Volvo 1997 Annual Report Download - page 53

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26 Assets pledged
1995 1996 1997
Property, plant and equipment
– mortgages 552 544 298
Chattel mortgages 372 362 862
Receivables 863 922 1,335
Inventories 372 36 1,266
Cash, marketable securities 1,624 2,636 2,893
Other 1,651 2,003 89
Total 5,434 6,503 6,743
The liabilities for which the above assets were pledged amounted at
year-end to 9,924 (4,527; 4,881). Pledged assets in subsidiaries are
included in Other in the amount of — (1,750; 1,519).
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27 Contingent liabilities
1995 1996 1997
Discounted bills 530 368 628
Guarantees:
Bank loans and trade bills
– associated companies 256 316 22
Bank loans –
customers and others 1,804 1,873 1,531
Recourse obligations 1,252 515 123
Other contingent liabilities 3,608 3,116 3,102
Total 7,450 6,188 5,406
The amount shown for guarantees to customers and others pertain-
ing to bank loans, 1,531 (1,873: 1,804) includes the unutilized por-
tion of credit facilities, 46 (11; 40) Recourse obligations pertain to
receivables that have been transferred (sales-financing operations),
less reduction for recognized credit risks. Other contingent liabilities
include 699 (528; 940) related to claims in connection with the tax
audit of the Volvo Group, for which provisions were not deemed
necessary. In addition, suit against Volvo Car Corporation pertaining
to the model designations of passenger cars in Puerto Rico has been
recorded as a contingent liability.
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28 Leasing
Effective in 1997, Volvo is applying Recommendation RR6,
“Accounting for leasing contracts”, of the Swedish Financial
Accounting Standards Council. See Note 1 under “Changes in
accounting principles.”
At December 31, 1997, future rental income from noncancellable
financial and operating leases amounted to 19,991 (13,051; 9,509),
of which 19,322 (12,745; 8,488) pertains to sale-financing compani-
es. Future rental income is distributed as follows:
Operational Financial
leasing leasing
1998 2,847 3,526
1999 2,610 3,050
2000 2,206 2,405
2001 1,042 1,236
2002 263 503
2003 or later 208 95
Total 9,176 10,815
At December 31, 1997, future rental costs related to noncancellable
leases amounted to 6,356 (7,269; 7,122), of which 2,548 (2,170;
1,173) in sales-financing companies. Rental expenses in 1997
amounted to 2,002 (1,782; 1,401).
Future rental payments are distributed as follows:
Rental
payments
1998 1,861
1999 1,404
2000 1,029
2001 832
2002 687
2003 or later 543
Total 6,356
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29 Personnel
In accordance with a resolution adopted at the Annual General
Meeting, the fee paid to the Board of Directors is a fixed amount of
SEK 2,260,000, to be distributed as decided by the Board. The
Chairman of the Board, Håkan Frisinger, receives a fee of SEK
850,000.
During 1997, Leif Johansson, President and Chief Executive
Officer since April 23, 1997, received 5,164,383 in salary and other
benefits amounting to SEK 121,106. His bonus for 1997 is SEK
692,300 (SEK 1,000,000 on an annual basis). Leif Johansson is elig-
ible to take early retirement on pension at age 55. A pension is earned
gradually over the years up to the employee’s retirement age and is
fully earned at age 55. During the period between the ages of 55
and 65, he would receive a pension equal to 70% of his pension-
qualifying salary, and a pension amounting to 50% of his pension-
qualifying salary after reaching the age of 65. Leif Johansson has a
twelve month notice of termination from AB Volvo and six months on
his own initiative. If Leif Johansson’s employment is terminated by
AB Volvo, he is entitled to a severance payment equal to two years’
salary, plus bonus.
During 1997, Sören Gyll, President and Chief Executive Officer up
to and including April 22, 1997, received SEK 6,158,506 in salary
and other benefits amounting to SEK 432,783. A payment of SEK
3,180,000 was also made to a pension fund on behalf of Sören Gyll,
equal to the bonus to which Sören Gyll was entitled. Sören Gyll con-
tinued to serve the Group until December 31, 1997 and then retired
on pension. During the period between the ages of 57 and 65, he
will receive a pension amounting to 70% of his salary, and upon
reaching the age of 65 he will receive a pension amounting to 50%
of his salary.
The Group Executive Committee, members of the executive com-
mittees of subsidiaries and a number of key persons receive bonuses
in addition to salaries. Bonuses are based on the performance of the
Volvo Group and/ or of the executive’s company, in accordance with
the bonus system established by the Volvo Board in 1993 and revis-
ed in 1996 and 1997. A bonus may, in principle, amount to a maxi-
mum of 50% of an executive’s annual salary.
The employment contracts of certain senior executives contain
provisions for severance payments when employment is terminated
by the Company, as well as rules governing pension payments to
executives who take early retirement. The rules governing early re-
tirement provide that, when employment is terminated by the
Company, an employee is entitled to severance pay equal to the
employee’s monthly salary for a period of 12 or 24 months, depend-
ing on age at date of severance. In certain contracts, replacing con-
tracts concluded earlier, an employee is entitled to severance pay-
ments amounting to the employee’s monthly salary for a period of 30
to 42 months. In agreements concluded after the spring of 1993,
severance pay is reduced, in the event the employee gains employ-
ment during the severance period, in an amount equal to 75% of
income from new employment. An early-retirement pension may be
received when the employee reaches age 60. A pension is earned
gradually over the years up to the employee’s retirement age and