Volvo 2004 Annual Report Download - page 80

78 The Volvo Group
Notes to consolidated financial statements
Note 27Cash flow
Other items not affecting cash pertain to risk provisions and losses
related to doubtful receivables and customer-financing receivables
551 (1,079; 1,306), capital gains on the sale of subsidiaries and
other business units 95 (85; –), revaluation of shares in Scania AB
and Henlys Group Plc amounting to negative 820 (positive 4,030; –),
provision for industrial relocation and contractual pension 530 (–; –),
deficit in the Swedish pension fund – (–; 807), and other negative
19 (negative 95; negative 158).
Net investments in customer-financing receivables resulted in
2004 in a negative cash flow of SEK 7.4 billion (4.3; 5.7). In this
respect, liquid funds were reduced by SEK 19.4 billion (15.6; 14.9)
pertaining to new investments in financial leasing contracts and
installment contracts.
Divestments of shares and participations, net in 2004 amounted
to SEK 15.1 billion, mainly related to the divestment of the Scania B-
shares. Investments in shares and participations, net in 2003 and in
2002 amounted to SEK 0.1 billion.
Acquired and divested subsidiaries and other business units, net
in 2004 amounted to negative SEK 0.1 billion and in 2003 to SEK
0.0 billion and in 2002 to a negative SEK 0.1 billion.
During 2004, 2003 and 2002 net installments of loans to exter-
nal parties contributed SEK 0.0 billion, SEK 0.9 billion, SEK 1.7 bil-
lion, respectively to liquid funds.
The change during the year in bonds and other loans increased
liquid funds by SEK 8.8 billion (1.9; decrease 0.1). New borrowing
during the year, mainly the issue of bond loans, provided SEK 19.1
billion (25.4; 33.1). Amortization during the year amounted to SEK
28.9 billion (23.5; 33.2).
Note 26Contingent liabilities
2002 2003 2004
Credit guarantees
– issued for associated companies 219 154 110
– issued for customers and others 3,337 3,508 2,471
Tax claims 982 1,098 1,433
Other contingent liabilities 4,796 4,851 5,175
Total 9,334 9,611 9,189
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, 2004, the estimated value of counter guaran-
tees received and other collaterals, for example the estimated net
selling price of used products, amounted to 5,135.
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. The Mont Blanc
tunnel was re-opened for traffic in 2002. An expert group was
appointed by the Commercial Court in Nanterre, France, to investi-
gate 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.
Following the closure in October 2003 of an investigation for poten-
tial criminal liability for the fire, the trial for unintentional manslaughter
started in Bonneville (France) on January 31, 2005 and is expected
to last until late April 2005. Volvo Truck Corporation is one of 16
parties tried for unintentional manslaughter. A claim was filed with
the Commercial Court in Nanterre by the insurance company
employed by the French tunnel operating company against certain
Volvo Group companies and the trailer manufacturer in which com-
pensation 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 Bonneville 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. Although the total sums claimed are substantial,
Volvo is unable to determine the ultimate outcome of the litigation
referred to above.
AB Volvo and Renault SA have signed a settlement agreement
regarding the disagreement the companies have had since 2001
pertaining to Volvo’s acquisition of Renault VI/Mack. According to
this settlement, Renault SA transferred EUR 108 M to AB Volvo. The
receivable was reported as a reduction of the goodwill amount per-
taining to the acquisition of Renault VI/Mack.
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.