Volvo 1999 Annual Report Download - page 6

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4
Com m ents by the Chief
Executive Officer
Volvo Buses coordinating its structure
Volvo Buses had a difficult year, but the program to coordinate the operations of
acquired companies is producing results. Purchasing costs had been reduced by five
percent on an annual basis at the end of the year. The objective for 2000 is a further
reduction of ten percent, which will strengthen the company’s competitiveness.
During the fourth quarter the negative trend of income was also reversed and
ambitious efforts are being made to improve income this year.
Importantly, production is under way in Wroclaw, in Poland. The plant in Wroclaw
will become a center for production of complete buses and this will gradually improve
profitability.
Volvo Penta is capturing market shares
Volvo Penta has completed an aggressive rationalization program. The company also
captured market shares in Europe and North America.Volvo Penta achieved its highest
operating income to date and an improvement in operating margin from 1.9 to 5.5
percent.
During the year a major, strategically important, decision was made to develop a
new generation of marine diesel engines. Two new gasoline-powered engines for
marine use were also introduced, primarily for sale in the North American market.
Volvo Penta sales of industrial engines are developing rapidly in Asia. A new plant
was inaugurated in China, primarily with an eye on the Chinese market, but also for
exports to other countries in East Asia.
Volvo Aero stronger in engine com ponents
Volvo Aero’s sales, which have doubled in three years, now amount to nearly SEK 10
billion annually. Operating income of SEK 584 M in 1999 was the best to date.
Aggressive actions in the areas of engine components and service are continuing.
The acquisition of Norsk Jetmotor (now Volvo Aero Norge) is further strengthening
the company’s position in engine components. In North America, Volvo Aero
concluded an agreement with Boeing that is important in the commercial after-sales
market.
For Volvo Aero’s military operations, which supply the RM12 engines used in the
Gripen aircraft, the order from South Africa for 28 planes is an important contract and
can lead to more export sales.
In January 2000, for the first time, Volvo Aero became part of a military aircraft
engine program outside Sweden. This occurred through a contract with General
Electric to supply components for the next generation of F18 fighter aircraft in the
United States.
MAY1999 JUNE
Volvo Construction Equipm ent
divested its m arketing
com pany in Spain in line with
its strategy of organizing sales
via independent dealers.