The increased market share is the result of

a competitive customer offering of trucks equipped with engines that provide considerable fuel savings. The new generations of engines that comply with the EPA 2010 emission standards combined with the Group’s automated mechanical transmissions, the I-shift of Volvo Trucks and the Mack mDRIVE, provide for fuel savings of up to 5% compared to the previous generations of engines. The driveline package also has better driveability, less wear and improved safety. At the annual Mid-America Trucking Show in Louisville, Kentucky, both Mack and Volvo Trucks furthermore introduced trucks with new aerodynamic and powertrain features which, when combined with the improvements already achieved through the use of SCR technology, deliver fuel efficiency gains of 8-12% over previous generations of trucks. The new and improved drivelines has meant that an increasing number of customers opt for Volvo Group engines. During 2011, 79% of Volvo trucks built in North America were equipped with Volvo engines. Mack Trucks are solely equipped with the Group’s Mack engines. The Group’s bus business also had successes. In spite of a weak market, Prevost’s share of the North American market for coaches increased to 34% (24). Nova Bus had a market share of 15% for city buses.

16

19.8%

Volvo Group’s market share in the heavy-duty segment increased from 18.0% in 2010 to

Market development, heavy-duty trucks, North America Thousands 216

in 2011

07 208

08 185

09 118

10 142

11 216

Market development, construction equipment, North America Thousands

I-shift to be produced in the U.S. As a result of the strong demand for the Group’s automated mechanical transmissions, the company in June announced that production of the Volvo I-Shift and Mack mDRIVE gearboxes will start at its U.S. engine plant in the third quarter of 2012. Volvo Trucks introduced its I-Shift transmission on the North American market in 2007. During 2011, 45% of trucks with Volvo engines in North America were equipped with I-Shift and customers continue to report significant fuel economy improvements with the autoshift transmission. Since I-Shift is only available together with Volvo engines, this also helps promote sales of the company’s own engines. I-Shift incorporates a host of fuel-saving and productivity-enhancing features into a reliable, durable, and lightweight design. The transmission is currently assembled in K?ping, Sweden, and then sent to the US production plant in Hagerstown, Maryland for adaptation to North American market requirements. The company is now investing USD 7 M in Hagerstown to build a new assembly line, install new equipment and tooling, and train its employees. The new assembly line is primarily intended to supply the North American market.

112

07 173

08 137

09 68

10 82

11 112

I-shift

Volvo Group in North America
? Net sales: SEK 60,560 M (47,922) ? Share of Group sales: 19% ? Number of employees: 15,427 ? Share of Group employees: 16% ? Largest markets: USA, Canada and Mexico.

17

A global group 2011

Average truck age, years 8.2 7.3 6.3 1980 1985 1990 1995 7.3 7.2 6.5 2000 2005 2011

6.8

Old trucks create replacement demand One of the effects of the relatively weak North American market for heavy-duty trucks during 2007 to 2010 is that the truck fleet has become increasingly old. Generally, older trucks bring with them an increased need for service and repairs and thus increased costs for truckers. In spite of the investment a new truck entails, in many cases it is more profitable to buy a new truck to lower the total cost of ownership. Against the background of a truck fleet that is at its oldest in many years, there is a need to replace old trucks with new ones at many haulers.

Volvo CE invests in North America Over the next couple of years, Volvo Construction ?Equipment (Volvo CE) plans to spend USD 100 M in its Shippensburg, Pennsylvania, USA manufacturing facility and start production of Volvo wheel loaders, excavators and articulated haulers in North America. Also, the Volvo CE North American sales headquarters and Volvo Rents will relocate from Asheville, North Carolina to Shippensburg, by September 2012. It makes sense, when possible, to manufacture products close to where the customers are. Producing Volvo wheel loaders, articulated haulers and excavators in Shippensburg will result in shorter lead times for customers. Volvo CE will work closely with local suppliers to increase the North American content of the products, which will reduce the exposure to exchange rate fluctuations. A new Customer and Demonstration Center will be built in Shippensburg. In addition, Volvo CE will put up a new office building on the campus to house its Regional Sales Headquarters and its Training Center.

18

Since the acquisition of the Shippensburg facility in 2007, Volvo Construction Equipment has continuously invested in the existing plant. In June 2010, a 18,580 m2, USD 30 M expansion of the facility was finalized, to improve manufacturing flow and increase production space to incorporate the production of Volvo motor graders. Manufacturing Volvo wheel loaders, articulated haulers and excavators in Shippensburg, PA will have no significant impact on the current production in other Volvo locations. It will, however, further improve the competitiveness and profitability of the total business.

Multi-million dollar contract for Volvo Buses in New York City In June 2011, Volvo Buses secured an order for 328 articulated buses for New York City through its subsidiary Nova Bus. The order is valued at SEK 1.5 billion. The order applies to 328 Nova LFS articulated buses. The client, MTA New York City Transit, has a fleet of more than 6,000 buses, the largest bus fleet among all local transport companies in North America and one of the largest in the world. In the past year, MTA tested 90 of Nova’s articulated buses, including on Line M15 in Manhattan. They are the first buses in New York City with three doors and low floors throughout the bus, which contribute to more rapid and comfortable boarding and alighting. The buses functioned very well during the test and contributed to the new major order. The 328 new buses will be delivered from August 2011 to April 2013. One prerequisite for selling city buses in the US is that a large portion of the manufacturing must also occur in the country. The buses for New York City are manufactured in the Nova Bus plant in Plattsburgh, in the northern part of New York State.

NOVA Bus IN NEW YORK CITY

19

A global group 2011

Development by continent

SOUTH AMERICA CONTINUES TO RISE
The South American market has had high growth rates in recent years with Brazil as the engine. The fundamentals are in place for this development to continue.

Strong market The South American market for heavy-duty trucks rose by 7% to 148,000 trucks in 2011 compared to 138,800 the year before. Brazil is the largest market by far in South America. With 111,500 heavy-duty trucks in 2011 (109,800) Brazil accounted for approximately 75% of the total market in the region. The Brazilian market was primarily driven by the positive economic development in the country. Against the background that Brazil moved directly from the Euro III emission standard to Euro V on January 1, 2012 order intake is expected to be relatively weak in the beginning of the year. The total market for heavy-duty

trucks in Brazil is expected to record a slight decline and reach a level of about 105,000 trucks for the full year 2012. The construction equipment market rose by 18% in 2011 compared to the strong 2010. The South American market for construction equipment is expected to grow by 0–10% during 2012. The South American bus market was strong during the year and is estimated to have grown by more than 30%. The total bus market in Brazil increased by 25% to 4,900 buses, driven by prebuys ahead of the changeover to Euro V and by many procurements of BRT-systems (Bus Rapid Transit) in the cities. Volvo Buses increased its market share to 23%.

20

The South American bus market increased by more than

30%

Market development, heavy-duty trucks, South America Thousands 148

07 91

08 117

09 86

10 139

11 148

Market development, construction equipment, South America Thousands

Increased market shares in heavy-duty trucks Volvo Trucks reaped success in the Brazilian market in 2011. Competitive products and a strong dealer network provided for big strides forward in the market. The market share within heavy-duty trucks increased to 17.1% (14.8).

42

5,200 employees

07 25

08 33

09 21

10 35

11 42

Volvo Group in South America
? Net sales: SEK 35,142 M (29,013) ? Share of Group sales: 11% ? Number of employees: 5,234 ? Share of Group employees: 5% ? Largest markets: Brazil, Chile and Peru.

21

A global group 2011

Focus

BRAZIL
The Brazilian economy has had a very good growth since the beginning of the 21st century thanks to increased private consumption and measures to reduce poverty. ?

Even though the global financial crisis a few years ago led to a recession also in Brazil, the economy there rebounded faster than in many other parts of the world. During 2008 GDP grew by 5.2%, followed by a fall of 0.3% in 2009 but it turned around strongly and rose by 7.5% during 2010 and by 2.9% in 2011, according to Consensus Economics. New products During the year, Volvo Trucks was the first manufacturer to launch trucks that comply with the new emission regulation according to Euro V that took effect on January 1, 2012. The year also saw the launch of the all-new mediumduty truck Volvo VM, which is produced specifically for the South American market. The truck is adapted to applications such as regional and city distribution. In order to meet the increasing demand for buses in the front engine segment, which in South America amounts to as many as 16,000 buses annually, Volvo Buses launched a new front engine bus that was wellreceived when it was introduced. Success at Fenatran Volvo do Brasil brought together 250 journalists from Brazil and other Latin American countries for a press conference with head of Volvo do Brasil, Roger Alm, at

the opening of the 18th International Transportation Fair – Fenatran 2011. Fenatran is the largest trade fair of the transport segment in Latin America and took place in S?o Paulo from October 24 to 28, 2011. The outcome of the fair was very positive for Volvo do Brasil with large interest from customers and more than 10,000 visitors to the Volvo stand. Also, during the fair a large number of orders were signed, of which more than half were for the new Euro V trucks. Increased production During the year, Volvo do Brasil started the production of the automated mechanical gearbox I-Shift. Volvo also started local production of 11-liter engines. Previously, components for the I-Shift were imported from Europe and assembled locally. The gearboxes will equip the Volvo FH and Volvo FM. “The I-Shift gearbox has been getting outstanding acceptance in Brazil and in all the other countries of South America. It already equips about 80% of the Volvo FH and Volvo FM trucks and over 90% of the highway buses which leave our assembly line in Curitiba”, says head of Volvo do Brasil, Roger Alm. The success of the electronic gearbox is mainly due to the noticeable consumption reduction that it allows –

22

26.1 Volvo Group net sales in Brazil SEK bn

I-shift
up to 5% compared to vehicles with manual equipment. Besides, it provides more durability to the clutch, less tire wear, and increases the comfort and safety levels for the driver. With the 11-liter engine nationalization, the Curitiba Volvo factory increases its portfolio of locally manufactured products. The engines line is flexible and now both 13-liter and 11-liter engines are manufactured in the country. Best employer in Brazil For the second time, Volvo do Brasil was chosen as the best employer in Brazil. The survey is conducted by the Você S/A and Exame magazines and comprises 504 companies in different sectors. It ranks the best 150 employers in Brazil. Volvo do Brasil has 3,900 employees and headquarters in Curitiba and it has always been ranked in the top ten. In the 2011 survey, Volvo do Brasil obtained excellent results in all categories. Volvo CE moves ahead Volvo Construction Equipment (Volvo CE) moves ahead in Brazil. In accordance with the strategy to support the development in growth economies, the factory in Pederneiras has started to manufacture three excavator models. Volvo CE has also introduced its Chinese brand SDLG with great success in Brazil. The machines are imported from China and reach new customer segments where Volvo CE has had a hard time competing in the past. Surverys show that as many as 90% of SDLG customers have pre-

3.6

00

11

viously not been in contact with the Volvo Group regarding construction equipment. Largest contract for hybrid buses In July 2011, Volvo Buses received its largest hybrid bus order thus far. The city of Curitiba in Brazil ordered 60 buses that generate up to 35% less fuel consumption. “Several of the largest cities in Brazil and the rest of South America tested a Volvo 7700 Hybrid in 2010 and at the beginning of this year,” says Luis Carlos Pimenta,

head of Volvo Buses in Latin America. “The tests were very successful and contributed to this first order, which we believe will be followed by additional orders from other cities.” Consequently, Volvo Buses has decided to commence manufacturing hybrid buses in Curitiba. It will involve the same hybrid technology used in Volvo’s hybrid buses and trucks in Europe and which is currently the world’s most efficient for heavy vehicles.

Volvo Group in Brazil
? Number of employees: 4,546 ? P  roduction: Curitiba (trucks and buses) and Pederneiras (construction equipment) ? ?  Net sales: SEK 26,056 M, 8% of Group sales ? Best employer 2011

Brazil
? Area: 8,547,404 km2 ? Population: 195 million (2010 estimate) ? Capital: Brasilia with 2.5 million inhabitants (2010 estimate) ? O  ther big cities (2010 estimates): S?o Paulo (10.4), Rio de Janeiro (6.3), Salvador de Bahia (3.0) and Fortaleza (2.6) ? GDP per capita: USD 10,471 (2010)

23

A global group 2011

Development by continent

ASIA GROWING IN IMPORTANCE
Through both acquisitions and organic growth, the Volvo Group has created a good position from which to develop further in the dynamic and fast-growing markets in Asia. With increased wealth and the associated needs for transport and with substantial investments in infrastructure, the region is of large and growing importance to the Group.
Growing markets Sales in Asia accounted for 24% of Group net sales during 2011. In 2000 the corresponding figure was 7%. The sharp increase has primarily been achieved by the acquisitions of UD Trucks of Japan (which was named Nissan Diesel at the time of the acquisition), the majority in Lingong of China and through the joint venture VECV in India, but also through substantial organic growth in many markets. Through the brands UD Trucks, Volvo, Renault Trucks and Eicher, the Volvo Group has strong positions in Japan, India, Korea and all of Southeast Asia. In Japan the heavy-duty truck market grew by 1% to 24,800 vehicles during 2011. The first half of the year was weak, primarily as an effect of the earthquake and ensuing tsunami that hit the country on March 11. Towards the end of the year, there were signs of a recovery in the market, among other things against the backdrop of the work to rebuild devastated regions beginning to get underway. For 2012, the Japanese market for heavy-duty trucks is expected to grow to approximately 30,000 vehicles. In China the largest part of net sales stem from construction equipment. The Chinese market slowed somewhat during the latter part of 2011 after a number of years of strong growth. In total, the market grew by 7% during the year. The Volvo Group strengthened its position as leader in the segment for wheel loaders and excavators. In Asia outside of China, the market for construction equipment grew by 28%. In 2012 the Chinese market is expected to be on the same level as in 2011. Asia excluding China is expected to grow by 10–20%. Volvo CE number 1 in China With a volume totaling 405,000 machines, the Chinese market for construction equipment is the world’s largest. When measured in number of units, it is in fact almost as large as the rest of the world put together. And the Volvo Group is number 1 in wheel loaders and excavators in China. During 2011 Volvo Construction Equipment’s both brands Volvo and SDLG had a combined market share of 12% within wheel loaders and excavators. That made them market leaders in China, ahead of all domestic manu? facturers and with a good margin to the other global manufacturers. Contributing to the success was the fact ? that SDLG started selling a range of four excavators, a product they previously lacked. In January 2012, SDLG’s new excavator plant in Linyi, China was inaugurated and at the same time four updated versions of the excavators were launched, In addition, the product range was extended with one excavator.

24

12%

Volvo CE and SDLG had a combined market share of
Market development, heavy-duty trucks, Japan Thousands

in China
25

Growth plans for DND Through UD Trucks, the Volvo Group has a joint venture for trucks together with Dongfeng of China. A fact unknown to many. The joint venture, DND, manufactures heavy-duty UD trucks in a factory in Hangzhou in Southern China. DND was included in the acquistion of UD Trucks in 2007 and gave the Group access to domestic production in China. A number of European manufacturers are trying to get into China, and some have shares in domestic companies producing Chinese brands, but the Volvo Group is the only Western manufacturer making trucks under its own brand, UD, in the country. China is the world’s largest truck market with registrations of 899,000 heavy-duty trucks in 2011. DND had a volume of 900 trucks in 2011, and the Volvo Group is together with its joint venture partner examining different possibilities to expand the cooperation in order to grow the sales volumes within the DND framework. In addition to the UD trucks being manufactured by DND, the Group also sells some 1,000 Volvo trucks annually. These trucks are built in Europe and shipped to China. With those volumes, Volvo has a strong position in the European segment of the market. New Condor During the year, UD Trucks launched its new medium-duty truck Condor, which had undergone a full model change. The new trucks have a new cab design that conveys the impression of a unified family identity with the Quon heavy-duty truck series. They also feature various advanced techno? logies accumulated on the company’s heavy-duty trucks to deliver outstanding fuel economy, improved environmental and aerodynamic performance and safety. Technology Center in Jinan A part of the increased focus on growth markets is the development of products aimed particularly at those markets. Volvo CE’s new technology center in Jinan, China is part of these efforts and covers both the Volvo and the SDLG brand. Jinan is the capital of Shandong province where Lingong has its manufacturing. The center entails an investment of SEK 300 M, and when fully complete in 2013 it will have 200 employees and cover an area of 50,000 square meters.

