Volvo 2004 Annual Report Download - page 21

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take time to recreate. The inability of a
supplier to deliver could have an adverse
effect on production at certain of Volvo’s
manufacturing locations.
The cost for raw material and compon-
ents can vary significantly over the busi-
ness cycle. These variations can occur
due to changes in the commodity market
or our suppliers’ ability to deliver.
Volvo is working closely with the sup-
pliers to manage these aspects, including
reviewing suppliers’ financial stability, qual-
ity systems and their production flexibilty.
The commercial vehicles industry
is subject to extensive government
regulation
Regulations regarding exhaust emission
levels, noise, safety and levels of pollu-
tants from production plants are exten-
sive within the industry. These regulations
are subject to change, often making them
more restrictive. The costs to comply with
these regulations can be significant to the
commercial vehicle industry.
Most of the regulatory challenges
regarding products relates to engine
emissions. The Volvo Group is a large
player in the commercial vehicle industry
and is one of the top three high-volume
world producers of heavy duty diesel
engines. The product development
capacity, within the Volvo Group, is well
consolidated and the Volvo Group has a
unique opportunity, compared to competi-
tors, to focus development resources to
meet these challenges. Future product
regulations are well known, provided that
they are not changed, to the Volvo Group
and the product development strategy is
well tuned to the introduction of new regu-
lations. The new regulations regarding
product emissions are extensive, but our
current assessment is that they are man-
ageable for the Volvo Group and within
our estimates.
Volvo has had production facilities in
numerous countries worldwide for many
years. A worldwide production standard
for environmental performance has been
introduced, enabling production plants to
achieve best industry standard wherever
we operate in the world.
Volvo is reliant on the protection
and preservation of its intellectual
property
Volvo products are sold primarily under
the brands “Volvo”, ”Volvo Penta”, "Volvo
Aero", “Renault Trucks” and “Mack”. Volvo
owns or otherwise has rights to a number
of patents and trademarks, relating to the
products it manufactures, which have
been obtained over a period of years.
These patents and trademarks have been
of value in the growth of Volvo’s business
and may continue to be of value in the
future. Volvo does not regard any of its
businesses as being dependent upon any
single patent or group of patents.
Through Volvo Trademark Holding AB,
AB Volvo and Volvo Car Corporation joint-
ly own all trademarks containing “Volvo”
globally. AB Volvo has an exclusive right
to use the “Volvo” name and trademark in
relation to its products and services.
Similarly, Volvo Car Corporation has an
exclusive right to use the brand in relation
to their products and services. To secure
these rights and avoid having the trade-
mark eroded, AB Volvo and Volvo Car
Corporation have jointly adopted mechan-
isms to control their respective use of the
trademark and to prevent others from
taking undue advantage of it.
With regard to the “Mack” trademark,
which is owned within the Volvo Group,
similar control mechanisms apply. Volvo’s
rights to use the “Renault” trademark are
limited to the truck sector only and are
governed by a licence agreement with the
French company Renault SA, the owner
of the “Renault” trademark.
Complaints or litigation from
customers and other third parties
Volvo can be subject to complaints and
litigation from customers, employees or
other third parties, alleging health, envir-
onmental, safety or operational concerns
or failure to comply with applicable laws
and regulations. These claims, even if
successfully solved without direct
adverse financial effect, could have a
material adverse effect on Volvo’s reputa-
tion and divert financial and management
resources from more beneficial uses.
Volvo continuously reviews its manu-
facturing and administrative processes with
the aim of ensuring that Volvo products and
operations meet applicable legal and other
regulatory requirements.