Volvo 2008 Annual Report Download - page 7
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CEO comment
In every respect, 2008 was a year of extremes. From record sales
and earnings during the fi rst half of the year to a weak close, with
losses in the fourth quarter. From 12-month delivery times for
trucks and problems with bottlenecks in production to weak order
bookings, a large number of cancellations and shutdown days in
our plants during the latter part of the year.
Due to the sharp slow-
down in the global
economy triggered
by the fi nancial crisis
that started in the
summer of 2008, we
decided already dur-
ing the autumn to initiate the actions that are
required as a recession approaches. In a
declining economy, it is extremely important
to act quickly to reduce the Group’s cost level
and ensure we do not build inventories, since
large inventories generally lead to pressure
on prices. In the present situation, it is also
highly important that we continue to reduce
our working capital and work hard to create a
cash fl ow that will improve our freedom of
action.
Sharp production cutbacks
During the second half of the year, we imple-
mented sharp production cutbacks to lower
inventories of new trucks and construction
equipment as part of efforts to maintain our
product prices, which represent one of the
most important factors in securing favorable
profi tability in the future. We have been suc-
cessful in these efforts. During the fourth
quarter, inventories of new trucks declined
13% and of new construction equipment by
19%. During the beginning of 2009, we have
continued to work diligently and focused to
reduce inventories to the new, lower levels of
demand that prevail in most of our markets,
and for most of our products.
Our net debt remains low, corresponding to
40% of equity at year-end
2008, and excluding pro-
visions for future pensions
and healthcare costs that
fall due for payment in the
distant future the net debt
was 27% of equity. At
year-end we had liquid
assets in the form of cash and cash equiva-
lents totaling SEK 24 billion, in addition to SEK
27 billion in unutilized credit facilities.
We have initiated savings at all levels in all
operations and we are maintaining a high pace
in the implementation of decided actions.
Unfortunately, this has forced us to issue
notices of redundancy to a large number of
employees. These are necessary decisions for
the Volvo Group that, regrettably, affect many
employees and their families. The notices of
redundancy have been a direct consequence
of a credit market that does not work for our
customers, and more recently, refl ects a rap-
idly declining global demand.
We have initiated sav-
ings at all levels in all
operations and we are
maintaining a high pace in the imple-
mentation of agreed measures.
A global group 2008
3