07 43

08 35

09 19

10 25

11 25

Market development, construction equipment, China Thousands 399

07 203

08 251

09 230

10 371

11 399

Volvo Group in Asia
? Net sales: SEK 73,586 M (65,487) ? Share of Group sales: 24% ? Number of employees: 19,924 ? Share of Group employees: 20% ? Largest markets: China, Japan, India and South Korea.

New company for electric and hybrid drivelines in China In April 2011, Volvo Bus and SAIC Motors of China agreed to form a new joint venture company in China for driveline systems for electric and hybrid buses. The new company is 60% owned by SAIC and 40% owned by Volvo. Volvo invests CNY 40 million and SAIC CNY 60 million in the new company, Shanghai Green Bus Drive System Co, based in Shanghai. The new company will industrialize SAIC Motors and Volvo Buses research and development projects within electric and hybrid drivelines for buses. Since the beginning of the 21st century, Volvo and SAIC together operate Sunwin Bus, which is one of the largest city bus manufacturers in China.

25

A global group 2011

FOCUS

India
The Indian market is in an exciting growth phase with growing prosperity and increasing investments in infrastructure.
Exciting development in VECV The Volvo Group’s joint venture company VE Commercial Vehicles (VECV) comprises the entire Eicher Motors truck and bus operations and the Volvo Group’s Indian sales operations in the truck segment as well as the service operations for trucks and buses. The joint venture was formed in 2008. The Indian market for heavy-duty trucks grew by 12% to 237,000 trucks in 2011 compared to 212,000 vehicles in 2010. The market for light and medium-duty trucks grew by 19% to 103,000 vehicles (87,000). With 11% of the total Indian market for commercial vehicles, i.e. heavy-duty, medium-duty and light-duty trucks as well as buses, Eicher is India’s third largest manufacturer of commercial vehicles. The position is especially strong in the light and medium-duty segment in which Eicher during 2011 had a market share of 30.5% (30.5). In heavy-duty trucks the market share is developing in the right direction, although from low levels, since Eicher during 2011 launched its, new heavy-duty truck program based on the cooperation in VECV. During 2011, Eicher had 3.1% of the market in the heavy-duty segment compared to 2.0% the year before. The ambition is to grow within heavy-duty trucks in the coming years. India to become center for new medium-duty engine VECV’s facility in Pithampur is home to a rapid expansion. Part of the new construction taking place is the SEK 480 M investment in the production of the Volvo Group’s new global medium-duty engine. The investment gives the Volvo Group a complete facility in India for processing and assembling the new medium-duty engine, which will be introduced in the Group’s trucks and buses worldwide in the next few years. Through this investment, it will be possible for the Volvo Group to locate most of its production of mediumduty engines to VECV’s plant in Pithampur. VECV has an established supplier base in India and efficient purchasing channels and already today, VECV produces about 40,000 engines per year in the existing plant. The Group will now have an engine platform that combines the latest in Japanese technology with India’s highly competitive production cost. The investment in Pithampur will result in an annual production capacity of an additional 85,000 new medium duty base engines. At the same time, the Volvo Group will invest an additional SEK 460 M in the Group’s production plants for engines in Ageo, Japan and Venissieux, France. Through this investment, the Group will, among other things, have an annual final assembly capacity for 30,000 medium-duty base engines for the European market. Development of the new medium-duty engine has been led by Volvo Powertrain in Ageo and the engine has been designed to meet current and future exhaust requirements in Europe, the US and Japan. In addition to production of the base engine itself, the

26

11%

of the total Indian market
Volvo Group sales in India, SEK bn 6.0

facility in Pithampur will also conduct final assembly of engines for India and all of Volvo Group’s global markets with Euro III and Euro IV emission requirements. Production and final assembly of the engines for the Japanese market will be in Ageo, while final assembly of the engines for the European market will take place in Venissieux. By gathering base engine production in India, it will be possible for us to meet the Group’s need for cost-efficient medium-duty engines in Asia, while also contributing to an increase in our competitiveness in the medium-duty segment in other markets. Production of the Group’s new medium-duty engine program started in Ageo in 2010 for the Japanese and U.S. markets. The production of medium-duty engines in Pithampur starts in 2012. Excavator production in India In November, the first excavator rolled out of Volvo CE’s new excavator plant in Bangalore, India. The production of excavators will increase substantially during 2012. The plant will continue to manufacture road machinery. The new excavator line is part of a SEK 144 M investment to upgrade the plant. The local production of excavators will mean greater machine availability for Indian customers, as well as shorten delivery lead times and respond to customer requirements more quickly. Full speed ahead for Volvo Buses On the eve of its 10th year in India, Volvo Buses announced SEK 500 M investment plans for the next five years. In the first phase the company will expand its current industrial establishment and introduce a range of new products. Over the last decade the company has emerged as a leader in its class with a dominant market presence and

0.3 00 11

in the process re-defined how people see buses. The Indian market has witnessed a paradigm shift in the bus business. While earlier, coaches built on truck chassis were the norm of the day, the entry of Volvo Buses introduced the concept of a true-bus chassis with rear engines. Volvo Buses also brought in the idea of BRT, efficient, bus-based public transport systems. Mr Akash Passey, head of Volvo Buses in India, said, “The need for buses as sustainable transport solutions is high in India and we aim to grow multifold in the years to come. From 1,000 buses to 5,000. From 1,000 people to 5,000 people and be a billion dollar company.” The ambition is to be there by 2015. By this time Volvo aims to export 20–25% of its volumes not only in South Asia but to markets beyond. Volvo Buses today has over 70% market share in the luxury inter-city coach segment and over 50% market share in the low floor air-conditioned city bus segment respectively. Towards the end of the year, Volvo Buses launched three new city buses and coaches in India and thus increased the product range to encompass ten buses.

Volvo Group in India
? Number of employees: 3,919 ? P  roduction: Pithampur (Eicher – engines, gearboxes, axles, trucks, bus chassis) and Bangalore (Volvo – assembly of trucks, buses and construction equipment) ? ? Net sales: SEK 6,007 M, 2% of Group sales ? Third largest commercial vehicle manufacturer in India through the VECV joint venture together with Eicher Motor Limited

India
? Area: 3,288,000 km2 ? Population: 1,171 million (2010) ? C  apital: New Delhi with 242,000 inhabitants (Estimate 2010. New Delhi is a part of the Delhi metropolitan area) ? O  ther big cities: Mumbai (Bombay 13.8 million), Delhi (12.6), Bangalore (5.4), Kolkata (Calcutta 5.1) ? GDP per capita: USD 1,176 (2010)

27

A global group 2011

Overall challenges

FUTURE TRANSPORT NEEDS
In 2012, the Volvo Group celebrates 85 years. In 1927, the first series-produced Volvo car rolled off the production line at the Gothenburg plant. For 85 years, Volvo has developed pioneering products and services.
Challenges 1  Population growth, urbanization and megacities 2  Climate change, oil resources and alternative fuels 3  Shortage of natural resources and raw material 4 Safety and security 5 Competent labor

Much has happened since 1927. Volvo has developed from a small local industry to one of the world’s largest manufacturers of trucks, buses and construction equipment with more than 100,000 employees, production facilities in 20 countries and sales in more than 190 countries. It is crucial to keep pace in a rapidly changing world. Today, it is more important than ever to understand the operating environment, how it impacts the Volvo Group and, first and foremost, to act on these changes to meet future transport needs. The next pages define some of the more significant challenges and the actions being undertaken by the Volvo Group to meet these challenges.  opulation growth, urbanization P and megacities The population of the earth is ever increasing. In 2050, the population is expected to exceed nine billion. Since 2008, more than half the world’s population live in cities and in fifty years that figure is expected to have risen to two-thirds. The most intensive pace of urbanization is ongoing in Africa and Asia. In addition, the number of megacities and megaregions with populations exceeding ten million is growing rapidly. Approximately 20% of the world’s population is expected to live in cities with populations in excess of two million inhabitants by 2015. This trend is leading to an increased need for transportation. Large quantities of goods, products and people are transported daily within as well as to and from cities. Cities, particularly major cities, have particular requirements for town and traffic planning. Furthermore, traffic jams as well

PRE DI AND SHAPE THE
TO
as pollution and noise need to be addressed through specially adapted vehicles for urban environments.

1

Climate change, oil resources and ? alternative fuels Climate change comprises one of the most complex and difficult questions of our time. Fossil fuel is the single largest source of greenhouse-gas emissions, which are deemed responsible for climate changes. For a long time, oil was considered a reliable source of energy but today oil use is a highly contested issue. This is primarily attributable to the environmental problems associated with oil but also since future access to oil is uncertain due to dwindling oil reserves and instability in the oil producing regions. It is no longer a question of whether we have to convert to a fossil-free society; it is now a question of how this will be achieved and at what pace it will be performed. Major efforts have been made to develop the use of alternative, renewable-energy sources. However, the development of alternative fuels differs widely in different regions depending on the natural resources available, which, in turn, entails a challenge in the form of developing vehicles adapted for various differing types of fuel. The move towards large-scale use of renewable fuel is also dependent on political decisions to create the necessary infrastructure.

2

28

PRE DICT HE FUTURE
5
Future transport solutions
Together, these challenges result in an increased need for sustainable and efficient solutions for the transportation and infrastructure sector. In parallel, they set raised requirements for the Volvo Group and its ability to supply the right products and services. The Volvo Group’s vision is to be world leader in sustainable transportation solutions. The Group works continuously on a wide front to improve the transportation of goods and people. Three concrete examples of how the Volvo Group is already designing transport systems of the future are Bus Rapid Transit (BRT), Green Corridors and Intelligent Transport Systems (ITS). Bus Rapid Transit Public transport plays a decisive role in solving congestion and air pollution in major cities. Bus Rapid Transit (BRT) is an extremely effective public transport solution that meets growing transportation needs in cities around the world. A combination of high-capacity buses, exclusive bus lanes with priority at junctions, efficient ticket systems, traffic management and passenger information makes BRT an effective solution for transporting many people quickly, simply and comfortably. Read more about BRT on page 30.

Shortage of natural resources and raw material Population growth, a rapidly growing middle class and increased purchasing power leads to increasing numbers of people consuming in line with western consumption patterns. Mankind is utilizing an increasing amount of land and resources. More efficient use of resources is required and the recovery of a greater proportion of material is becoming increasingly important to secure access to material.

3

Safety and security Traffic safety becomes increasingly important as transportation increases. The subject is a high priority for governments and institutions the world over. In the future, focus on safety in a broader sense will continue to increase because of military conflicts, crime, terrorism and natural disasters, which will impact the safety of drivers, vehicles and goods.

4

Competent labor For many years, interest has waned for education and careers in the fields of mathematics, natural sciences and engineering in industrialized countries. However, the need for competent employees with these types of specialist skills will increase as the products and services are becoming increasingly sophisticated.

Green Corridors The aim of Green Corridors is to increase efficiency and safety while reducing environmental impact through concentrating freight traffic between major centers via efficient motorways, sea routes and railways that complement each other. Read more about Green Corridors on page 35. Intelligent Transport Systems Intelligent Transport Systems (ITS) is an area experiencing rapid growth. The combination of new technology with advanced IT and communication technology offers major opportunities to reduce congestion, environmental impact and increase safety. Smart vehicles that communicate with each other and their operating environment enable traffic to be efficiently controlled and for fuel efficiency to be improved through the provision of real-time assistance to drivers by various sensors that assist the driver in monitoring other vehicles and traffic. Read more about ITS on page 35.

29

A global group 2011

Bus Rapi t
solves tomorrow’s
Challenge
All over the world, there is a growing need for safer, more efficient and greener public transport. In particular, cities are increasingly impacted by congestion, pollution and noise. Congestion costs society billions annually and impairs life quality for every individual that, each day, spends hours in traffic to get to work, school or visit family and friends.

30

d Transit today
public transport problems

31

A global group 2011

With easy boarding and debarking, together with efficient ticket systems, the travel time can be shortened significantly.

Volvo’s solution – BRT
Bus Rapid Transit (BRT) is a public transport concept specially developed for cities to meet growing transportation needs, to increase the efficiency of public transport and, in parallel, reduce fuel consumption and exhaust emissions. BRT comprises dedicated lanes for buses with a high service frequency and passenger capacity. BRT can be compared to public transport by rail regarding travelling time, service frequency, punctuality and capacity. The investment cost is as low as 5% of the amount required for an equivalent subway system. In addition, the process of developing and implementing a functional BRT system is significantly shorter. In addition, BRT is complemented with a system for real-time traffic monitoring and passenger information. The system also supplies traffic management with critical data about the vehicle including fuel consumption, distance and speed.

Result
The BRT system reduces bus and car traffic and thus contributes to safer traffic with less negative environmental impact. Dedicated bus lanes reduce the risk of accidents while lowering fuel consumption and thereby emissions, since the buses do not need to stop and accelerate as frequently. Environmental impact is further reduced through the use of larger but fewer modern buses that transport more passengers more rapidly. A BRT bus can carry as many as 270 passengers. Using public transport can be perceived as awkward, boring and in some places it is also associated with risk. However, the speed, comfort, safety and reliability of BRT provides an attractive alternative. The dedicated bus lanes, high service frequency, simplicity of boarding and alighting in combination with an efficient ticket system make for significant reductions in journey times compared with traditional bus systems. Passengers are provided with access to information on departure and journey times at bus stops, onboard and via mobile applications. The concept was developed in the Brazilian city of Curitiba in the 1970s and a number of cities worldwide view BRT as a promising solution. Cities in Canada, France, the Netherlands, China, Australia and the US have already implemented the concept. In Mexico City, 450,000 passengers a day are transported by the BRT system, which has reduced the city’s carbon emissions by 80,000 tons per year. In Bogota, 1.5 million journeys are made every day with the BRT system resulting in a reduction in carbon emissions of 300,000 tons each year.

Reduced ? emissions of carbon dioxide
32

How much public transport does USD 1 billion buy?

10 kilometers of subway

50 kilometers of tramway

250 kilometers of Bus Rapid Transit

33

A global group 2011

?transp So

INTELLIGENT

34

ort lutions
Challenges
Population growth, urbanization and a rapidly growing middle class are leading to an increasing need for transportation. According to the European Commission’s estimates, freight volumes in Europe will rise by 50% between 2000 and 2020. However, infrastructure will not be expanded at the same rate. If transportation is to continue to provide a driving force for socio-economic development, the transport system must be improved and made more efficient. When traffic increases there is a correlated risk that accidents will increase. Another challenge is presented by the protection of drivers and cargos. Threats and robbery are a few of the risks faced by the Group’s customers and society. The issues are complex and require collaboration between several parties. Therefore, the Volvo Group collaborates with the public sector, private sector, academic institutions and our customers to develop services and solutions that make the transport system smarter, safer and more efficient. Read more about how the Volvo Group is working to solve tomorrow’s transportation challenges. 35

A global group 2011

Advanced IT and communication technology improves the efficiency and safety of the transport system.

Volvo’s solutions and expected results
Green Corridors – safer and more efficient transportation To meet increased needs for transportation, the various modes of transport need to interact to a greater degree. The aim of the Green Corridor is to make freight traffic efficient through concentrating transport routes specially adapted for heavy transports between major centers on efficient motorways, sea routes and railways that complement each other. The trucks are equipped with IT systems that aid drivers to drive in a fuel-efficient manner and to communicate with each other and the road system.  xpected result – The aim is to develop a more effiE cient process for handling goods through increased collaboration between different modes of transport. The primary advantages expected to be achieved with Green Corridors are increased safety and reduced congestion while making transportation as environmentally adapted as possible. Smart vehicles that reduce and prevent accidents Every day, trucks and cars get stuck in traffic for hours when trying to deliver goods or get to work. Many accidents occur in these types of situations. 90% of all traffic accidents arise from the human factor. A reduction in the number of accidents requires increasing the “intelligence” of vehicles and enabling them to communicate with each other and the surrounding infrastructure. Active safety systems enable the driver to be liberated from the monotonous task of maneuvering in traffic jams. When the system is activated, the driver can monitor the vehicle and instead focus attention where it is really needed.  xpected result – to reduce the number of acciE dents and even avoid potentially dangerous situations through providing assistance to the driver in handling difficult traffic situations. Smart and safe vehicles In Europe goods worth EUR 8 billion are stolen every year. One of six truck drivers have been threatened or assaulted during their work. With modern technology, the driver, truck and the load is protected in an effective manner. With advanced technology for detection, electronic surveillance of transportation and electronic document management, drivers, vehicles and cargo is protected. Through electronic surveillance, it is for example easier to detect diversions and avoid high risk situations.  xpected result – reduce theft and improve safety E for drivers by preventive systems while at the same time making transports more efficient.

