Volvo 2006 Annual Report Download - page 80

Financial Services
– essential to the overall offering
Market growth
Commercial Focus (CF), the strategic initiative
launched in 2005, made it possible for Financial
Services to better capitalize on existing growth
possibilities. The CF initiative is a centralized
business strategy that was formed to provide
high quality financial solutions by utilizing
knowledge and experience from local and
international business teams. The goals are to
integrate Financial Services’ activities more
closely with the sales processes of the busi-
ness areas, enhance the depth and breadth of
the product offering and develop the supply of
services to key accounts.
Within the Danafjord real estate unit, a num-
ber of projects were started aimed at meeting
the Volvo Group’s growing need for office
premises and lighter duty properties. For ex-
>>> At its heart, a successful finance company
is about relationships. Financial Services finds
this to be true in each of its nearly 60 markets.
Thus the year 2006 was characterized by
intense efforts to align Financial Services more
closely with its customers’ operations. For
example, new customer finance companies
were started or approved in the emerging mar-
kets of China, Hungary and Slovakia. In Europe,
a new regional structure to improve synergies,
transparency and availability was introduced.
The US sales organization was strengthened
and restructured based on product categories.
At the end of 2006, management of the real
estate and banking operations was transferred
to AB Volvo, which meant that the business
area is solely a financial service operation from
2007.
Financial solutions are vital to the Volvo Group. They increase
customer satisfaction, competitive benefi ts, profi tability and
growth. Financial Services offers traditional fi nancial services
such as installment contracts, operating and fi nancial leasing and
dealer fi nancing. In many markets, insurance and rental services
and other offerings are also available.
Ragnesands Bus company chooses Volvo Financial
Services to fulfill its financing and service agreement
needs.
Credit portfolio,
net1, SEK bn
Operating
income1, SEK M
Return on share-
holders’ equity1, %
05 06
76.7
0302
61.3 64.360.1 78.8
04
05
15.3
06
15.5
03
9.8
02
4.8
04
11.1
05 06
2,301
0302
490 1,365926 2,033
04
Market penetration2, %
05
21.7
06
19.7
03
23.6
02
18.8
04
22.4
2 Share of business financed by Financial Services in markets where
financial services are offered.
Penetration by business area2, %
Volvo
CE Volvo Trucks Renault Trucks Buses Mack Trucks
34 30 28 24 16 15 13 12
2005
2006
11 10
ample, investments were made in a new head
office for Volvo 3P and Volvo Powertrain, both
in Lundby, Göteborg. Non-strategic properties
were divested or prepared for divestment dur-
ing the year. The occupancy rate at the end of
2006 was 99.7% (99.9), and 49% (52) of the
leases was to external tenants and 89% (81) of
the leases extends for five years or more.
Volvo Treasury, the Group’s internal bank,
coordinates the Group’s global funding strategy
and financial infrastructure. It is also respon-
sible for the management of all interest-bear-
ing assets and liabilities and the execution of
foreign exchange transactions. Volvo Treasury
experienced strong earnings in 2006, with
significant value creation in management of
assets and in foreign exchange transactions.
1 Years 2004, 2005 and 2006 are reported in accordance with IFRS and
2002 and 2003 in accordance with Swedish GAAP. See Note 1 and 3.
76Business areas 2006