Volvo 2003 Annual Report Download - page 59

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Note 28 Cash flow
Other items not affecting cash pertain to risk provisions and losses
related to doubtful receivables and customer-financing receivables
1,079 (1,306; 1,541), deficit in the Swedish pension fund – (807; –),
capital gains on the sale of subsidiaries and other business units 85
(–; 829), write-down of shares in Scania AB and Henlys Group Plc
amounting to 4,030 (–; –) and other negative 95 (negative 158;
negative 173).
Net investments in customer-financing receivables resulted in
2003 in a negative cash flow of SEK 4.3 billion (5.7; 3.7). In this
respect, liquid funds were reduced by SEK 15.6 billion (14.9; 16.6)
pertaining to new investments in financial leasing contracts and
installment contracts.
Investments in shares and participations, net in 2003 and in 2002
amounted to SEK 0.1 billion. Divestments of shares and participa-
tions, net in 2001 amounted to SEK 3.9 billion, mainly related to the
sale of Volvo’s holding in Mitsubishi Motors Corporation.
Acquired and divested subsidiaries and other business units, net
in 2003 amounted to SEK 0.0 billion and in 2002 to a negative
SEK 0.1 billion. 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 2003, 2002 and 2001 net installments of loans to exter-
nal parties contributed SEK 0.9 billion, SEK 1.7 billion and SEK 0.2
billion, respectively to liquid funds.
The change during the year in bonds and other loans increased
liquid funds by SEK 1.9 billion (decrease 0.1; increase 6.2). New
borrowing during the year, mainly the issue of bond loans and a
commercial paper program, provided SEK 25.4 billion (33.1; 31.4).
Amortization during the year amounted to SEK 23.5 billion (33.2; 25.2).
Note 27 Contingent liabilities
2001 2002 2003
Credit guarantees
– issued for associated companies 67 219 154
– issued for customers and others 5,557 3,337 3,508
Tax claims 1,151 982 1,098
Other contingent liabilities 3,666 4,796 4,851
Total 10,441 9,334 9,611
The reported amounts for contingent liabilities reflect the Volvo
Group’s risk exposure on a gross basis. The reported amounts have
thus not been reduced because of counter guarantees received or
other collaterals in cases where a legal offsetting right does not
exist. At December 31, 2003, the estimated value of counter guaran-
tees received and other collaterals, for example the estimated net
selling price of used products, amounted to 5,149.
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 consid-
ered 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 was appointed by the Commercial
Court in Nanterre, France, to investigate the cause of the fire and
the losses it caused. At present, it is not possible to anticipate the
result of this on-going investigation or the result of other French
legal actions in progress regarding the fire. The investigating magis-
trate appointed to investigate potential criminal liability for the fire
issued its final order and all parties previously placed under investi-
gation, including Volvo Truck Corporation, have been sent to trial for
unintentional manslaughter. It is expected that the trial will take place
in 2005.
A claim was filed with the Commercial Court in Nanterre by the
insurance company employed by the French tunnel operating com-
pany against certain Volvo Group companies and the trailor manu-
facturer in which compensation for the losses claimed to have been
incurred by the tunnel operating company was demanded. The
claimant requested that the Court postpone its decision until the
expert group has submitted its report. The Court of Nanterre has
since then declined jurisdiction in favour of the civil Court of Bonne-
ville before which several other claims had been filed in connection
with this matter. As a result, the Court of Bonneville is likely ultimately
to rule on all civil liability claims filed in France against Volvo Group
companies in connection with the Mont-Blanc tunnel fire. Volvo
Group companies are also involved in proceedings regarding this
matter 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 outcome 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.