36

The goal with Green corridors is to reduce the impact on the environment while simultaneously increasing efficiency and safety on highways through specially adap? ted transport stretches for heavy traffic.

37

A global group 2011

Brands

IMPORTANT ASSETS FOR THE GROUP
By selling products with different brands, the Volvo Group can penetrate many different customer and market segments in mature markets as well as growth markets.
Volvo Group does business under several leading and respected brands. Each brand in the portfolio is focused on different industry and market segments. Several brands are available globally, while some are focused on specific regions of the world.

Volvo
The Volvo brand, which has been built up over decades, enjoys a solid position worldwide. It is one of the world’s best known and respected brands within trucks, buses and construction equipment. It is associated with the Group’s core values – quality, safety and environmental care.

Renault Trucks
Renault Trucks is one of the largest European manufacturers of commercial vehicles, with its origins in the Renault automobile company that was founded in 1898, and in Berliet, founded in 1895. To worldwide customers Renault Trucks are renowned for its innovative and caring approach to efficiency and economy.

UD Trucks
UD Trucks was established in 1935 and is one of the world’s leading manufacturers of trucks and buses. UD Trucks markets light, medium and heavy-duty trucks, buses and bus chassis, engines and vehicle components.

Mack
For more than a century Mack has been one of the largest manufacturers of heavy-duty trucks in North America, and focused on commercial vehicles from the start. Today, Mack is one of the strongest heavyduty truck brands in the North American market.

Eicher
Eicher is one of the largest players in the Indian commercial vehicle market and the obvious choice in the value and mass market segments for customers with high demands on profitability, flexibility and driver effectiveness.

38

Volvo Penta
Volvo Penta is one of the strongest and most global brand names in the engine industry. In addition to quality, safety and environment, Volvo Penta is associated with innovative and performanceoriented products. Penta has been a registered brand name for more than 100 years.

Volvo Aero
Volvo Aero is a world-leading brand and develops, manufactures and services components for aircraft engines and gas turbines. Volvo Aero has been committed to long-term relationships since 1930.

SDLG
SDLG is a leading brand in the Chinese construction machinery industry, especially for wheel loaders. The SDLG brand is sold primarily in China and other emerging markets.

Prevost
With more than 10,000 vehicles on North American roads, Prevost is a leading North American manufacturer of premium touring coaches and bus shells for high-end motorhomes and speciality conversions.

Nova Bus
Nova Bus is a leading North American provider of sustainable transit solutions, including environmentally-friendly buses, high-capacity vehicles and integrated intelligent transportation systems.

39

A global group 2011

The Volvo Group’s

product offering
Trucks
All brands in the Volvo Group’s truck operations have a unique and distinct brand-specific character that attracts customers in their market segments. The trucks are sold and marketed under the brands Volvo, Renault Trucks, UD, Mack and Eicher, which all offer customers a broad range of products and services for efficient and economic transports.

Long-haul

Regional distribution

City distribution

Construction

Eicher

Mack Trucks

UD Trucks

Renault Trucks

Volvo Trucks

Buses
Volvo Buses’ product range includes complete buses and bus chassis for city, intercity and coach traffic. The company has a total offering that, in addition to buses, includes a? global service network, efficient spare parts handling, service and repair contracts, financial services and traffic information systems.

City buses

Intercity buses

Coaches

Chassis

Marine and industrial applications Volvo Penta manufactures engines and drive systems for marine applications, for both leisure and commercial craft, with an engine range of 10 to 900 hp and has a global service network of approximately 4,000 dealers. Volvo Penta also supplies industrial engines ranging from 75 kW to 640 kW for irrigation pumps, generator units and other industrial applications.

Marine engines

Industrial engines

40

Construction equipment
Volvo Construction Equipment develops, manufactures and markets equipment for construction and related industries under the brands Volvo and SDLG. Its products are leaders in many world markets, and include a comprehensive range Compact construction equipment Heavy construction equipment of wheel loaders, hydraulic wheeled and crawler excavators, articulated haulers, road machinery and a wide range of compact equipment.

Road machinery

Wheel loaders

Crawler excavators

Articulated haulers

Motor graders

Backhoe loaders

Wheeled excavators

Wheel loaders

Compaction equipment

Crawler excavators

Crawler excavators from Lingong

Lingong wheel loaders

Pavers

Skidsteer loaders

Asphalt milling machines

Aerospace industry
Volvo Aero develops and manufactures advanced compon? ents for aircraft engines and space rockets with light weight in focus. More than 90% of all new large commercial aircraft are equipped with engine components from Volvo Aero. Engine components Engine overhaul

The company is also responsible for the engines of the Swedish Air Force’s Gripen fighters. Volvo Aero also has an aftermarket business that comprises repair and maintenance of select aircraft engines as well as stationary gas turbines. Space

Financial services
Financial services such as customer and dealer financing, and other services such as insurance, contribute to the Volvo Group total solution offering by creating customer value such as convenience, speed and peace of mind. Providing attractive financial solutions and other support ser? vices is essential to meet today’s high customer demands, and to attract and retain Volvo Group customers.

Customer and dealer financing

41

A global group 2011

World-class services

Strengthens customer relationships
Many customers want long-term cooperation around total solutions to execute their work as efficiently as possible with maximum profitability and reliability.
Soft product share of Industrial O perations’ net sales 2011 ?

Sales of hard products 77% (73) Sales of services and aftermarket products (soft products) 23% (27)

When customers choose supplier of vehicles or machinery, the offering of supplementary services combined with excellent products is a crucial factor. Accordingly, the Volvo Group offers such services as financing and insurance, various forms of service agreements, accessories

and spare parts. The Volvo Group’s increasingly broad range of these services and aftermarket products, so called soft products, is of ever-increasing importance to the Group’s competitiveness.

The services and aftermarket products business (so called soft products)

Aftermarket Product Areas

Service Offering

Spare parts

Software

Accessories

Service Products ?

Uptime Services ?

Fleet/Transport Services

Support ? ervices S

Financial Services

New parts

Vehicle software ?

Accessories

Service literature ?

Service ? lanning p

Transport management

Competence development

Dealer financing ?

Used and remanu? factured parts

Non-Volvo accessories

Service / dealer tools

Maintenance and repair

Driver time management

Fleet management ?

Customer financing

Extended parts

Merchandise products

Parts ? Services

Updates and upgrades

Vehicle management ?

Call center services

Rental

Service contracts ?

Security, safety & environment ?

Consultancy Services

Insurance

Driver info & support

Information services

Card and payment solutions

42

Growing aftermarket business In addition to vehicles and machines, the Volvo Group’s offering includes various types of financing solutions, insurance, rental services, spare parts, preventive maintenance, service agreements, assistance services and IT services. The range and flexibility of the offering means that the solutions can be customized for each customer. Since a large part of the offering within the aftermarket business is requested as long as products are being used, they contribute to balancing the fluctuations in the business cycle for the Group. By strengthening the aftermarket offering, profitability and revenue sustainability can improve for the Group throughout the business cycle. The strategy to increase sales of services and aftermarket products is an important element in the Volvo Group’s effort to achieve targets for profitability and growth, both in mature markets and in the Group’s new markets. During 2011, the services and aftermarket products business (soft products) represented approximately 23% of net sales in the Industrial Operations compared to 27% in 2010. The extended product offering such as used vehicles and machines, trailers and superstructures and special vehicles were previously defined as soft products.

Starting January 1, 2012 these are instead defined as hard products. The numbers above and in the pie chart on page 42 reflect the new definition and the comparison numbers have been restated. Develop and increase interface with customers The majority of Volvo Group’s customers are companies within the transportation or construction industries. The reliability and productivity of the products are important and in many cases crucial to the customers’ success and profitability. The goal is that Volvo Group companies shall be regarded as number one in customer satisfaction, in terms of both products and services. The Volvo Group shall also be number one when the dealers’ customers assess customer satisfaction. A competent and professional dealer and service network is of vital importance to the Volvo Group and contributes to strengthening the Group’s various brands.

43

A global group 2011

Global industrial structure and strong market channels
Backed by competitive product programs, strong dealers and increasingly more complete offerings including total solutions with spare parts, workshops, service packages, financing and leasing, the Volvo Group’s companies have established leading positions on a global market.

Industrial structure

15,427 employees

5,234 employees

Production facilities

North America

South America

Volvo? Renault Trucks Group Trucks Operations UD Trucks Mack Trucks Eicher* Engines and transmissions Construction Equipment Buses Volvo Penta Volvo Aero
*Ownership ≥ 50%

New River Valley (US) ? ? Macungie (US) ? Hagerstown (US) Mexico City (MX), Shippensburg (US) St Claire, St Eustache (CA), Mexico City (MX), Plattsburgh (US) Lexington (US) Newington (US)

Curitiba (BR) ? ? Las Tejerias (VE) ? Curitiba (BR) Pederneiras (BR) Curitiba (BR) ?

44

a

c

a

The Volvo Group has an established and strong position in Europe, North America, and South America. Through the acquisitions of UD Trucks and Lingong and the cooperation within trucks and buses with India-based Eicher Motors the position has been strengthened in many markets in Asia. Through its acquisitions the Volvo Group has also established a global industrial structure with manufacturing as well as sales and distribution channels on all continents.

19% 16%

North
A m e ri

Share of net sales Share of employees

11% 5%

So u t h

A m e ri c

Share of Group’s net sales

Trucks, 64%

Construction Equipment, 21%

Buses, 7%

Volvo Penta, 3%

Volvo Aero, 2%

Customer Finance, 3%

39% 56%

Eu r

55,121 employees

2,456 employees

Europe

Asia

G?teborg, Ume? (SE), Gent (BE), Kaluga (RU) Blainville, Bourg-en-Bresse,?Limoges, Vénissieux?(FR), Kaluga (RU) ? ? ? K?ping, Sk?vde (SE), Leganès (ES), Vénissieux (FR) Arvika, Bra?s, Eskilstuna, Hallsberg (SE), Konz-K?nen, Hameln?(DE), Belley (FR), Wroclaw (PL) Bor?s, S?ffle, Uddevalla (SE),?Wroclaw (PL) G?teborg, Vara (SE) Trollh?ttan, Link?ping?(SE), Kongsberg (NO)

Bangalore (IN), Bangkok (TH) ? Ageo (JP), Hangzhou* (CN) ? Pithampur* (IN) Ageo, Kounosu, Hanyu?(JP)? Changwon (KR), Shanghai, Linyi*?(CN), Bangalore (IN) Bangalore (IN) Shanghai* (CN) Shanghai?(CN) ?

ts

op
e

24% 20%

A si

a

19,924 employees

7% 3%

Ot h e

r
m ark e
Rest of world

Durban (ZA), Brisbane (AU) ? Johannesburg* (ZA) Brisbane (AU) ? ?

?

45

Board of directors’ report 2011

Sustainable development

Part of the problem – and the solution
The Volvo Group’s vision is to become world leader in sustainable transport solutions. Efficient transport is crucial for societal and economic development. While the Group’s products and services are closely linked to growth and development, they also contribute to climate change, emissions, congestion and traffic accidents. Transports are essential for a society, but need to be made sustainable. As one of the world leading manufacturers of transport and infrastructure solutions the Volvo Group has both a responsibility and opportunity to address the issues and reduce the negative impact.

CREATING SHARED
46

Contributing to a more sustainable world The Volvo group has a long history of developing pioneering products and services for the transport and infrastructure industries. The Group is convinced that its products and services will play an important part also in the sustainable society. The Volvo Group has the skills, resources and global reach to shape the future of transport.

In the following section you can read more about

Responsible ? business is good business Environmentally enhanced products The Volvo Group – a high performing organization Responsible sourcing

Responsible ? business is good business
The Volvo Group believes there is no contradiction in running a financially viable business while contributing to sustainable development. A strategic CSR (Corporate Social Responsibility) approach is increasingly important for the Volvo Group’s competitiveness by e.g. improving brand image, reducing cost, creating new business opportunities and building stakeholder relationships. The Volvo Group is convinced that responsible business contributes to long-term success. Responsibility is deeply rooted within the Volvo Group and is based on the values and principles in the Group’s Code of Conduct. The Volvo Group strives to assume economic, environmental and social responsibility for its operations, products and services within its sphere of influence in the value chain. The Volvo Group believes this approach is essential to build lasting relations with customers, employees, suppliers and other stakeholders. The Volvo Group’s global foot print has changed dramatically in the past decade. The Volvo Group has grown significantly and has welcomed new employees and new entities. As a consequence, the Group is operating in approximately 190 markets. Local conditions differ – as do the expectations on business in different parts of the world. From risk to value For a long time, CSR has primarily been seen as an effective risk management tool and for optimizing the use of resources. Risk management and building relationships with stakeholders are important components of the overall CSR strategy. However, the Volvo Group believes that this approach fails to fully explain the business potential of CSR or how a proactive approach creates value for the Volvo Group. The Volvo Group is convinced that CSR is much more than a risk management tool. Creating shared value The world faces urgent global challenges, such as climate change, depletion of natural resources and uneven distribution of wealth. The complexity, size and scale of these challenges require cooperation among states, regions and different sectors of society. The expectations on business to provide solutions to the challenges are growing. Today, a company is largely judged by the value it brings to society The Volvo Group develops products and services based on customer needs and the Group intends to give its shareholders a good return on their investment. But the Group also strives to serve society by providing solutions that meet the challenges of sustainable transport. This is what the Volvo Group means with Creating shared value.

The right product or service in order to contribute to high pro? ductivity in the transport system

Sustainable Transport Solutions Sustainable transport solutions to ?  the Volvo Group are solutions that  “improve the short and long term  economic and environmental per? formance meanwhile social impact  is considered”, by providing:

Energy efficient transport solutions Safe and secure with very low emiss? ? transport ? solutions ions of CO2 , PM, NOx and noise

VALUE
The Global Compact The Volvo Group is a signatory of the UN Global Compact.

