Volvo 1998 Annual Report Download - page 12

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Important coordination steps taken during 1998 included establishment of
new structures within the engine and axle area. In the distribution area, coordin-
ation of the spare parts operations of Trucks, Buses, Construction Equipment and
Marine and Industrial Engines continued in Europe and in North and South
America. In addition, joint distribution organizations for commercial products in
a number of markets in East Asia and Eastern Europe were formed.
During 1998, it was decided that the sales-financing operations for commer-
cial products would be managed and developed within a common area of re-
sponsibility.
Strategic acquisitions within Buses and Construction Equipment
During 1998, strategic acquisitions and structural transactions were carried out
within Volvo’s commercial products sector totaling SEK 6.4 billion. Volvo Buses
acquired Scandinavia’s largest body manufacturer, Finnish Carrus Oy, 51% of the
North American bus manufacturer Nova BUS Corporation through Prévost Car
Incorporated and the Mexican bus manufacturer Mexicana de Autobuses SA de
CV (MASA).
MASA is Mexico’s second-largest manufacturer of coaches and inter-city buses.
Its production facilities will be integrated with the rest of the Volvo Group’s
production structure in North America. In addition to its acquisition of MASA,
Volvo is studying the possibilities of producing cabs for construction equipment in
Mexico, and establishing a Group purchasing unit and a wholly owned finance
company. Together with Prévost, which was acquired in 1995, Nova BUS and
MASA are a base for the growth of Volvo Buses in North America.
With the aim to reinforce the industrial and commercial cooperation that
already exists between Volvo and the British manufacturer and supplier of coach
and bus bodies, Henlys Group Plc, AB Volvo acquired 10% of the shares in Henlys
in 1998.
Volvo Construction Equipment acquired South Korean Samsung Heavy
Industries’ construction equipment division and reduced its holding in Euclid
Hitachi Heavy Equipment Inc, from 60% to 20%. As a result of the transaction
with Samsung, Volvo is multiplying its annual production capacity of excavators
and is consolidating its position as one of the world’s largest producers of construc-
tion equipment.
Moreover, Trucks strengthened its operations in sales financing through the
purchase of BRS Truck Rental and Hire, a British company. In January 1999, after
the close of the fiscal year, AB Volvo acquired 12.85% of the shares in Scania AB,
corresponding to 13.47% of the voting rights, in the company.
Deutz – a new joint-venture partner in the engine field
In 1998, in the field of diesel engines for commercial vehicles, an agreement was
signed with Deutz AG, the German diesel engine manufacturer. Under terms of
the agreement, Deutz is becoming the principal supplier of small and medium-
size diesel engines for Volvo’s commercial products. The two companies will
jointly develop medium-size diesel engines. Volvo intends to concentrate its
operations in the field of commercial diesel engines on heavy duty engines in the
8-16 liter displacement range. Volvo will also supply such engines to Deutz.
Including acquisition of a 10% minority interest in Deutz AG, the agreement
involves an investment of SEK 1 billion.
BOARD OF DIRECTORS’ REPORT
Research and Development
• Sharing of components
• Common concept development
• Coordinated advanced
engineering
• Electronics
Components
• Diesel engines
• Transmissions
• Axles
Sourcing
• Co-ordinated purchasing
• Global suppliers
• Support functions
Parts
• Distribution and logistics
of parts
Distribution
• Co-ordinated marketing
approach in
– Asia
– Eastern Europe
Service
• Financing
• Service Contracts
• Leasing
• Insurances
Potential opportunities of cost
sharing between Volvo’s
commercial products