Volvo 1998 Annual Report Download - page 7

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The transport vehicle industry is in a phase of heavy consolidation, in both the
supplier and customer segments. Increasingly larger and more cost-efficient units
are being formed and price pressure is intensifying. Our intention is to meet the
economies of scale problem on several fronts.
The overriding goal is to create the necessary expansion through organic
growth, that is, increase sales in the existing operations and on markets where
we are already established. We will also invest in new products and services as
well as in broadening our geographical base. It is also particularly important to
further strengthen our relations in those major markets that are experiencing
growth.
In order to achieve higher cost efficiency, we intend to intensify efforts to sys-
tematically identify and capitalize on the synergies inherent in our existing op-
erations. This process is under way. There are integration gains to be realized,
particularly in such areas as diesel technology, driveline components, purchasing,
marketing, logistics and after-sales. Sales financing is becoming increasingly
important and represents an area which will increase in scope but also one in
which synergistics gains can be acheived. It is also our intention to make a con-
certed effort and develop our expertise in the area of efficient and environment-
ally sound transportation solutions, a rapidly growing market in highly industrial-
ized countries and in developing economies.
We will also participate in a considered manner in the ongoing restructuring
of the industry through acquisitions. The financial freedom of action gained
through the sale of Volvo Cars provides us the opportunity to play an active role
and methodically seek new partners who can best contribute to securing the strat-
egic positions we want to achieve. We have announced our interest in expanding
the truck and bus operations, but there are similar expansion strategies in the
other business areas, particularly Construction Equipment.
The Volvo now being created has a homogeneous and, commercially, a more
logical structure than previously. It is also a group with the financial freedom of
action to invest in its own future. I view this as a major task involving great
responsibility to apply our mandate to further develop the significant segment of
Swedish industry that Volvo represents and to manage the value that has been
built-up over the years. I am fully convinced that we have the capability to meet
the expectations placed by the shareholders and the employees on a partly new,
stronger and, in the long-term, more profitable company.
Leif Johansson
March 8, 1999
5
The Volvo Group now being
formed is a more focused unit,
which for many years has
demonstrated its ability to suc-
cessfully compete in the world
market for commercial pro-
ducts and services – a market
that is growing.