Sustainability is part of our business – Responsibility is part of our culture

47

Board of directors’ report 2011

Environmentally enhanced ? products
Climate change is one of the greatest challenges faced by mankind. Research shows that transport is responsible for approximately 13% of the total greenhouse gas emissions caused by humans. As one of the world’s largest manufacturer of commercial vehicles the Volvo Group has a responsibility to work to reduce CO2 emissions from its products. The Group’s vision is to become world leader in sustainable transport solutions. It is critical for the Volvo Group’s future success to continue to develop breakthrough innovations and technologies and converting them into financially viable products and services. The Volvo Group’s products and services are important components of the transport system. However, the transport system sets the boundaries for our products. The Group therefore has to cooperate and partner with other actors in order to develop sustainable transport solutions. Three areas of focus The Group’s product development is affected by the cost of, access to and availability of fuel, as well as legislation in the environmental area. Therefore, the Volvo Group focuses its research and development on the development of: ? Energy-efficient drivelines ? Hybrid drivelines ?V  ehicles that can be operated on renewable fuels. The Volvo Group also participates in public and private partnerships to develop sustainable and efficient transport systems such as Bus Rapid Transport System (BRT) and Intelligent Transport Solutions (ITS). Energy efficient drivelines Approximately 90% of the environmental impact results from the use of the products. The Group’s main focus is therefore on reducing the environmental impact of products in use. The Volvo Group estimates the fuel-saving potential for a standard truck will be 15% in 2020 compared with fuel consumption in 2005. New technology can lead to even more significant savings. For instance, the use of a hybrid driveline may improve fuel savings by up to 37% in certain bus operations. The Volvo Group is working on research and development to meet the future Euro VI legislation, which will come into effect in the EU in 2014. Emissions of NOx (Nitrogen Oxides), and PM (Particulate Matter) will be reduced by 97% compared to a truck from the early 1990s. Vehicles compliant with the Euro VI will thereby emitt very low levels of NO x and PM. Hybrid technology Hybrid technology is one of the most promising and competitive technologies for commercial vehicles. Because of its potential for saving fuel, hybrid technology means lower operating costs for customers while at the same time significantly reducing environmental impact. Hybrid technology is best suited to urban operations since the most appropriate vehicles for hybrid drivelines are those operating in continuous stop-go conditions, such as city buses and refuse or distribution trucks. The Volvo Group’s I-SAM concept consists of an electric motor and a diesel engine working in parallel, whereby each of them can be used where they are most effective. Production of the Volvo Hybrid city bus and the Volvo Hybrid doubledecker started in 2010. Significant fuel savings of up to 37% makes this bus a commercially viable option. In 2011 Volvo Trucks commenced sales of hybrid trucks, under the name Volvo FE Hybrid, to customers in selected European markets. Tests show that the fuel saving potential for this truck is up to 20%. Renewable and alternative fuels Carbon dioxide neutral vehicles are powered by fuel produced from renewable raw materials such as biomass. Reducing dependency on fossil fuels such as oil, coal and natural gas by increasing the use of renewable fuels makes business and environmental sense. The Volvo Group’s research on renewable fuels is mainly focused on Methane Diesel and DME (dimethyl ether). Joint DME project DME is a potential alternative to fossil fuel; it is energy-efficient and has a proven lower environmental impact. Estimates show that by replacing conventional diesel with Bio-DME carbon dioxide emissions will be cut by 95%. The BioDME project is a joint venture with, among others, the EU and the Swedish Energy Agency. The aim is to involve the entire chain; from production of DME from biomass, distribution to DME used as vehicle fuel. The Volvo Group is coordinating the project and develops demonstration vehicles for field tests between 2010 and 2012. Two vehicles were handed over to customers for field tests in early 2011. Combining methane and diesel The benefit of methane diesel technology is that methane fuel is already available as a fuel for vehicles. In 2011, Volvo Trucks launched the new Volvo FM Methane Diesel truck. The truck is powered by up to 75% gas and therefore the CO2-emissions will be considerably reduced. Volvo Trucks is the first manufacturer in Europe to start selling gaspowered trucks for long-haul operations.

Partnership with WWF In 2010, the Volvo Group became the world’s first manufacturer in the automotive industry to join the World Wildlife Fund for Nature (WWF) Climate Savers Program. The Volvo Group has thereby committed to even more ambitious emission targets for greenhouse gases than previously. The Volvo Group’s truck companies have undertaken to reduce carbon dioxide emissions from vehicles manufactured between 2009 and 2014 by 13 million tons. In 2011 it was agreed that Volvo Construction Equipment and Volvo Bus should join the WWF Climate Savers program. The partnership was launched during a ceremony in February 2012 in China.

48

30% Exhaust emissions
including CO2 from fuel use

5% Maintenance

-5% Recycling
12% Producing
the truck

93

%

D r i v i n g t he t ru

ck

Resource use of crude oil and fuel production

58% Fuel

Life Cycle Assessment Each new product from the Volvo Group should have less environmental impact than the product it replaces. The Group uses Life Cycle Analysis (LCA) to map a product’s environmental impact in order to make better informed decisions in the development process. Findings from analyses indicate approximately 90% of the environmental impact results from the use of the products. The Group’s main focus is therefore on reducing the environmental impact of products in use.

Emissions regulations for trucks and buses
Particles, g/kWh 0,16 0,12 0,08 0,04 0 Europe USA NOx, g/kWh 8 6 4 2 0

Significantly reduced emissions

120 100 80 60 40 20 0
1995 2000 2005 2010 2015 2020

Carbon monoxide (CO) Nitrogen oxides (NO X) Solvents (VOCs) Benzene Particulate matter (PM) from diesel Carbon dioxide (CO2 ) Sulphur dioxide (SO2)
Source: ACEA - European Automobile Manufacturers' Association.

1996
Euro II

2002
Euro III

2002
Euro IV

2009
Euro V

Euro VI

2014

EPA 2002 EPA 2007 EPA 2010

2002

2007

2010

Particles, g/kWh

NOx, g/kWh

Within the EU all road transport emissions except for CO 2 are expected to decrease in the future. This is the result of stringent emission regulations.

In September 2009, Euro V was implemented in Europe and in January 2010, EPA 2010 was implemented in North America. Euro V entails a 50% reduction of NO x emissions compared to Euro IV. With the implementation of EPA 2010, emission levels for particulates and NO x are close to zero. Euro VI will come into effect in January 2014 in the EU.

49

Board of directors’ report 2011

A high-performing organization
Increased global presence, new products, new technology, demographic changes and more rapid fluctuations in the global economy will lead to challenges in the supply of expertise and resources. Attracting and retaining competence The Volvo Group’s ambition is to offer interesting opportunities and a unique company culture that help us attract and retain the best people, whoever they are and wherever we do business. Without engaged employees, who are willing to take an active part in the Group’s development and future, the Volvo Group will not succeed in pursuing its strategies. It is therefore important we attract the right expertise and competent engineers to continue the development of environmentally enhanced products. The Volvo Group regularly maps the strategic competence needs, and annually aggregate findings on a Group level to identify the most important future needs. Academic Partner Program The number of people in Europe graduating with degrees in mathematics, science and technology (MST) is declining, and this trend may have
Academic Partner Program The Volvo Group Academic Partner Program (APP) is a systematic approach for long-term cooperation with selected universities and research institutes in areas of special interest. The program aims to provide the Group with a holistic picture of important collaborative partners and to increase the Group’s visibility to students and researchers. Our involvement with universities is also important for creating relationships with students and potential employees to secure ? access to future competence.

an effect on the future competitiveness of Europe. The Volvo Group is involved in a comprehensive series of cooperative ventures with research bodies and academic institutions to advance the technologies needed for future product development. One example is the ?Academic Partner Program. Competence development Investing in the Group’s employees is a fundamental part of staying competitive, sustainable and profit? able. The Volvo Group’s training programs are offered at all levels for employees, and the activities range from traditional and e-based training to individual coaching and mentoring. Individual competence development is based on a personal business plan, which provides support for translating corporate strategic objectives into individual objectives and contribution. The purpose is to ensure that employees clearly understand their role in the team and what is expected of them. Developing talents Every manager is responsible for assessing and developing talent in the organization. The Leadership Pipeline provides the Group with a structured approach to developing and preparing present leaders as well as potential leaders for future roles. The Leadership Pipeline has been set up jointly with research institutes and is based on global research. It is also designed to support the Volvo Group’s culture and values as well as the strategic objectives.

Diversity enhances innovation To create the dynamics required to succeed at a global level the Volvo Group needs to recruit and retain a broad spectrum of employees with different backgrounds, experience and perspectives. In the Volvo Group diversity is considered to be a catalyst for innovation and a source of competitiveness and profitability. By expanding the knowledge base, skills and understanding, the Group becomes more responsive to customer needs and it strengthens the Group’s market position. Diversity and inclusion have long been prioritized within the Volvo Group. Employee engagement In 2011, an Employee Engagement Index was added to the Volvo Group Attitude Survey (VGAS). By including engagement there is a clearer connection to the Group’s wanted position, culture and business success. The results from VGAS is benchmarked against an international database with data gathered from over 14 million employees, representing over 80 countries. In the 2011 VGAS, the Volvo group reached an Employee Engagement Index of 76%. This can be compared with the global norm of 68%. The survey reveals that the Volvo Group’s general strengths are the employees’ pride at manufacturing products of high quality and that they clearly understand their role and the business objectives.

Geographic distribution of employees

Key figures
Number of employees at year-end Share of women, % Share of women, Board Members, % Share of women, Presidents and other senior executives, %

2011

2010

Sweden 25% Europe, excl. Sweden 31% North America 16% South America 5% Asia 20% Other countries 3%

98,162 17 13 17

90,409 16 12 15

50

Responsible sourcing
Responsible supply chain management is about managing risk, promoting responsible behaviour and building long-term relationships with suppliers to improve social, environmental and business ethics in the supply chain. Ensuring good standards in the supply chain is important to the Volvo Group and its stakeholders. The Group wants to ensure that unethical values are not built into the Group’s products and services. Since 1996 the Volvo Group has gradually increased requirements for suppliers regarding environmental, business ethics and social responsibility aspects. The requirements placed on suppliers are based on the principles contained in the Volvo Group’s Code of Conduct and international norms of behaviour. Sourcing and risk assessments In 2011, more than 39,000 suppliers delivered products and services to the Volvo Group. Approximately 6,000 are suppliers of direct material used in automotive products. 8% of these suppliers are located in countries assessed as ‘high risk’ identified in the Volvo Group’s CSR country risk model. The risk assessments are based on analyses conducted by internationally recognized institutions and include factors such as human rights, labour standards and incidence of corruption. The Volvo Group has chosen to apply the same requirements and the same process on all suppliers. Results from the assessments in 2011 In 2011, 63% of Volvo Group purchasing spend derived from suppliers of direct materials that had completed the CSR assessment during 2010 and 2011. 73% of the suppliers that completed the assessment passed. Almost exclusively, the main reason for failing to comply with the assessment is a lack of adequate systems to pass on the requirements to their suppliers. Suppliers that do not pass are asked to draw up an action plan. The assessment was completed by 83% of suppliers from countries considered to be high risk from a CSR-perspective. In 2012, the Group will continue to focus on assessing suppliers in identified high- and medium risk countries from a CSR perspective and to work with the non-approved suppliers to ensure that the Group’s requirements are met.

Production
The environmental effort is and has long been one of the cornerstones in the Group’s work. The joint environmental policy is one of the most important documents for control. The policy is the foundation of the Group’s environmental management system, strategies and targets, audits and measures. Already in 1995, the first environmental management system was certified. At the end of 2011, 99% of the employees in production units were working in accordance with the certified environmental management system, primarily ISO 14001:2008. At each production unit, there is an environmental coordinator. The Group’s environmental goals are used to control, develop and monitor the environmental effort. Strategies to achieve the goals are included in the business plan. Since 2004, the Volvo Group has put an extra strong focus on energy reduction in its own production process. Energy consumption has since decreased by 46% per produced unit. The energy-saving goal for 2010–2012 is divided into two parts: ? C ontinue the work with investigating the possibility of making the Group’s facilities carbon neutral. ? Standby loss, i.e. energy consumption during non-production hours, must decrease by 50% and an additional 15% energy-saving per produced unit by 2012, compared with 2008. ? Focusing on energy-savings measures is good for both the environment and the Group’s financial results. A couple of years ago, when the Volvo Group launched the world’s first carbon-neutral plant, the primary reason was to reduce the environmental load, but it soon became quite clear that it was also a solid financial investment, which will generate significant cost savings in the long term. All production plants must comply with the common minimum requirements pertaining to chemicals, energy consumption, emissions to air and water, waste management, environmental organization and improvement work. Since 1989, environmental audits have been conducted to ensure compliance with the environmental policy and in the event of acquisitions; a review is conducted of the company and properties to observe environmental factors and risks. In 2011, 17 facilities in Sweden required permits. All have the necessary environmental permits and no permits needs to be renewed in 2012. The existence of contaminated land in our properties is documented annually. During 2011, no aftertreatment of contaminated land was in progress on Volvo Group property in Sweden. During 2011, no spills were reported, no major environmental incidents occurred and no environmental disputes are ongoing.

 olvo Group’s environmental p V ? erformance For information on the Volvo Group’s environmental performance see the Eleven-year summary.  olvo Group Sustainability Report V will be available on www.volvogroup.com  by the end of March.  nvironmental data report E Every year, the Volvo Group publishes  a detailed Environmental data report.  Read more under Responsibility at  www.volvogroup.com

51

Board of directors’ report 2011

the share

The most traded share in Stockholm
Many of the world’s leading stock markets had a weak development in 2011 in the wake of the debt crisis in Europe and concern for the global economy. The Volvo share also had a negative development.
The Volvo share is listed on the Nasdaq OMX Nordic Exchange in Sweden. One A share entitles the holder to one vote at Annual General Meetings and one B share entitles the holder to one tenth of a vote. Dividends are the same for both classes of shares. The Volvo share is included in a large number of indexes that are compiled by Dow Jones, FTSE, S&P and Nasdaq OMX Nordic. Negative development on the stock market In general, the development on the world’s leading stock exchanges was negative following two years of positive trends. On Nasdaq OMX Nordic, the OMXSPI index fell by 18% during the year. Trading in Volvo A shares on Nasdaq OMX Nordic decreased by 35% compared to 2010. The share price decreased by 34%, and at yearend the price for the Volvo A share was SEK 75.95. The highest price paid was SEK 119.50 on January 3, 2011. Trading in Volvo B shares on Nasdaq OMX Nordic increased by 30% compared to 2010. The share price decreased by 36% and was SEK 75.30 per share at year-end. The highest price paid was SEK 121.70 on January 3, 2011. In 2011, a total of 3.1 billion (2.5) Volvo shares at a value of SEK 282 billion were traded Nasdaq OMX Stockholm, corresponding to a daily average of 12.0 million shares (9.8). The Volvo share was the most traded share on Nasdaq OMX Stockholm in 2011. At year-end 2011, ? Volvo’s market capitalization totalled SEK 153 billion (238). An increasing portion of the trading in Volvo shares is carried out on alternative exchanges such as Bats Europe, Burgundy, Chi-X and Turquoise. According to Fidessa the direct trading on Nasdaq OMX Stockholm accounted for 56% of the turnover in the Volvo B share while the trading at Chi-X accounted for 11%, Burgundy for 5%, Bats Europe for 3% and Turquoise for 2%. The remainder of the trading took place outside these exchanges. Share conversion option In accordance with a resolution on the AGM on April 6, 2011, the Articles of Association have been amended to include a conversion clause, stipulating that series A shares may be converted into series B shares, after a request sent to the Board. During the year a total of 14.1 million A shares was converted to B shares, representing 2.1% of the initially outstanding A shares. A total of 50 requests from 33 persons or entities were handled. Further information on the procedure is available on the Volvo Group’s web site: www.volvogroup.com Dividend The Board proposes a dividend of SEK 3.00 per share for the financial year of 2011, which would mean that a total of SEK 6,082 M would be transferred to AB Volvo’s shareholders. For the preceding year a dividend of SEK 2.50 per share was paid out, in total SEK 5,069 M. Communication with shareholders Dialog with the shareholders is important for Volvo. In addition to the Annual General Meeting and a number of larger activities aimed at professional investors, private shareholders and stock market analysts, the relationship between Volvo and the stock market is maintained through such events as press and telephone conferences in conjunction with the publication of interim reports, meetings with retail shareholders’ associations, investor meetings and visits, as well as road shows in Europe, North America and Asia. On the website www.volvogroup.com it is possible to access financial reports, search for information concerning the share, insider trading in Volvo and statistics for truck deliveries. It is also possible to access information concerning the Group’s governance, including information about the Annual General Meeting, the Board of Directors, Group Management and other areas that are regulated in the “Swedish Code of Corporate Governance.” The website also offers the possibility to subscribe to information from Volvo.

Earnings and dividend per share Earnings per share, SEK Dividend per share, SEK
1 Proposed by the Board of Directors

Total return, Volvo B 160 140 120

07 7.37 5.50

08 4.90 2.00 09 (7.26) 0.00

10 5.36 2.50

11 8.75 3.001

100 80 60 40 20 07 08 09 10 11

B Share (incl. re-invested dividends) SIX Return index
Source: NASDAQ OMX

52

Price trend, Volvo Series B shares, 2007–2011, SEK

160 140

The largest shareholders in AB Volvo, December 311
2011

Voting rights, % 2010

Renault s.a.s. Industriv?rden Violet Partners LP SHB2 AMF F?rs?kring och Fonder

17.7 15.6 5.6 4.7 3.9

17.5 11.1 5.5 4.8 3.9

120 100

1 AB Volvo held 20,728,135 class A shares and 80,264,131 class B shares comprising in total 4.7% of the number of registered shares on December 31, 2011. 2 Comprises shares held by SHB, SHB Pension Fund, SHB Employee Fund, SHB Pensionskassa and Oktogonen.

