Volvo 2007 Annual Report Download - page 54
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Please find page 54 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.certain cases repossession of products.
Additionally, continuous and necessary
reserves are monitored in cases involving
uncertain receivables. An important part of the
Group’s credit risk is related to how the financial
assets of the Group have been placed. The
majority are placed in Swedish Government
bonds and interest-bearing bonds issued by
Swedish real estate financing institutions.
Liquidity risk
Volvo ensures its financial preparedness by
always maintaining a certain portion of revenues
in liquid assets. A healthy balance between
short- and long-term borrowing and access to
credit in the form of credit facilities are used to
hedge long-term financial needs.
Operational risk
The profi tability depends on successful
new products
The Volvo Group’s long-term profitability
depends on the Company’s ability to success-
fully launch and market its new products.
Product life cycles continue to shorten, putting
increased focus on the success of the Group’s
product development. It is highly important to
meet and exceed customer expectations to be
competitive in established markets and to be
able to expand into additional markets and/or
product segments.
Reliance on suppliers
Volvo purchases raw materials, parts and com-
ponents from numerous external suppliers. A
significant part of the Group’s requirements
for raw materials and supplies is filled by sin-
gle-source suppliers. The effects of delivery
interruptions vary depending on the item or
component. Certain items and components
are standard throughout the industry, whereas
others are internally developed and require
unique tools that are time-consuming to
replace.
The Volvo Group’s costs for raw materials
and components can vary significantly over a
business cycle. Cost variations may be caused
by changes in world market prices for raw
materials or by an inability of our suppliers to
deliver.
The companies in the Volvo Group and their
suppliers work closely together to manage
material flows by monitoring suppliers’ finan-
cial stability, quality-control systems and pro-
duction flexibility.
Reliance on the proper protection and
maintenance of its intangible assets
AB Volvo owns or otherwise has rights to
patents and brands that refer to the products
the Company manufactures and markets.
These have been acquired over a number of
years and are valuable to the operations of the
Volvo Group. Volvo does not consider that any
of the Group’s operations are heavily depend-
ent on any single patent or group of patents.
Through Volvo Trademark Holding AB, AB
Volvo and Volvo Car Corporation jointly own
the brand Volvo. AB Volvo has the exclusive
right to use the Volvo name and trademark for
its products and services. Similarly, Volvo Per-
sonvagnar AB has the exclusive right to use
the name and trademark Volvo for its products
and services.
The Volvo Group’s rights to use the Renault
brand are restricted to the truck operations
only and are regulated by a license from
Renault SA, which owns the Renault brand.
Complaints and legal actions
The Volvo Group could be the target of com-
plaints and legal actions initiated by custom-
ers, employees and other third parties alleg-
ing health, environmental, safety or business
related issues, or failure to comply with
applicable legislation and regulations. Even if
such disputes were to be resolved success-
fully, without having adverse fi nancial conse-
quences, they could negatively impact the
Group’s reputation and take up fi nance and
management resources that could be used for
other purposes.
Volvo continuously reviews its manufactur-
ing and administrative processes with the aim
of ensuring that Volvo products and opera-
tions meet applicable legal and other regula-
tory requirements. Volvo also has insurance
coverage in certain areas, for example prod-
uct liability, business interruption and property.
Risk related to human capital
A decisive factor for the realization of the
Volvo Group’s vision is our employees and
their knowledge and competence. Future
development depends on the company’s abil-
ity to maintain its position as an attractive
employer. To this end, we strive for a work
environment in which energy, passion and
respect for the individual are guiding principles.
Every year a Group-wide survey is conducted,
and according to the survey the number of
satisfi ed employees is continually increasing.
Contractual conditions related to take
over bids
Some of AB Volvo’s long term loan agree-
ments contain conditions stipulating a right
for the bondholder to request repayment in
advance under certain conditions following a
change of the control of the company. In Vol-
vo’s opinion it has been necessary to accept
those conditions in order to receive fi nancing
on otherwise acceptable terms. Note 34 Per-
sonnel contains information concerning rules
regarding severance payments applicable for
the Group Executive Committee and certain
other senior executives.
Further information
Further risk information is provided
in Note 29 and Note 36.
50 Board of Directors’ Report 2007