Volvo 2002 Annual Report Download - page 53

Note 28Cash flow
Other items not affecting cash pertain to risk provisions and losses
related to doubtful receivables and customer-financing receivables
1,306 (1,541; 522), deficit in the Swedish pension fund 807 (–; –),
surplus funds from Alecta – (–; –508), capital gains on the sale of
subsidiaries and other business units – (–829; –573) and other
–158 (–173; –120).
Net investments in customer-financing receivables resulted in
2002 in a negative cash flow of SEK 5.7 billion (3.7; 4.5). In this
respect, liquid funds were reduced by SEK 14.9 billion (16.6; 15.5)
pertaining to new investments in financial leasing contracts and
installment contracts.
Investments in shares and participations, net in 2002 amounted to
SEK 0.1 billion. Divestments of shares and participations, net in 2001
amounted to SEK 3.9 billion, mainly related to the sale of Volvo’s
holding in Mitsubishi Motors Corporation. Investments in shares and
participations, net, in 2000 amounted to SEK 1.6 billion, of which
SEK 1.3 billion was attributable to additional investments in Scania.
Acquired and divested subsidiaries and other business units, net
in 2002 amounted to SEK –0.1 billion, mainly related to additional
acquisition of shares in Volvo Aero Services LP. Acquired and divested
subsidiaries and other business units, net in 2001 amounted to SEK
13.0 billion mainly pertained to the final payment of SEK 12.1 billion
from the sale of Volvo Cars, divestment of the insurance operation in
Volvia and acquired liquid funds within Mack and Renault V.I.
During 2002, 2001 and 2000 net installments of loans to exter-
nal parties contributed SEK 1.7 billion, SEK 0.2 billion and SEK 0.3
billion, respectively to liquid funds.
The change during the year in bonds and other loans reduced
liquid funds by SEK 0.1 billion (increase 6.2; 8.1). New borrowing
during the year, mainly the issue of bond loans and a commercial
paper program, provided SEK 33.1 billion (31.4; 9.5). Amortization
during the year amounted to SEK 33.2 billion (25.2; 11.4).
Note 27Contingent liabilities
2000 2001 2002
Recourse obligations 509 2,490 1,649
Guarantees:
Bank loans and trade bills – associated companies 48 67 219
Bank loans – customers and others 1,516 3,067 1,688
Tax claims 2,071 1,151 982
Other contingent liabilities 2,645 3,666 4,796
Total 6,789 10,441 9,334
Recourse obligations pertain to receivables that have been trans-
ferred, less reduction for recognized credit risks. Tax claims pertain to
charges against the Volvo Group for which provisions are not con-
sidered necessary.
Legal proceedings
In March 1999, an FH 12 Volvo truck was involved in a fire in the
Mont Blanc tunnel. The tunnel suffered considerable damage from
the fire, which continued for 50 hours; 39 people lost their lives in
the fire, and 34 vehicles were trapped in the tunnel. It is still unclear
what caused the fire. The Mont Blanc tunnel was re-opened for
traffic in 2002.
An expert group has been appointed by the Commercial Court in
Nanterre, France, to investigate the cause of the fire and the dam-
age it caused. At present, it is not possible to anticipate the result of
this investigation or the results of certain other French investigations
now in progress regarding the fire. One of the investigations is being
carried out by an Investigation Magistrate appointed to investigate
potential criminal liability for the fire. A number of individuals and
companies had formally been placed under investigation before
Volvo Truck Corporation (VTC) was also placed under investigation
in July 2002. At VTC’s request, the investigating magistrate has
ordered an additional enquiry on the causes of the fire and VTC is
cooperating fully with the investigating magistrate and the experts
newly appointed.
A lawsuit has been filed with the Commercial Court in Nanterre,
by the insurance company employed by the French company that
operates the tunnel, against certain Volvo Group companies and the
trailer manufacturer in which it demands compensation for the losses
it claims to have suffered. The plaintiff has requested that the court
postpone its decision until the expert group submits its report. Certain
Volvo Group companies have further been involved in proceedings
before the Civil Court of Bonneville instigated by the French Tunnel
operating company against Bureau Central Francais, the owner of
the truck and its insurers. These proceedings partly overlap with the
proceedings in the Commercial Court of Nanterre. Volvo Group com-
panies are also involved in proceedings regarding matters in connec-
tion with the tunnel fire before courts in Aosta, Italy, and Brussels,
Belgium. Volvo is unable to determine the ultimate outcome of the
litigation referred to above.
AB Volvo and Renault SA have a dispute regarding the final value
of acquired assets and liabilities in Renault V.I. and Mack. This
process could result in an adjustment in the value of the transfer. Any
such adjustment will affect the amount of acquired liquid funds and
Volvo’s reported goodwill amount. The outcome of this dispute cannot
be determined with certainty. However, Volvo believes that the out-
come will not lead to an increase in goodwill.
Volvo is involved in a number of other legal proceedings incidental
to the normal conduct of its businesses. Volvo does not believe that
any liabilities related to such proceedings are likely to be, in the
aggregate, material to the financial condition of the Group.