80 60 40

Share capital, December 31, 2011 Registered number of shares1 of which, Series A shares2 of which, Series B shares3 2,128,420,220 663,527,946 1,464,892,274 1.20 2,554 251,715 229,825 21,890

20

07 Volvo B

08 OMX Stockholm PI

09

10

11

Quota value, SEK Share capital, SEK M Number of shareholders Private persons Legal entities
For further details on the Volvo share, see note 19.

OMX Stockholm Machinery PI

Source: NASDAQ OMX

Price trend, Volvo Series B shares, 2011, SEK 130 3 120 110 16 100 90 80 70 60 Q1 Volvo B
Source: NASDAQ OMX Events 1 Truck deliveries for December 2010, February 4 2 Year-end report 2010, February 4 3 Truck deliveries for January, February 16 4 Annual Report 2010, March 16 5 Truck deliveries for February, March 16 6 Olof Persson appointed new Volvo CEO, March 16 7 Annual General Meeting 2011, April 6 8 Truck deliveries for March, April 27 9 Report on the first quarter, April 27 10 Truck deliveries for April, May 17 11 Truck deliveries for May, June 17 12 Truck deliveries for June, July 22 13 Report on the second quarter, July 22 14 Truck deliveries for July, August 30 15 Truck deliveries for August, September 15 16 New financial targets for AB Volvo, September 22 17 Volvo Group restructures, October 4 18 Truck deliveries for September, October 25 19 Report on the third quarter, October 25 20 Capital markets day in Stockholm, November 8 21 Truck deliveries for October, November 16 22 Truck deliveries for November, December 19

1&2

4,5&6 7

8&9 10 11 12&13 21 20 18&19 17 22

1 The number of outstanding shares was 2,027,427,954 at December 31, 2011. 2 Series A shares carry one vote each. 3 Series B shares carry one tenth of a vote each.

20 16&17

14 15

Q2 OMX Stockholm PI

Q3 OMX Stockholm Machinery PI

Q4

Ownership by country1
Sweden 60% Great Britain 14% USA 10% France 7% Switzerland 2% Luxembourg 2% Others 5%
1 Share of capital, registered shares.

Ownership categories1
Non-Swedish owners 40% Private shareholders 12% Pension funds and insurance companies 10% Savings funds 15% Others 23%

 ore details on the Volvo share and M Volvo’s holding of treasury shares are provided in note 19 to the financial statements and in the Eleven-year summary.

1 Share of capital, registered shares. The employees' ownership of shares in Volvo through pension foundations is insigni?cant.

53

Board of directors’ report 2011

Significant events

DURING 2011
Some of the important events during 2011 was that Olof Persson assumed position as new CEO, the Group received new financial targets and a new organization was adopted.

The first quarter Olof Persson appointed new Volvo CEO The Board of Directors of AB Volvo decided to appoint Olof Persson, 46, then President of Volvo Construction Equipment, as the new President and Chief Executive Officer of Volvo. Olof Persson assumed the position as President of AB Volvo and CEO of the Volvo Group on September 1, 2011 when Leif Johansson retired. Pat Olney new CEO of Volvo CE Effective May 1, Pat Olney, 42, was appointed new President and CEO of Volvo Construction Equipment. Pat Olney has an extensive experience spanning 17 years in the construction equipment industry, with 10 of these in senior management roles within Volvo CE. He assumed his new position on May 7, 2011. Annual General Meeting of AB Volvo The Annual General Meeting of AB Volvo held on April 6, 2011 approved the Board of Directors’ motion that a dividend of SEK 2.50 per share be paid to the company’s shareholders. Peter Bijur, Jean-Baptiste Duzan, Leif Johansson, Hanne de Mora, Anders Nyrén, Louis Schweitzer, Ravi Venkatesan, Lars Westerberg and Ying Yeh were reelected as members of the AB Volvo Board. Leif Johansson was reelected for the period extending to August 31, 2011, when he stepped down from his assignment as President and Chief Executive Officer of Volvo. In addition, Olof Persson was elected to the Board for the period starting on September 1, 2011, when he took office as President and Chief Executive Officer of Volvo. Louis Schweitzer was reelected Chairman of the Board. Jean-Baptiste Duzan, representing Renault s.a.s, Carl-Olof By, representing AB Industri? v?rden, H?kan Sandberg, representing Svenska Handelsbanken, SHB Pension Fund, SHB Employee

Fund, SHB Pensionskassa and Oktogonen, and Lars F?rberg, representing ? Violet Partners LP, and the Chairman of the Board were elected members of the Election Committee. The Meeting resolved that no fees would be payable to the members of the Election ? Committee. The Annual General Meeting adopted a proposal from Renault S.A. and Industriv?rden concerning an addendum to AB Volvo’s Articles of Association that will permit voluntary conversion of Series A shares to Series B shares. The amendment of the Articles of Association was subject to approval by shareholders representing at least two thirds of the votes cast and the voting rights represented at the Meeting. Volvo CE invests in its North American operations Over the next couple of years, Volvo Construction Equipment plans to invest USD 100 M in its Shippensburg, PA, USA manufacturing facility and start production of wheel loaders, excavators and articulated haulers in North America. Also, Volvo CE’s North American sales headquarters and Volvo Rents will relocate from Asheville, NC to Shippensburg, PA by September 2012. The second quarter UD Trucks launches new Condor In July, UD Trucks launched its new Condor medium-duty trucks, which have undergone a full model change. The new models adopt a new cab design that conveys the impression of a unified family identity with the Quon heavy-duty truck series. They also feature various advanced technologies accumulated on the company’s heavy-duty trucks to deliver outstanding fuel economy, improved environmental and aero? dynamic performance and safety. The new Condor models are powered by engines fitted ?

with a newly developed common rail system that increases the maximum fuel injection pressure for achieving high levels of power and torque in a small displacement volume. The third quarter New financial targets In September it was announced that the Board of Directors of AB Volvo had decided to implement new financial targets for the Volvo Group starting in 2012. The new targets have been set in order to enable the growth and profitability of the various operations to be measured and benchmarked annually against relevant competitors. ? The financial targets for the Group are as follows: ? ? The annual organic sales growth for the truck, bus and construction equipment operations, as well as Volvo Penta, shall be equal to or exceed a weighted-average for comparable competitors. ? Each year, the operating margin for the truck, bus and construction equipment operations, as well as Volvo Penta, shall be ranked among the top two companies when benchmarked against relevant competitors. ? For Customer Finance Operations, the existing targets of 12-15% return of equity (ROE) and an equity ratio exceeding 8% stand firm. Volvo Aero has an ROE target of 15–25%. When calculating the ROE, Volvo Aero will be assigned the same equity ratio as that for the Group’s Industrial Operations. ? The capital structure target is set to a net debt, including provisions for post-employment benefits, for the Industrial Operations of a maximum of 40% of shareholders’ equity under normal conditions.

54

Pat Olney

Olof Persson

Volvo Aero

Volvo Group restructures its truck business and launches new organization In October it was announced that the Volvo Group is to have a new organization which better utilizes the global potential of the brands and products within the truck operations. For example, the sales and marketing of all of the truck companies will be organized in three regional organizational units, directly under the CEO. In the same manner, all product development and production of trucks and engines will be placed in two new central organizational units under the CEO. Production, product planning and product development for the non-truck business areas will remain with their respective business area. The new organization was in place as of January 1, 2012. The fourth quarter Volvo Group’s 2011 Capital Market Day At Volvo’s Capital Market Day in Stockholm on November 8, 2011 President and CEO Olof Persson presented the Group’s new financial targets that were announced on September 22, 2011, and the new organization that applies from the beginning of 2012. He also emphasized the major growth potential he sees in the existing businesses which, combined with higher cost efficiency, over time gives the Group the potential to increase its operating margin by at least 3 percentage points, thus facilitating achievement of the new financial targets. AB Volvo evaluates the possibility of divesting Volvo Aero On November 21, 2011 it was announced that AB Volvo, as a step in further streamlining the Volvo Group towards commercial vehicles, had initiated a process aimed at divesting Volvo Aero.

Carl-Henric Svanberg proposed as new Chairman of AB Volvo On December 12, 2011 the Election Committee of AB Volvo proposed the election of Carl-Henric Svanberg as new Chairman of the Board at the Annual General Meeting on April 4, 2012. AB Volvo’s current Chairman Louis Schweitzer has declined reelection. The Election Committee also proposed the reelection of Board members Peter Bijur, Jean-Baptiste Duzan, Hanne de Mora, Anders ? Nyrén, Ravi Venkatesan, Lars Westerberg, Ying Yeh and Olof Persson. Detailed information about the events is available at www.volvogroup.com
Volvo CE at ConExpo

UD Trucks new Condor

Sales increase in the bus business

 orporate Governance Report Volvo C has issued a corporate governance report which is separate from the annual report. The corporate governance report is included in this document, after the annual report as such, on pages 150–159.

55

Board of directors’ report 2011

Trucks

Continued earnings improvement
2011 was characterized by a continued recovery in demand in the Group’s mature markets and a continued strong development in the emerging markets. Towards the end of the year the first signs of a moderate slowdown became visible in Europe.

Demand in Europe and North America increased during the year, but towards the end of the year it weakened in Europe. The Japanese market was negatively affected by the earthquake and tsunami that hit the country in March but recovered towards the end of the year. In Brazil demand was strong during the year. Total market In 2011 the heavy-duty truck market in Europe 29 (EU, Norway and Switzerland) increased by 35% to 242,400 trucks compared to 2010. The situation still varied significantly within Europe. While parts of Southern Europe were struggling, other regions in Northern and Eastern Europe had recovered from the low levels of 2010. In 2012, the total market for heavy-duty trucks in Europe 29 is expected to experience a moderate decline to a level of about 220,000 trucks. The start of the year is expected to be slow with a gradual pick-up in demand as customers start to renew their fleets ahead of the new emission regulation in 2014. In 2011, the total market for heavy-duty trucks in North America increased by 52% to 216,100 trucks compared to 142,100 in the previous year. Demand was strong throughout the year, driven primarily by the need to replace the industry’s aging highway tractor population. Activity in the refuse vehicle segment was steady. Although the vocational truck segment continued to suffer as a result of the depressed construction market, some positive signs were seen in the energy sector, particularly natural gas production. In 2012, the total market for heavy-duty trucks in North America is expected to grow to a level of about 250,000 trucks.

In 2011, the total market in Brazil increased by 2% to 111,500 heavy-duty trucks (109,800). The increase was lower than anticipated because of less prebuying than expected ahead of the new, stricter emission regulation that came into effect on January 1, 2012. The total Brazilian market for heavy-duty trucks is expected to record a slight decline and reach a level of about 105,000 trucks in 2012. The beginning of the year is expected to be slow followed by a gradual pick-up in demand driven by a general increase in economic activity and increased acceptance of the new, more expensive Euro V trucks. In Japan the market for heavy-duty trucks was 24,800 vehicles in 2011 (24,500), which was an increase of 1%. Following the earthquake and the subsequent tsunami that hit Japan on March 11, 2011 there were signs of a market-recovery during the latter part of 2011 and into 2012. For 2012, the total Japanese market for heavy-duty trucks is expected to increase to about 30,000 trucks. The Indian market for heavy-duty trucks grew by 12% to 237,000 trucks in 2011 compared to 212,000 vehicles in 2010. Earnings In 2011, net sales in the truck operations increased by 24% to SEK 207,703 M (167,305). The operating income improved to SEK 18,260 M (10,112), while the operating margin was 9.1% (6.0). Increased sales volumes, higher capacity utilization and continued strict control on operating costs had a positive impact on profitability.

New products At the annual Mid-America Trucking Show in Louisville, Kentucky, both Mack and Volvo Trucks introduced trucks with new aerodynamic and powertrain features which, when combined with the improvements already achieved through the use of SCR technology, deliver fuel efficiency gains of 8-12% over previous generations of trucks (EPA 2007). The world’s most powerful hybrid truck was launched by Volvo Trucks in the first quarter. The Volvo FE Hybrid, the first parallel hybrid from Volvo Trucks, uses techniques able to reduce fuel consumption and carbon dioxide emissions by up to 20%, and it makes the truck much more silent. In May, Volvo Trucks launched the new Volvo FM MethaneDiesel truck, a gas-powered truck for long-haul operations enhancing its focus on alternative fuels. This truck can be powered by up to 75% gas and if run on biogas, emissions of carbon dioxide from fossil fuel could be cut by up to 70% compared with a conventional diesel engine. In September, a 750 hp version of the Volvo FH16 was launched. Renault Trucks delivered the first serial Renault Premium Distribution hybrid truck (Hybrys Tech). Renault Trucks also launched a system called Optiroll on the Renault Premium Route Optifuel truck, which further reduces fuel consumption. In July, UD Trucks launched its new Condor medium-duty trucks, which have undergone a full model change.

The truck operations consist of Volvo Trucks, Renault Trucks, UD Trucks, Mack Trucks and VECV in India (50% direct and indirect ownership). The product offer stretches from heavy-duty trucks for long-? haulage and construction work to light-duty trucks for distribution. Number of employees 41,469

Position on world market In total, the Volvo Group is Europe’s largest and the world’s second largest Western manufacturer of heavy trucks. Brands Volvo, Renault Trucks, UD Trucks, Mack and Eicher.

Fuel-efficient engines is one important factor behind the truck operations’ success.

