Volvo 2006 Annual Report Download - page 129

Financial information 2006 125
Note 28 Assets pledged
2004 2005 2006
Property, plant and equipment – mortgages 205 593 310
Assets under operating leases 1,665 1,700 609
Chattel mortgages 374 350 367
Receivables 319 360 576
Inventories 13 16 –
Cash, marketable securities 470 230 98
Other assets pledged – 6 –
Total 3,046 3,255 1,960
The liabilities for which the above assets were pledged amounted at year-end to 2,108 (3,372; 3,194).
Note 29 Contingent liabilities
2004 2005 2006
Credit guarantees
– issued for associated companies 110 13 –
– issued for customers and others 2,471 1,267 1,109
Tax claims 1,433 695 983
Other contingent liabilities 5,175 5,875 5,634
Total 9,189 7,850 7,726
The reported amounts for contingent liabilities refl ect 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, 2006, the estimated value of counter guar-
antees received and other collaterals, for example the estimated net
selling price of used products, amounted to 3,650 (4,479; 5,135).
Tax claims pertain to charges against the Volvo Group for which
provisions are not considered necessary. Other contingent liabilities
pertain mainly to residual value guarantees.
Legal proceedings
In March 1999, an FH 12 Volvo truck was involved in a fi re in the
Mont Blanc tunnel. The tunnel suffered considerable damage from
the fi r e, which continued for 50 hours. 39 people lost their lives in
the fi r e, and 34 vehicles were trapped in the tunnel. The Mont Blanc
tunnel was re-opened for traffi c in 2002. An expert group was
appointed by the Commercial Court in Nanterre, France, to investi-
gate the cause of the fi re 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
fi r e . Following the closure in October 2003 of an investigation for
potential criminal liability for the fi r e, the trial for unintentional man-
slaughter started in Bonneville (France) on 31st January, 2005 and
lasted until late April 2005. The judgment was given on 27th July,
2005. Volvo Truck Corporation was one of 16 parties tried for unin-
tentional manslaughter. Volvo Truck Corporation was acquitted and
not required to pay any civil damages to the plaintiffs. Volvo Truck
Corporation’s acquittal with regards to criminal charges is fi nal.
Some of the plaintiffs have appealed the award of civil damages and
those proceedings, hence, are ongoing. A claim was fi l ed 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 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 favor of
the civil Court of Bonneville before which several other claims had
been fi l ed in connection with this matter. As a result, the Court of
Bonneville is likely ultimately to rule on all civil liability claims fi l ed in
France against Volvo Group companies in connection with the Mont-
Blanc tunnel fi r e. Volvo Group companies are also involved in pro-
ceedings regarding this matter before courts in Aosta and Turin
(Italy) and Brussels (Belgium). Although the aggregate amount
claimed is substantial, Volvo is unable presently to determine the
ultimate outcome of the legal proceedings mentioned above, the
only exception being the criminal charges mentioned above from
which Volvo Truck Corporation has now been acquitted.
Between 1985 and 1995, Volvo Aero Norway A/S (“VAN”) and
Snecma entered into several agreements relating to the supply by
VAN of components for the Snecma CFM56 engine. These aircraft
engine programs are long term agreements, with an expected term
of not less than thirty years. In 2005, Snecma fi l ed a request for
arbitration against VAN, requesting a declaratory award stating that
Snecma is entitled to calculate VAN’s compensation under the
agreements in other ways than the common and undisputed inter-
pretation of the agreements during nearly twenty years of perform-
ance. An award in Snecma’s favour would mean that the compensa-
tion would be signifi cantly reduced. It is diffi cult to assess the
magnitude of such a reduction of the concession levels since,
instead of fi xed levels of payment, the levels of payment to VAN
would be affected by the actual payments received by Snecma from
its customers. VAN has no access to the commercial information
needed to calculate the payment levels in such case. VAN has
rejected Snecma’s claims. Arbitral hearings are expected to be fi n al-
ized during the fi r st half of 2007.
Volvo has received a document subpoena from the United States
Securities and Exchange Commission (the ”SEC”) in connection with
the SEC’s investigation into the United Nations Oil For Food Pro-
gram. Volvo is cooperating with this investigation. Volvo is also aware
that the Swedish and French authorities are also separately investi-
gating the Oil for Food program.