Volvo 2007 Annual Report Download - page 52
Download and view the complete annual report
Please find page 52 of the 2007 Volvo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Risk management
– a continuous process
All business operations involve risk – managed risk-taking is a
condition of maintaining a sustained favorable profi tability.
Group to manufacture and deliver orders in a
timely manner.
To cope with the peaks and troughs in
demand, we need to act appropriately in the
various stages of the business cycle. This
involves adjusting production capacity and
operating expenses.
Intense competition
Continued consolidation in the industry is
expected to create fewer but stronger com-
petitors. Our major competitors are Daimler,
Paccar, Navistar, MAN, Scania, Caterpillar,
Komatsu, CNH, Cummins and Brunswick. In
recent years, new competitors have emerged
in Asia, particularly in China. These new com-
petitors are mainly active in their domestic
markets, but are expected to increase their
presence in other parts of the world.
Our brands are well-known and strong in
many parts of the world. Strong brands com-
bined with an attractive product portfolio
make it possible for Volvo to be competitive.
Prices may change
The prices of commercial vehicles have, at
times, changed considerably in certain mar-
kets over a short period. This instability is
caused by several factors, such as short-term
variations in demand, shortages of certain
component products, uncertainty regarding
underlying economic conditions, changes in
import regulations, excess inventory and
increased competition. Overcapacity within
the industry can occur if there is an economic
downturn in the Group’s major markets or
worldwide, potentially leading to increased
price pressure.
The financial result of the business depends
on our ability to quickly react to changes in
demand and particularly to adapt production
levels, reduce production and operating
expenses, and deliver competitive new prod-
ucts and services.
Extensive government regulation
Regulations regarding exhaust emission
levels, noise, safety and levels of pollutants
from production plants are extensive within
the industry.
Most of the regulatory challenges regarding
products relate to reduced engine emissions.
The Volvo Group is a significant player in the
commercial vehicle industry and the world’s
largest producer of heavy-duty diesel engines.
The product development capacity within the
Volvo Group is well consolidated to be able to
focus resources for research and development
to meet tougher emission regulations. Future
product regulations are well known, and the
product development strategy is well tuned to
the introduction of new regulations. The new
regulations regarding product emissions are
stringent, but our current assessment is that
they are manageable for the Volvo Group. The
Risk may be due to events in the world and can
affect a given industry or market. Risk can be
specifi c to a single company. At Volvo we work
daily to identify, measure and manage risk –
in some cases we can infl uence the likelihood
that a risk-related event will occur. In cases in
which such events are beyond our control, we
strive to minimize the consequences. In 2007,
the work on a new Group-wide risk manage-
ment model based on the Enterprise Risk
Management concept began. The ambition is
to have a uniform, forward-oriented, group-wide
system where the Group’s risk management is
improved even further.
External-related risk
The commercial vehicles
industry is cyclical
Historically, the Volvo Group’s markets have
undergone signifi cant changes in demand as
the general economic environment has fl uctu-
ated. Investments in infrastructure, major
industrial projects, mining and housing con-
struction all impact the Group’s operations,
since its products are central to these sectors.
The cyclical demand for the Group’s products
has, at times, restricted, and may in the future
temporarily restrict, the ability of the Volvo
Emissions regulations for trucks and buses
US 10, 2010
US 07, 2007
0.16
0.14
0.12
0.10
0.08
0.06
0.04
0.02
0.00
Particles, g/kWh
NOx, g/kWh
012345678
Euro 2, 1996
Euro 3, 2002
Euro 4, 2006
Euro 5, 2009
US 02, 2002 The currently applicable emissions
standards are Euro 4, in Europe, and
US 07, in North America. The
difference between Euro 3 and Euro
4 is considerable. Emissions of
particles have been reduced by 80%,
and of NOx, by 30%. Euro 5 will
entail a 50% reduction in NOx
emissions compared with Euro 4.
Heavy truck registrations, >16 tons
0706050403
329295277255229
208
349308249178
Europe
North
America
Vehicles,
thousands
48 Board of Directors’ Report 2007