56

Net sales as percentage of Volvo Group’s sales
64% (63)

Net sales SEK bn

Net sales by market
SEK M Europe North America South America Asia Other markets Total 2011 85,173 37,120 26,822 37,551 14,037 200,703 2010 69,606 26,901 21,680 35,231 13,888 167,305

200.7

187.9 203.6 138.9 167.3 200.7

07

08

09

10

11

Operating income (loss) and operating margin

Deliveries by market
Number of trucks Europe North America South America Asia Other markets Total 2011 95,113 42,613 29,274 56,165 15,226 238,391 2010 65,503 24,282 21,483 53,833 14,888 179,989

18,260
SEK M %

07
15,193 8.1

08

09

10

11

12,167 (10,805) 10,112 18,260 6.0 (7.8) 6.0 9.1

INCREASED
SALES IN ALL MARKETS
10 11 14.2 16.0 Volvo 10 11 10.2 10.3 Renault 10 11 5.2 4.8 Volvo 10 11 10.9 10.8 Renault 10 11 8.8 11.4 Volvo 10 11 7.4 6.8 Mack

10 11 22.2 20.1 UD
Market shares in Japan, heavy-duty trucks

Market shares in Europe, heavy-duty trucks

Market shares in Europe, medium-duty trucks

Market shares in North A ? merica, heavy-duty trucks

57

Board of directors’ report 2011

Construction Equipment

WIDESPREAD DEMAND UNDERPINS GROWTH
Volvo Construction Equipment (Volvo CE) is among the largest global producers of excavators, haulers, loaders and a range of smaller equipment such as backhoe loaders. The road machinery range includes ? graders, compactors and pavers. Its Chinese built SDLG branded excavators, loaders and compactors are marketed through separate sales channels.
Volvo CE’s equipment is distributed to customers through a global network of independent dealers, and in some instances, Volvo-owned distributors. The customer offering also includes services such as financing, leasing and used equipment sales. Customers are using Volvo CE products in different applications, including general construction, road building and maintenance, demolition, waste processing, material handling and extraction. Widespread demand Measured in units sold, the total world market for heavy, compact and road machinery equipment increased by 18% in 2011, compared to 2010. After a long period of low growth, the mature markets of Europe saw rises of 31% in 2011, whereas demand in the previously sluggish North American market jumped by 37%. Asia excluding China grew by 28% and Other Markets by 14%. In China, government efforts to cool inflation dampened demand, but sales nevertheless increased by 7% in this, the world’s largest construction equipment market. Recoveries in mature economies coupled with continued buoyant demand in emerging markets and internal cost reductions saw Volvo CE to a confident 2011 in terms of sales and income. During 2011 the company sold a record 84,000 machines, compared with 66,000 in 2010. Net sales increased by 21% to SEK 64,987 M (53,810). Operating income rose to SEK 6,653 M (6,180) whereas the operating margin amounted to 10.2% (11.5). These are solid results given the significant currency headwinds and the supplierrelated consequences of the earthquake and tsunami that struck Japan in early March, which had a negative effect on both sales and income. Strengthen position in BRIC countries In 2011 Volvo CE saw strong momentum in all BRIC markets. Significantly, it became market leader in China for excavator and wheel loader sales, with a share of 12%. Despite a softening of the Chinese market, Volvo CE’s sales there grew by 29% in 2011. In October the company broke ground on its major new technology center in Jinan, China, which, when completed, will design products for the BRIC markets and form part of the company’s plan to have a global footprint of engineering and design resources. The third quarter saw Volvo CE announce a SEK 350 M investment in a new excavator plant in Kaluga, Russia, which will see production start in early 2013. Distribution in Russia also got a boost; with new partner Ferronordic committing USD 100 M to expanding dealer locations in the vast country. In India, dealer development was also in focus, and SEK 140 M is being spent on expanding Volvo CE’s Bangalore facility to accommodate excavator production. Elsewhere, the company saw strong market growth across South America, with its SDLG wheel loader range gaining the market leadership position among Chinese brands in the region. A SEK 65 M investment will see Volvo CE excavators produced at the Pederneiras, Brazil facility. Reduce break-even Further investments were announced that will see efficiency gains and lower the break-even point, as well as reducing currency exposure. Localization of sourcing and production is essential to this objective, with the most notable example being the announcement of a USD 100 M investment in the company’s Shippensburg, US facility to allow production of wheel loaders, excavators and articulated haulers. Launch Tier 4i/Stage IIIB engines Volvo has taken the lead in introducing envi? ronmentally friendly Tier 4 Interim/Stage IIIBcompliant products in North America and Europe, with the successful launch of complete new generations of machines affected by the legislation. The company’s new V-ACT engine systems have the hallmarks of lower emissions, better performance, improved operational economy and higher quality. As well as advanced engine monitoring and control, the new Volvo system uses an advanced exhaust after-treatment system that reduces particulate matter by 90% compared to the previous machine series. New products Volvo CE chose the ConExpo exhibition in Las Vegas in March 2011 to unveil its fundamentally updated product range, which includes excavators, wheel loaders, articulated haulers, backhoe loaders – and the Red Dot award winning L220G wheel loader. In all, over 50 new models were introduced to dealers and customers in Europe and North America, with a host of new products also available in Asia and other markets.

Volvo CE manufactures equipment for construction applications and related industries. Number of employees 14,857

Position on world market Volvo CE is the world’s largest manufacturer of articulated haulers and one of the world’s largest manufacturers of wheel loaders, excavators, road development machines and compact construction equipment. Brands Volvo and SDLG (Lingong).

Volvo CE launched more than 50 new models during the year.

58

Net sales as percentage of Volvo Group sales
21% (20)

Net sales? , SEK bn

Net sales by market
SEK M Europe North America South America Asia Other markets Total 2011 19,052 7,862 4,177 30,151 3,745 64,987 2010 16,138 6,267 4,130 24,352 2,923 53,810

65.0

53.6

07

56.3

08

35.7

09

53.8

10

65.0

11

Operating income (loss) and operating margin

6,653

SEK M %

07

08

09

10

11

4,218 1,808 (4,005) 6,180 6,653 7.9 3.2 (11.2) 11.5 10.2

Record

DELIVERIES AND SUBSTANTIAL RENEWAL
59

Board of directors’ report 2011

Buses

Increased sales and profitability
For Volvo Buses, 2011 was yet another strong year, with sharply increased sales and improved profitability.

Volvo Buses is one of the world’s largest manufacturers of heavy buses. The range comprises complete buses, chassis, transport solutions, telematic systems, financial solutions, as well as service and maintenance contracts. The company offers global products adapted to local conditions, with manufacturing in Europe, Asia, North America and South America. Volvo Buses has sales in about 85 countries and is one of the bus industry’s strongest service networks, with more than 1,500 retailers and service workshops globally. Global leader in hybrid buses During the year, the trend toward more efficient transport solutions continued within the bus industry, with less energy consumption and lower environmental impact. Volvo Buses introduced a new bus model for city traffic – the Volvo 7900. The new bus model is available in hybrid and for natural gas/biogas, as well as diesel/biodiesel. The hybrid model has up to 37% lower fuel consumption and carbon-dioxide emissions than the corresponding diesel bus. With the Volvo 7900, Volvo Buses will strengthen its industry-leading position in terms of fuelefficient hybrid vehicles. In total, Volvo Buses has now sold more than 400 hybrid buses, of which 110 were to the U.K., 60 to Curitiba, Brazil, 32 to Troms?, Norway, 25 to Sweden, 10 to Hamburg, Germany and 8 to Mexico in 2011. Developing the vehicle of the future The next development step in the hybrid area is a chargeable hybrid, which can operate quietly

for long distances and is completely exhaust-free, using only electricity. The technology has the potential to reduce fuel consumption by as much as 65% compared with current diesel-driven buses. A prototype was developed in 2011 and field tests will commence in Gothenburg in autumn 2012. In China, there is major interest in alternative drivelines and fuels. Here, Volvo Buses and SAIC (Shanghai Automotive Industry Corporation) have started a joint venture company for research, development and industrialization of buses with alternative drive systems, both refined electric vehicles and hybrids. Within the framework of the EBSF research program (European Bus System of the Future), Volvo Buses has developed a demonstration vehicle with various solutions that may contribute to making public transportation more efficient and attractive for passengers, for example, by more rapid entering and alighting, shorter travel times and less crowding. Tests in traffic commenced in Gothenburg in December 2011. Lower operating costs with telematics To assist customers in reducing their operating costs, Volvo Buses is also offering telematic systems. In 2011, Volvo Bus Telematics with Traffic Management, Fleet Management and Vehicle Management was launched, which will make it easier for operators to monitor fuel consumption and service requirements for each vehicle.

New investments in India In 2011, Volvo Buses celebrated ten years of successful presence in India, where the company is the market leader in luxuriously equipped intercity buses and air conditioned low-floor buses. Comprehensive new investments are currently being planned, which will significantly increase the industrial capacity. The investments will meet demand in the domestic market and facilitate increased export. Increased deliveries, decreased order intake In 2011, the bus market continued to develop favorably in Asia and South America, while it decreased in Europe and North America. Volvo Buses increased its deliveries by 25% primarily due to substantially higher deliveries in ? South America and North America. In total, 12,786 buses and bus chassis (10,229) were delivered, which are the highest deliveries to date. The final two quarters showed a somewhat slower order intake. Sales and income In 2011, net sales rose to SEK 22,289 M (20,516) strengthened by increased deliveries in South America, North America and Europe. Operating income improved to SEK 1,036 M (780) and the operating margin amounted to 4.6% (3.8). Profitability was favorably impacted by increased volumes and an improved market mix.

Buses has a product range comprising city and intercity buses, coaches and chassis. Number of employees 7,400

Position on world market The business area is one of the world’s largest producers of buses. Brands Volvo, Prevost, Nova and Sunwin.

In addition to complete buses, Volvo Buses also delivers bus chassis for completion at external body builders.

60

Net sales as percentage of Volvo Group sales
7% (8)

Net sales SEK bn

Net sales by market
SEK M Europe North America South America Asia Other markets Total 2011 7,009 7,541 2,721 3,027 1,991 22,289 2010 6,242 7,200 1,737 3,299 2,038 20,516

22.3

16.6

07

17.3

08

18.5

09

20.5

10

22.3

11

Operating income (loss) and operating margin
SEK M %
1,036

Deliveries by market
Number of buses Europe North America South America Asia Other markets Total 2011 2,695 3,014 2,620 3,417 1,040 12,786 2010 2,395 2,092 1,174 3,477 1,091 10,229

07
231 1.4

08
(76) (0.4)

09
(350) (1.9)

10
780 3.8

11
1,036 4.6

HYBRIDS
61

LEADER IN

Board of directors’ report 2011

Volvo penta

Improved profitability
Volvo Penta offers complete drive systems for leisure boats and professional boats, and for industrial applications such as power generation, cranes, pumps and container trucks.

In the commercial shipping area, Volvo Penta delivers diesel engines for the toughest-possible operating conditions. Coast guards, ferry companies, port authorities and shipyards all over the world use Volvo Penta’s reliable engines for towing, passenger transports, patrolling and sea rescue. In the leisure boat industry, Volvo Penta develops and delivers complete drive systems to world-leading boat builders such as Fairline, Sunseeker and Princess in the UK, Jeanneau/ Beneteau in France, Chaparral in the US and Schaefer Yachts in Brazil. Volvo Penta’s innovative technological solutions for boats create competitiveness and customer benefits in the form of lower fuel consumption, easier manoeuvering and shorter installation times. Through partnerships in the communication and navigation area, and by fully integrated drive systems, Volvo Penta offers boat driving environments with a strong focus on comfort and user-friendliness. Volvo Penta’s customers have access to the marine industry’s most global service and dealer network with about 4,000 dealers worldwide. In the industrial engine area, Volvo Penta delivers diesel engines to world-leading customers such as Cargotech in Finland, Sany in China, Kohler in the US and Sandvik in Sweden. With their unique performance, operational and environ? mental features, Volvo Penta’s industrial engines create strong competitiveness for this type of global customers, and by utilizing the breadth and strength of the Volvo Group’s combined service offering, Volvo Penta can also offer efficient support in the form of global service and aftermarket services.

Volvo Penta contributes substantial synergies and economies of scale to the Group’s total diesel engine manufacturing. About one-fifth of volumes in the diesel engine plant in Sk?vde comprise engines delivered by Volvo Penta. More than half of the Group’s total volumes of 16-liter engines are delivered to Volvo Penta’s customers. Total market The total market for industrial engines was strong during the first half of the year, but demand in Europe and North America weakened toward year-end due to the debt crisis and global financial turmoil. Stable demand was noted in China and many other countries in Asia and South America. The total market for marine engines remained largely unchanged compared with the weak trend during recent years. European boat sales were adversely impacted by bailout packages and austerity measures in Southern Europe, particularly in Italy and Spain. Domestic boat sales in Italy, which is traditionally Volvo Penta’s largest marine market in Europe, are estimated to have decreased about 70% over five years. In North America, boat sales were consistently at historically low levels and as a result, total demand for both marine gasoline and diesel engines remained very low in the US. Product renewal With an aggressive focus on product development and product renewal, Volvo Penta has created a modern and highly competitive product range for industrial engines in recent years. The Volvo Group’s proven SCR technology enables

the industrial engine range to meet future emissions regulations, while Volvo Penta can also offer its customers significant installation benefits and favorable operating economy. On the marine side, Volvo Penta launched D6-400 in 2011 – the world’s most powerful diesel sterndrive. This 400-hp power package confirms Volvo Penta’s world-leading position in the diesel sterndrive segment. Earnings trend Sales amounted to SEK 8,859 M compared with SEK 8,716 M in the preceding year. Operating income was SEK 781 M compared with SEK 578 M in the preceding year. The operating margin was 8.8% (6.6). Earnings were positively impacted by increased sales, effective cost control and a favorable product mix. Production and investments In 2011, Volvo Penta completed the launch of a new logistics system that enables efficiency enhancements across the entire chain – from order to delivery. In recent years, Volvo Penta’s engine plant in Vara, Sweden has worked systematically to reduce its environmental impact and energy costs. The plant has accepted AB Volvo’s challenge to all plants within the Group to become energy-? efficient and phase out fossil fuels. Due to these efforts, all manufacturing in the Vara plant was carbon neutral from 2011.

Volvo Penta provides engines and power systems for leisure and commercial craft, as well as for industrial applications such as power generation and container trucks. Number of employees 1,338

Position on world market Volvo Penta is the world’s largest producer of diesel engines for leisure boats and a leading, independent producer of industrial engines.

Volvo Penta offers boat driving environments with focus on comfort and user-friendliness.

62

Net sales as percentage of Volvo Group sales
3% (3)

Net sales, SEK bn

Net sales by market
SEK M Europe North America South America Asia Other markets Total 2011 4,546 1,386 342 2,245 340 8,859 2010 4,507 1,500 335 2,008 366 8,716

8.9

11.7

07

11.5

08

09
8.2

10
8.7

8.9

11

Engine volumes Operating income (loss) and operating margin
No. of units Marine engines1 Industrial engines Total
1 Excluding outboard engines.

2011 20,074 21,137 41,211

2010 22,183 20,298 42,481

781

SEK M %

07
1,173 10.0

08
928 8.1

09
(230) (2.8)

10
578 6.6

11
781 8.8

Good EARNINGS
DESPITE WEAK MARKET
63

Board of directors’ report 2011

Volvo AERO

IMPROVED PROFITABILITY
Volvo Aero develops and manufactures advanced components for rocket engines, and civil and military aircraft engines. The company also carries out maintenance and repair on aircraft engines and stationary gas turbines.

Since the 1980s, Volvo Aero’s civil operations have grown steadily in terms of sales and significance, while the company’s military operations have decreased in a corresponding fashion to the present figure of about 5% of sales. Since Volvo Aero has an independent role, the company can sign agreements with all major manufacturers in the aircraft engine industry. As a result, Volvo Aero’s engine components are now found in more than 90% of all new large civil aircraft. Volvo Aero can now also claim the role as a designer of new engine components. The company has assumed a leading role in the field of light-weight structures, which is now gaining significance in the industry since less weight leads to lower fuel consumption and, in turn, lower emissions from aircraft – two vital issues for the airline industry. A key component in the light-weight venture is the composite company ACAB, which Volvo Aero acquired in 2007. During the year, ACAB secured a strategic contract with Korean Air concerning future collaboration in the areas of radomes, wing structures and other composite components. The continued success of Volvo Aero’s focus on high quality is confirmed by the fact that, in 2011, the single-engine military aircraft Gripen, with a Volvo RM12 engine, exceeded 160,000 hours of operation with no engine-related breakdowns or serious incidents. This is unique for all air forces worldwide.

Total market According to the airline industry’s international trade organization, IATA, passenger traffic increased 5.9% in 2011 while air-freight declined 0.7%, compared with the preceding year. Airbus and Boeing reported 2,529 new orders during the year, nearly a two-fold increase compared with the preceding year (1,269). The order book for large civilian aircraft rose from 6,995 aircraft at the end of 2010 to 8,208 at the end of 2011. The aircraft manufacturers delivered 1,011 aircraft in 2011, a 4% increase compared with the preceding year. Product renewal An agreement signed with aeroengine manufacturer Pratt & Whitney in June makes Volvo Aero a program partner in the PW1100G engine, which is built with geared turbofan technology. The engine will power the A320neo aircraft and has been listed by TIME Magazine as one of the 50 best inventions of 2011. The PW1100G engine was the most significant development in the aerospace industry during the year. Boeing’s new 787 aircraft, Dreamliner, commenced operation in 2011, as well as Boeing’s modernized version of the 747 (747-8). Both aircraft are offered with a GEnx engine, in which Volvo Aero is a program partner. Development of the Rolls-Royce engine, Trent XWB, for the A350 XWB Airbus aircraft continues as planned and several major milestones were passed during the year. Volvo Aero is a program partner in the engine.

