Volvo 1997 Annual Report Download - page 28

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26
Financial review by business area
In the medium-heavy segment (7,5 to 15,9 tons total weight), Volvo is retain-
ing its strategy of having a product program under the Volvo name, with key
components produced by Volvo, while cooperation with Mitsubishi in this seg-
ment will lead to a common model platform in the future.
Much higher volum e of sales and deliveries in North America
Volvo’s total deliveries of trucks in Europe in 1997 amounted to 34,460
(34,970) units, a decrease of 1%. Deliveries in Western Europe declined by 4%,
while shipments to Eastern Europe rose 29%. During the year the European
market was characterized by severe competition.
Deliveries in North America rose 24%, to 20,900 (16,850) units, due in parti-
cular to favorable market acceptance of the new Volvo VN and 770 models.
Deliveries in South America were up 40%, to 6,970 units, in a sharply increased
total market that leveled off in the fourth quarter.
Volvo’s deliveries in Asia and other markets declined by a total of 3%, to
6,650 trucks.
Lower m argins on European operations
affected operating income
Trucks’ operating income amounted to SEK 1,812 M (878). The trend of results
in North America during the year was positive, with a gradually declining loss
that was converted to a profit in the fourth quarter. The profitability of the
European business was acceptable but earnings were affected by intense com-
petition and depressed margins. The results of the South American operations
were positive. Trucks’ operating margin was 3.6% (2.0) and its return on
operating capital was 18% (10).
High utilization of production capacity
Trucks produced 69,720 (62,750) medium-heavy and heavy trucks in 1997.
Utilization of capacity in the assembly plants and in production of components
during the year was high in Europe as well as in North and South America.
Growth of the North Am erican operations
Trucks’ operations in North America in 1997 were characterized by stable growth
and good market acceptance of the Volvo VN models. Comprehensive measures
were taken to improve profitability. Notable measures included a change in
management structure and the concentration of all production in the assembly
plant in New River Valley. O ther programs were focused on the dealer network
and on strengthening sales-financing companies and customer relations.
Volvo enters the Prem ium Sleeper segm ent
In 1997, as a further development of the Volvo VN, the Group introduced the
Volvo 770 for the North American market. The 770 model has a more spacious
cab that is fully equipped with a microwave oven and refrigerator/freezer, among
other amenities, to create the best possible environment for the operator.
With the introduction of the Volvo 770, Volvo is taking a major step into the
“Premium Sleeper” segment in North America. Premium Sleepers are the largest
trucks that are specially designed for so-called owner-operators. The segment has
been one of the fastest-growing in North America in recent years.
Market trends, trucks ≥16 tons
Registrations of new trucks, thousands of units
97
959493
100
200
300
400
500
800
700
600
Japan
655
174
190
57
234
96
655
171
205
53
226
Western Europa
North America
Other Countries
655
174
190
57
234
655
171
205
53
226
Total
The total market for Class
8 trucks in North Am erica
continued to grow,
amounting to approxim a-
tely 205,000 vehicles, whi-
le the total market in
Western Europe declined
slightly, to 171,000 units.
Dem and rose in South
Am erica, and also in Eas-
tern Europe. The financial
turbulence and currency
problems that characteri-
zed Southeast Asia resul-
ted in lower sales of
trucks in this region.
Num ber of trucks invoiced
Number 1995 1996 1997
Western Europe 32,330 32,310 31,030
Eastern Europe 1,830 2,660 3,430
North America 27,090 16,850 20,900
South America 7,800 4,980 6,970
Asia 5,270 4,850 4,710
Other countries 2,170 2,030 1,940
Total 76,490 63,680 68,980
SEK million 1995 1996 1997
Net sales 51,027 44,275 50,840
Operating income 5,073 878 1,812
Operating margin, % 9.9 2.0 3.6
Trucks’ largest m arkets
(truck s ≥16 tons)
Volvo trucks Market share,
registered %
1996 1997 1996 1997
USA 15,460 17,290 9.1 9.7
Brazil 3,570 4,510 24.3 23.3
Great Britain 5,780 4,420 19.2 16.7
France 4,770 4,130 13.7 13.5
Germany 3,270 3,090 8.5 7.5
A complete 11-year summary is shown on pages 76–87.