Earnings trend Sales totaled SEK 6,509 M compared with SEK 7,708 M in the preceding year. Operating income was SEK 336 M compared with SEK 286 M in the preceding year. The operating margin was 5.2% (3.7). On March 31, Volvo Aero acquired all of Pratt & Whitney’s shares in Volvo Aero Norway and thus became the company’s sole shareholder. On November 21, AB Volvo announced – as part of its efforts to further refine the Group’s focus on heavy commercial vehicles – that it had initiated a process to divest Volvo Aero. Production and investments In just a few short years, Volvo Aero’s North American subsidiary, VACT, outside Hartford in Connecticut in the US, has established itself as one of the market’s leading players in the field of fan cases for large aircraft engines. The most recent example is a fan case for the GP7000 engine in the Airbus A380. The company already manufactures fan cases for the Trent 900 for the same aircraft. Similarly, VACT has signed a contract for manufacturing both of the engine options offered with the new Boeing 787: the Rolls-Royce Trent 1000, and GEnx 1B. Volvo Aero has also signed a contract concerning the manufacture of GEnx 2B fan cases for the new Boeing 747-8. Other assignments include the GE90 for the Boeing 777 and V2500 for the Airbus A320.

Volvo Aero offers advanced components for aircraft engines and space applications, with a focus on lightweight technology for reduced fuel consumption. Services for the aerospace industry and for stationary gas turbines are also offered. Number of employees 2,904

Position on world market Volvo Aero holds a leading position as an independent producer, with engine components in over 90% of all new, large commercial aircraft delivered in 2011.

64

Net sales as percentage of Volvo Group sales
2% (3)

Net sales by market Net sales, SEK bn
SEK M Europe North America South America Asia Other markets Total 2011 3,036 3,304 8 108 53 6,509 2010 3,768 3,599 27 233 81 7,708

6.5

07
7.6

08
7.6

09
7.8

10
7.7

6.5

11

Operating income (loss) and operating margin

336

07
529 6.9

08
359 4.7 SEK M

09
50 0.6 %

10
286 3.7

11
336 5.2

POSITION
IN MANy ENGINE PROGRAMS
65

ESTABLISHED

Board of directors’ report 2011

Volvo Financial services

Increased profitability and growth
Volvo Financial Services (VFS) supports the Volvo Group product range with financial services by delivering integrated, competitive financial solutions that meet customer and dealer needs.

By developing long-term relationships with customers and dealers, VFS seeks to establish a number one market position for the financing of Volvo Group products where we operate. When customers choose a vehicle or equipment supplier, the offer of supplementary services is an important factor. Customers desire solutions that can enable them to work more efficiently while maximizing profitability and reliability. VFS creates value for Volvo Group customers by providing solutions including financing, leasing and insurance. These services are of increasing importance to the Volvo Group’s total offer. Portfolio improvements Although global economies and financial markets continued to be characterized by uncertainty and volatility during 2011, the VFS portfolio showed strong improvements in customer repayment patterns as evidenced by continued reductions in customer delinquencies, defaults and repossessions. During this period, VFS also successfully reduced inventories of repossessed units as used truck and equipment demand increased. Reduced credit losses have primarily contributed to VFS’ increased profitability during the year. Volvo Group unit deliveries strengthened and financing market shares remained stable during 2011. As a result, VFS returned to growth with a disciplined approach to balancing new business development with risk and cost control. Market development VFS continues to strengthen and standardize its operations in ways that increase efficiency,

execution and speed to market. This approach ? has prepared VFS to capitalize on profitable growth opportunities with stable, efficient and scalable business platforms. In the mature markets of North America and Europe, VFS continues to improve operational leverage and optimize results with standard technologies, solutions and shared services. In developing markets such as China, Russia and Brazil, VFS continues to make investments in prudent growth with a focus on strengthening local operations and maintaining a disciplined risk management structure. Downturn preparation and readiness are always in focus for such markets regardless of the current business environment. In India, VFS serves the market with a branded private label alliance in support of Volvo Group unit sales. Customer finance operations Total new financing volume in 2011 amounted to SEK 44.8 billion (35.1). Adjusted for changes in exchange rates, new business volume increased by 35% compared to 2010 as a result of increased sales volumes of the Volvo Group products and stable penetration levels. In total, 49,757 new Volvo vehicles and machines (34,522) were financed during the year. In the markets where financing is offered, the average penetration rate was 25% (25). As of December 31, 2011, the credit portfolio was SEK 95,544 M (84,550). During 2011 the credit portfolio increased by 13.8% (decrease: 4.4), adjusted for exchange-rate movements. The funding of the credit portfolio is matched in

terms of maturity, interest rates and currencies in accordance with Volvo Group policy. For further information see note 4. The operating income for the year amounted to SEK 942 M compared to SEK 167 M in the previous year. Return on shareholders’ equity was 7.3% (0.4). The equity ratio at the end of the year was 9.1% (9.0). The improvement in profitability is driven mainly by lower credit provisions and higher earning assets. During the year, credit provision expenses amounted to SEK 682 M (1,438) while write-offs of SEK 804 M (1,460) were recorded. The write-off ratio for 2011 was 0.93% (1.65). At the end of December 31, 2011, credit reserves were 1.33% (1.69%) of the credit portfolio. As a consequence of the strong volume growth in Brazil, VFS executed on its second large portfolio syndication in the second quarter of 2011. This transaction of approximately SEK 4 billion of the Brazilian credit portfolio served as an important risk mitigation measure and successfully freed up capital for reinvestment in the country. The transaction generated a positive impact on operating income of SEK 45 M.

Conducts operations in customer and dealer financing. Number of employees 1,323

Position on world market Volvo Financial Services operates exclusively to support the sales and leasing of vehicles and machines which are produced by the other business areas, enhancing their competitiveness.

66

Net sales as percentage of Volvo Group sales
3% (3)

Penetration rate1, % Operating income (loss) SEK M

942

29 27
Volvo Trucks

17 19
Renault Trucks

20 20
Mack Trucks

11 15
Buses

35 35
Volvo CE

12 14
UD Trucks

1,649 1,397 (680)

07

08

09

167

10

942

11

10

11

Distribution of credit portfolio

1 Share of unit sales financed by Volvo Financial Services in relation to total number units sold by the Volvo Group in markets where financial services are offered.

Volvo Trucks 44% Volvo CE 27% Renault Trucks 12% Mack Trucks 8% Buses 5% UD Trucks 3% Other 1%

IMPORTANT
PART OF THE TOTAL SOLUTION
67

AN

Board of directors’ report 2011

Balancing good returns and financial stability
The purpose of Volvo’s long-term financial strategy is to ensure the best use of Group resources in providing shareholders with a favorable return and offering creditors financial stability.
Volvo’s goal is a strong and stable financial position ? A long-term competitive market position requires availability of capital to implement investments. The financial strategy ensures that the Group’s capital is used in the best possible manner by: ? balancing shareholders’ expectations on favorable returns with creditors’ demands for financial stability ? strong and stable credit ratings ? diversified access to financing from the capital markets ? margin in the balance sheet to cope with a strong decline in the economy ? financing at competitive conditions to customers. The goal concerning capital structure is defined as the financial net debt for the Industrial Opera? tions and it shall under normal circumstances be below 40% of shareholders’ equity. Volvo carefully monitors the trend of financial key ratios to confirm that the financial position is in line with the Group’s policy. The financial key ratios include order intake as well as operational and financial development. The good demand for the Group’s products continued in 2011 and has contributed to the improvement of the Volvo Group’s profitability and financial position. The financial net debt in Industrial Operations declined during the year from 37.4% of shareholders’ equity to 25.2%. Volvo strives for strong, stable credit ratings The Volvo Group has continual meetings with the credit rating agencies Moody’s and Standard & Poor’s (S&P) to update them on the company’s development. These meetings contribute to the credit rating agencies’ ability to assess the Group’s future ability to repay loans. A high longterm credit rating provides access to additional sources of financing and lower borrowing costs. In April, 2011, S&P changed Volvo’s credit rating from BBB-/Baa3 with stable outlook to BBB/Baa2 with stable outlook. The change was attributable to a change in Volvo’s credit measurement. Moody’s rating of Volvo is BBB/Baa2 with stable outlook since July 24, 2009. Funding Volvo works actively for a good balance between short and long-term loans, as well as borrowing preparedness in the form of credit facilities, to satisfy the Volvo Group’s long-term financing needs. At the end of 2011, the Group had the equivalent of SEK 37.2 billion in cash and cash equivalents and short-term investments. In addition, the Group had SEK 33.4 billion in granted but unutilized credit facilities.

Financial strategy

Credit rating at February 6, 2012
Short-term Long-term

Moody’s Standard & Poor's DBRS (Canada) R&I (Japan)

P-2 A2 R-2 (high) a-1

Baa2 stable BBB stable – A- positive

68

Risks and uncertainties

Managed risk-taking
All business operations involve risk – managed risk-taking is a condition of maintaining a sustained favorable profitability.
Risk may be due to events in the world and can affect a given industry or market. Risk can be specific to a single company. At Volvo work is carried out daily to identify, measure and manage risk – in some cases the Group can influence the likelihood that a risk-related event will occur. In cases in which such events are beyond the Group’s control, the Group strives to minimize the consequences. The risks to which the Volvo Group are exposed are classified into three main categories: ? External-related risks – such as the cyclical nature of the commercial vehicles business, intense competition, changes in prices for commercial vehicles and government regulations ? Financial risks – such as currency fluctuations, interest levels fluctuations, valuations of shares or similar instruments, credit risk and liquidity risk. ? Operational risks – such as market reception of new products, reliance on suppliers, protection and maintenance of intangible assets, complaints and legal actions by customers and other third parties and risk related to human capital. External-related risk The commercial vehicles industry is cyclical The Volvo Group’s markets undergoes significant changes in demand as the general economic environment fluctuates. Investments in infrastructure, major industrial projects, mining and housing construction all impact the Group’s operations as its products are central to these sectors. Adverse changes in the economic conditions for the Volvo Group’s customers may also
Currencies

impact existing order books through cancellations of previously placed orders. The cyclical demand for the Group’s products makes the financial result of the operations dependable on the Group’s ability to react to changes in demand, in particular to the ability to adapt production levels and production and operating expenses. Intense competition Continued consolidation in the industry is expected to create fewer but stronger competitors. Our major competitors are Daimler, Paccar, Navistar, MAN, Scania, Caterpillar, Komatsu, Cummins and Brunswick. In recent years, new competitors have emerged in Asia, particularly in China. These new competitors are mainly active in their domestic markets, but are expected to increase their presence in other parts of the world. Prices may change The prices of commercial vehicles have, at times, changed considerably in certain markets over a short period. This instability is caused by several factors, such as short-term variations in demand, shortages of certain component products, uncertainty regarding underlying economic conditions, changes in import regulations, excess inventory and increased competition. Overcapacity within the industry can occur if there is a lack of demand, potentially leading to increased price pressure. Extensive government regulation Regulations regarding exhaust emission levels, noise, safety and levels of pollutants from production plants are extensive within the industry.

Most of the regulatory challenges regarding products relate to reduced engine emissions. The Volvo Group is a significant player in the commercial vehicle industry and one of the world’s largest producers of heavy-duty diesel engines. The product development capacity within the Volvo Group is well consolidated to be able to focus resources for research and development to meet tougher emission regulations. Future product regulations are well known, and the product development strategy is well tuned to the introduction of new regulations. Financial risk In its operations, the Volvo Group is exposed to various types of financial risks. Group-wide policies, which are updated and decided upon annually, form the basis of each Group company’s manage? ment of these risks. The objectives of the Group’s policies for management of financial risks are to optimize the Group’s capital costs by utilizing economies of scale, to minimize negative effects on income as a result of changes in currency or interest rates, to optimize risk exposure ? and to clarify areas of responsibility. Monitoring and control that established policies are adhered to is continuously conducted. Information about key aspects of the Group’s system for internal controls and risk management in conjunction with the financial reporting is provided in the Corporate Governance Report on page 150–159. Most of the Volvo Group’s financial transactions are carried out through Volvo’s ? in-house bank, Volvo Treasury, that conducts its operations within established risk mandates and limits. Credit risks are mainly managed by the different business areas.

Interest rates in Sweden, Europe and the U.S.
Sweden Europe The U.S.
Source: Reuters Source: Reuters Government bonds, 10 year benchmarks

01 10.3 9.2 7.9

02 9.7 9.1 7.3

03 8.0 9.1 6.7

04 7.3 9.1 6.5

05 7.5 9.2 6.7

06 7.4 9.3 5.8

07 6.8 9.3 5.8

08 09 7.8 7.2 10.9 10.4 8.6 7.7

10 6.7 9.0 8.3

11 6.9 8.9 9.0

SEK/USD SEK/EUR SEK/100 JPY

01 5.1 4.8 5.0

02 5.3 4.8 4.5

03 4.6 4.1 4.0

04 4.4 4.0 4.2

05 3.4 3.4 4.3

06 3.7 3.8 4.8

07 4.3 4.3 4.0

08 2.4 2.9 2.2

09 3.4 3.4 3.8

10 3.3 3.0 3.3

11 1.6 1.8 1.9

% % %

69

Board of directors’ report 2011

The nature of the various financial risks and objectives and the policies for the management of these risks are described in detail in notes 4 and 30. Various aspects of financial risk are described briefly in the following paragraphs. Volvo’s accounting policies for financial instruments are described in note 30. The overall impact on a company’s competitiveness is also affected however by how various macro-economic factors interact. Interest-related risk Interest-related risk includes risks that changes in interest rates will impact the Group’s income and cash flow (cash-flow risks) or the fair value of financial assets and liabilities (price risks). Currency-related risk More than 90% of the net sales of the Volvo Group are generated in countries other than Sweden. Changes in exchange rates have a direct impact on the Volvo Group’s operating income, balance sheet and cash flow, as well as an indirect impact on Volvo’s competitiveness, which over time affects the Group’s earnings. Credit-related risk An important part of the Group’s credit risk is related to how the financial assets of the Group have been placed. The majority are placed in interest-bearing bonds issued by Swedish real estate financing institutions. Liquidity risk Volvo ensures its financial preparedness by always maintaining a certain portion of revenues in liquid assets. Market risk from investments in shares or similar instruments The Volvo Group is indirectly exposed to market risks from shares and other similar instruments, as a result of managed capital transferred to independent pension plans being partly invested in instruments of these types. Operational risk The profitability depends on successful new products The Volvo Group’s long-term profitability depends on the Company’s ability to successfully launch and market its new products. Product life cycles continue to shorten, putting increased focus on the success of the Group’s product development.

Reliance on suppliers Volvo purchases raw materials, parts and components from numerous external suppliers. A significant part of the Group’s requirements for raw materials and supplies is filled by singlesource suppliers. The effects of delivery interruptions vary depending on the item or component. Certain items and components are standard throughout the industry, whereas others are internally developed and require unique tools that are time-consuming to replace. The Volvo Group’s costs for raw materials and components can vary significantly over a business cycle. Cost variations may be caused by changes in world market prices for raw materials or by an inability of our suppliers to deliver. Intangible assets AB Volvo owns or otherwise has rights to patents and brands that refer to the products the Company manufactures and markets. These have been acquired over a number of years and are valuable to the operations of the Volvo Group. Volvo does not consider that any of the Group’s operations are heavily dependent on any single patent or group of patents. Through Volvo Trademark Holding AB, AB Volvo and Volvo Car Corporation jointly own the Volvo brand. AB Volvo has the exclusive right to use the Volvo name and trademark for its products and services. Similarly, Volvo Car Corporation has the exclusive right to use the Volvo name and trademark for its products and services. The Volvo Group’s rights to use the Renault brand are restricted to the truck operations only and are regulated by a license from Renault s.a.s., which owns the Renault brand. Complaints and legal actions The Volvo Group could be the target of complaints and legal actions initiated by customers, employees and other third parties alleging health, environmental, safety or business related issues, or failure to comply with applicable legislation and regulations. Information about legal proceedings involving entities within the Volvo Group are found in note 24 Contingent Liabilities. Even if such disputes are resolved successfully, without having adverse financial consequences, they could negatively impact the Group’s reputation and take up resources that could be used for other purposes. Risk related to human capital A decisive factor for the realization of the Volvo Group’s vision is our employees and their

? nowledge and competence. Future development k depends on the company’s ability to maintain its position as an attractive employer. To this end, the Volvo Group strives for a work environment in which energy, passion and respect for the individual are guiding principles. Every year a Groupwide survey is conducted, and according to the survey the share of satisfied employees has been on a high level in recent years. Short-term risk factors An increase in demand could potentially result in delivery disturbances due to suppliers’ financial instability or shortage of resources. Uncertainty regarding customers’ access to the financing of products in emerging markets might have a negative impact on demand. Volvo verifies annually, or more frequently if necessary, the goodwill value of its business areas and other intangible assets for possible impairment. The size of the overvalue differs between the business areas and they are, to a varying degree, sensitive to changes in the business environment. Instability in the business recovery and volatility in interest and currency rates may lead to indications of impairment. The reported amounts for contingent liabilities reflect a part of Volvo’s risk exposure, see note 24 for contingent liabilities. Contractual conditions related to take over bids Some of AB Volvo’s long term loan agreements contain conditions stipulating the right for a bondholder to request repayment in advance under certain conditions following a change of the control of the company. In Volvo’s opinion it has been necessary to accept those conditions in order to receive financing on otherwise acceptable terms. Provisions stipulating that an agreement can be changed or terminated if the control of the company is changed are also included in some of the agreements whereby Renault Trucks’ has been given the right to sell Renault s.a.s.’ and Nissan Motor Co. Ltd’s light-duty trucks as well as in some of the Group’s purchasing agreements.

 urther information F Note 27 Personnel contains information concerning rules on severance payments applicable for the Group Executive Team and certain other senior executives.  Note 4 and 30 contain information regarding financial risks as well as goals and policies in financial risk management.  Further risk information is provided in note 24.

70

Content

Financial information 2011

page Financial performance Financial position Cash-flow statement Changes in consolidated Shareholders’ equity Notes to consolidated financial ? statements Parent Company AB Volvo Proposed remuneration policy Proposed disposition of unappropriated earnings Audit report for AB Volvo Eleven-year summary 72 76 78 80 81 126 138 139 140 141

Note
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

The Volvo Group
Accounting principles Key sources of estimation uncertainty Acquisitions and divestments of shares in subsidiaries Goals and policies in financial risk management ? Shares and participations Segment reporting Income Other operating income and expenses Other financial income and expenses Income taxes Minority interests Intangible assets Tangible assets Leasing Customer-financing receivables Receivables Inventories Marketable securities and liquid funds Shareholders’ equity Provisions for post-employment benefits ? Other provisions Liabilities Assets pledged Contingent liabilities Transactions with related parties Government grants Personnel Fees to the auditors Cash-flow Financial instruments

page
81 83 84 86 91 94 96 97 97 98 99 100 102 104 105 106 107 108 108 109 113 115 116 116 117 118 118 121 121 122

Note
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Parent Company
Accounting principles Intra-Group transactions Administrative expenses Other operating income and expenses Income from investments in Group companies Income from investments in associated companies ? Income from other investments Interest income and expenses Other financial income and expenses Allocations Income taxes Intangible and tangible assets Investments in shares and participations ? Other current ? receivables Untaxed reserves Provisions for pensions Other provisions Non-current liabilities Other current liabilities Contingent liabilities Cash-flow

page
130 130 130 131 131 131 131 131 131 131 132 132 133 133 133 134 134 134 134 134 134

71

Financial information 2011

Financial performance

Improved profitability
For the full year 2011, the Volvo Group generated the highest net sales, the best operating income and the highest operating margin ever.1

Income statements Volvo Group
Industrial operations SEK M 2011 2010 Customer Finance 2011 2010 Eliminations 2011 2010 Volvo Group Total 2011 2010

Net sales Cost of sales Gross income Research and development expenses Selling expenses Administrative expenses Other operating income and expenses Income from investments in associated companies ? Income from other investments Operating income Interest income and similar credits Interest expenses and similar charges Other financial income and expenses Income after financial items Income taxes Income for the period* * Attributable to: Equity holders of the parent company Minority interests ? Basic earnings per share, SEK Diluted earnings per share, SEK

Note 6,7 303,589 (231,516) 72,073 Note 6 ? ? ?Note 8 Note 5,6 ?Note 5 ? ? ? Note 9 ? Note 10 (13,276) (24,383) (7,105) (1,045) (82) (225) 25,957 644 (2,912) 297 23,986 (6,490) 17,496 ? ? ? ? ? ?

257,375 ? (197,480) ? 59,895 ? (12,970) (22,649) (5,640) (659) ? ? ? ?

8,883 (5,693) 3,190 0 (1,618) (27) (603) 0 0 942 0 0 0 942 (323) 619 ? ? ? ? ? ?

9,031 ? (5,974) ? 3,057 ? 0 (1,500) (25) (1,365) ? ? ? ?

(2,104) 2,104 0 0 0 0 0 0 0 0 (37) 37 0 0 0 0 ? ? ? ? ? ?

(1,658) ? 310,367 1,658 ? (235,104) 0 ? 75,263 0 0 0 0 ? ? ? ? (13,276) (26,001) (7,132) (1,649) (81) (225) 26,899 608 (2,875) 297 24,929 (6,814) 18,115 17,751 364 18,115 8.76 8.75

264,749 (201,797) 62,952 (12,970) (24,149) (5,666) (2,023) (86) (58) 18,000 442 (3,142) 213 15,514 (4,302) 11,212 ? 10,866 346 11,212 5.36 5.36

(86) ? (57) ? 17,834 ? 544 (3,244) 213 15,347 ? ? ? ?

0 ? 0 ? 167 ? 0 0 0 167 ? ? ? ?

0 ? 0 ? 0 ? (102) 102 0 0 ? ? ? ?

(4,168) ? 11,179 ? ? ? ? ? ? ?

(134) ? 32 ? ? ? ? ? ? ?

0 ? 0 ? ? ? ? ? ? ?

Note 11 Note 19 Note 19

Other comprehensive income
SEK M 2011 2010

Income for the period

18,115 (980) (3) (30) 39 ?Note 19 (144) (1,118) 16,997

11,212 (3,891) 113 (95) 148 (156) (3,881) 7,331 ?

Translation differences on foreign operations Translation differences on hedge instruments of net investment in foreign operations Accumulated translation difference reversed to income Available-for-sale investments Change in cash flow hedge reserve
Other comprehensive income, net of income taxes Total comprehensive income for the period

Attributable to: Equity holders of the Parent Company Minority interests ?
1 Since 1999, when the Group’s operation was directed towards commercial vehicles.

16,551 446 16,997

7,016 315 7,331

72

The Volvo Group
Net sales Net sales for the Volvo Group increased by 17% to SEK 310,367 M in 2011, compared with SEK 264,749 M in the preceding year. Operating income Volvo Group operating income improved to SEK 26,899 M (18,000). Operating income for the Industrial Operations increased to SEK 25,957 M compared with SEK 17,834 M in the preceding year. The Customer Finance operations’ operating income rose to SEK 942 M (167). Net financial items Net interest expense was SEK 2,267 M, compared with SEK 2,700 M in the preceding year. During the year, market valuation of derivatives, mainly used for eliminating interest exposure in the customer financing portfolio, had a positive effect on Other financial income and expenses in an amount of SEK 544 M. During 2010 the impact was positive and amounted to SEK 871 M. The currency in Venezuela was devalued twice during 2010, which negatively impacted Other financial income and expenses by SEK 274 M in 2010. Income taxes The tax expense for the year amounted to SEK 6,814 M (4,302) corresponding to a tax rate of 27% (28). Income for the periodSEK and earnings per m share The income for the period amounted to SEK 18,115 M (11,212), corresponding to diluted earnings per share of SEK 8.75 (5.36). The return on shareholders’ equity was 23.1% (16.0).

Net sales by business area , SEK M Trucks Construction Equipment Buses Volvo Penta Volvo Aero Eliminations and other Industrial Operations1 Customer Finance Reclassifications and eliminations Volvo Group

2011

2010

%

Operating income (loss) by business area, SEK M Trucks Construction Equipment Buses Volvo Penta Volvo Aero Eliminations and other Industrial Operations Customer Finance Volvo Group

2011

2010

200,703 64,987 22,289 8,859 6,509 242 303,589 8,883 (2,104) 310,367

167,305 53,810 20,516 8,716 7,708 (680) 257,375 9,031 (1,658) 264,749

20 21 9 2 (16) ?18 (2) ?17

18,260 6,653 1,036 781 336 (1,109) 25,957 942 26,899

10,112 6,180 780 578 286 (102) 17,834 167 18,000

1 Adjusted for acquired and divested units and changes in currency rates, net sales increased by 20%. Operating margin , % Trucks Construction Equipment Buses Volvo Penta Volvo Aero Industrial Operations Volvo Group
2011 2010

Change in operating income , SEK bn Operating income 2010 Gross income Recognition of VAT credits in Brazil relating to previous years Disturbances in operations in Japan as an effect of the earthquake and tsunami ? Result?from divestments of companies?in 2010 Changes in currency exchange rates, Industrial operations Write-down of shares listed in Japan Higher capitalization of development costs Higher research and development expenditures Tax credit for research and development activities Higher selling and administrative expenses Lower credit losses? Other Operating income 2011 18.0 19.4 0.6 (0.7) 0.2 (5.2) (0.2) 1.0 (2.0) 0.3 (4.7) 0.6 (0.4) 26.9

9.1 10.2 4.6 8.8 5.2 8.6 8.7

6.0 11.5 3.8 6.6 3.7 6.9 6.8

Net sales, SEK bn

Operating income, SEK M 2010 2011

07 285

08 304

09 218

10 265

11 310

Q1 Q2 Q3 Q4 2,799 4,770 4,913 5,518

Q1 Q2 Q3 Q4 6,522 7,648 5,774 6,955

73

Financial information 2011

Industrial Operations
In 2011, net sales for the Volvo Group’s Industrial Operations increased by 18% to SEK 303,589 M (257,375). Compared with 2010, sales increased in all of the Group’s market areas. Sales increased strongly in Eastern Europe and had a very positive development in North America, South America and Asia. In Western Europe demand weakened towards the end of the year. Considerable earnings improvement In 2011, the operating income for the Volvo Group’s Industrial Operations amounted to SEK 25,957 M compared to SEK 17,834 M in the preceding year. The operating margin for the Industrial Operations amounted to 8.6% (6.9). The earnings improvement is the result of increased sales and improved cost coverage in the industrial system, as an effect of increased production levels. In 2011, research and development expenses amounted to SEK 13,276 M (12,970). The continued high cost level is primarily a consequence of projects relating to new emission regulations in Europe and South America and the development of products for the growth markets. Selling expenses increased by 8% and administration expenses by 26%. Since return on equity was 23,1%, SEK 550 M was provisioned for profit-sharing to employees. Impact of exchange rates on operating income The combined effect of changed exchange rates had a negative effect on operating income of approximately SEK 5.2 billion in 2011, compared with 2010. This is mainly attributable to that the USD was weak during most of 2011.

Income Statement Industrial Operations, SEK M Net sales Cost of sales Gross income Gross margin, % Research and development expenses Selling expenses Administrative expenses Other operating income and expenses Income from investments in associated companies Income from other investments Operating income (loss) Industrial Operations Operating margin, %

2011

2010

Net sales by market area, SEK M Western Europe Eastern Europe North America South America Asia Other markets Total Industrial Operations

2011

2010

%

303,589 (231,516) 72,073 23.7 (13,276) (24,383) (7,105) (1,045) (82) (225) 25,957 8.6

257,375 (197,480) 59,895 23.3 (12,970) (22,649) (5,640) (659) (86) (57) 17,834 6.9

97,925 20,298 58,253 34,013 73,017 20,083 303,589

87,241 12,570 45,409 27,876 65,072 19,207 257,375

12 61 28 22 12 5 18

Impact of exchange rates on operating income
Compared with preceding year, SEK M

Operating net flow per currency
Local currency, million 2011 2010

Net sales1 Cost of sales Research and development expenses Selling and administrative expenses Total effect of changes in exchange rates on operating income

(20,286) 13.280 397 1.408 (5.201)

USD EUR GBP CAD JPY (x100)

3,970 57 555 397 (218)

2,410 373 405 241 (103)

1 Group sales are reported at monthly spot rates and the effects of currency hedges are reported among Cost of sales. Research and development costs Research and development costs, SEK bn Research and development costs, % of net sales

07 11.1 3.9

08 14.3 4.9

09 13.2 6.3

10 13.0 5.0

11 13.3 4.4

74

Customer Finance Operations
Total new financing volume in 2011 amounted to SEK 44.8 billion (35.1). Adjusted for changes in exchange rates, new business volume increased by 35% compared to 2010 as a result of increased sales volumes of the Volvo Group products and stable penetration levels. In total, 49,757 new Volvo vehicles and machines (34,522) were financed during the year. In the markets where financing is offered, the average penetration rate was 25% (25). As of December 31, 2011, the credit portfolio was SEK 95,544 M (84,550). During 2011 the credit portfolio increased by 13.8% (decrease: 4.4), adjusted for exchange-rate movements. The funding of the credit portfolio is matched in terms of maturity, interest rates and currencies in accordance with Volvo Group policy. For further information see note 15. The operating income for the year amounted to SEK 942 M compared to SEK 167 M in the previous year. Return on shareholders’ equity was 7.3% (0.4). The equity ratio at the end of the year was 9.1% (9.0). The improvement in profitability is driven mainly by lower credit provisions and higher earn

相关文章:
沃尔沃 升级安全卡车标准
FH 碰撞测试实验 ● 零事故——沃尔沃卡车的安全理念 毫无疑问,沃尔沃卡车是安全的代名词。最安全的车体,优秀的操作性和可视性,高效的驾 驶员培训体系,先进的...
volvo沃尔沃卡车
文档信息举报文档 kings_men贡献于2011-09-06 0.0分 (0人评价)暂无用户评价 我要评价 贡献者等级:初试锋芒 二级 格式:doc 关键词:沃尔沃卡车 ...
营销案例VOLVO卡车中国传奇
除去产品的高品质不说, 沃尔沃卡车在对每位潜在客户的运营状况进行细致深入的分析...文档贡献者 seisure 贡献于2011-12-01 1/2 相关文档推荐 2012中国汽车十大...
沃尔沃卡车重新定义“高效运输”共商物流发展之道
龙源期刊网 http://www.qikan.com.cn 沃尔沃卡车重新定义“高效运输”共商物流发 展之道 作者: 来源:《驾驶园》2015 年第 09 期 8 月 26 日,第七届...
对沃尔沃新FH系列卡车详细解读
沃尔沃新FH系列卡车详细解读_计算机硬件及网络_IT/计算机_专业资料 暂无评价|0人阅读|0次下载|举报文档 对沃尔沃新FH系列卡车详细解读_计算机硬件及网络_IT/...
沃尔沃卡车全球保修政策
VTC 国际保修 VTC International warranty 沃尔沃卡车公司对于本保修证书中规定车辆的保修包括: 交车时存在的或在保修期内产生的材料缺陷或 制造工艺缺陷。 Volvo ...
沃尔沃卡车2014“高效先锋评选”升级
龙源期刊网 http://www.qikan.com.cn 沃尔沃卡车 2014“高效先锋评选”升级 作者:路智军 来源:《驾驶园》2014 年第 07 期 6 月 5 日,“驾驭梦想 高效先行...
吉利收购沃尔沃绩效分析
吉利收购沃尔沃绩效分析_经济/市场_经管营销_专业资料。吉利并购沃尔沃绩效分析 14...年年报 2010 年年报 2011年报 2012 年年报 长期偿债能力分析: 资产负债率...
沃尔沃广告赏析
沃尔沃《Epic Splits》广告赏析 广告以 Enya 的《Only Time》作为背景音乐,53 岁的好莱坞动作巨星尚格云顿 站在两辆平行的新款沃尔沃 FM 卡车的后视镜上,镜头逐渐...
沃尔沃全动感服务完全资料
我们将持续保障沃尔沃卡车全年运营 95%以上的高完好率,时刻为您的财富与梦想保 ...文档贡献者 哈马兰士 贡献于2011-07-13 专题推荐 2014教师资格材料分析辅... ...
更多相关标签: