Volvo 2009 Annual Report Download

Download and view the complete annual report

Please find the complete 2009 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.

Page out of 146

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146

The Volvo Group 2009
• by telephone, +46 8 402 90 76, beginning March 12, 2010
• by mail addressed to AB Volvo (publ), ”AGM”,
• on AB Volvo's website www.volvogroup.com
• name
• personal number (registration number)
• address and telephone number
• name and personal number (registration number) of the proxy, if any
• name(s) of any accompanying assistant(s)
Christer Johansson +46 31-66 13 34
Patrik Stenberg +46 31-66 13 36
Anders Christensson +46 31-66 11 91
John Hartwell +1 212 418 7432
Tel +46 31 66 00 00
Fax +46 31 53 72 96

Table of contents

  • Page 1
    The Volvo Group 2009

  • Page 2
    ... Renault Trucks UD Trucks Mack Trucks VE Commercial Vehicles Buses Construction Equipment Volvo Penta Volvo Aero Financial Services Sustainable development Leading products - developed with the customer in focus. Corporate Governance Report 56 62 64 Corporate Governance Report Group Management...

  • Page 3
    ... South America Organization The Volvo Group has product-related companies and supporting business units. This makes for close cooperation with customers and an efficient use of Group-wide resources. 04 & 1999 2009 3.9 16.6 Trucks Buses Construction Equipment Volvo Penta Volvo Aero Financial...

  • Page 4
    ...2009 3.0 15.7 handles customer demand for spare parts and other services. 14 & Employees The majority of the Group's employees work in Sweden, France, Japan, the US, China, Brazil and South Korea. 55 & Share of Group's net sales Trucks Buses Construction Equipment Volvo Penta Volvo Aero Financial...

  • Page 5
    ... -17.0 Key ratios Net sales Volvo Group, SEK M Operating income Volvo Group, SEK M Operating income industrial operations, SEK M Operating income Customer Finance, SEK M Operating margin Volvo Group, % Income after financial items, SEK M income for the period, SEK M Diluted earnings per share, SEK...

  • Page 6
    ... the Group's sales of new products declined by almost 40%, the aftermarket business, with sales of spare parts, service hours and other aftermarket services, only declined a few percent during the year, which is positive from a profitability viewpoint. In total, the Volvo Group incurred an operating...

  • Page 7
    ...reduced costs. Reduced sales of new spare parts, due to the recessionary conditions in the aviation industry, and weaker earnings in the American aftermarket business led to a weakening of Volvo Aero's operating result. Customer financing operations in Financial Services reported a sharp increase in...

  • Page 8
    ... via the dealers all the way to the end-customers. This entails planning, purchasing, shipping and storing parts, as well as inventory management, order management, and tools and services for the aftermarket. BUSINESS UNITS Number of employees: 4,133. Volvo Logistics Volvo Logistics develops and...

  • Page 9
    ... marine and industrial engines: 44,983. Volvo Aero offers advanced components for aircraft engines and space applications with a focus on lightweight technology for reduced fuel consumption. Number of employees: 2,991. Financial Services Conducts operations in customer and dealer financing. Number...

  • Page 10
    A GLOBAL GROUP 2009 Vision, mission and values Our vision The Volvo Group's vision is to be valued as the world's leading supplier of commercial transport solutions. Our mission By creating value for our customers, we create value for our shareholders. we use our expertise to create transport-...

  • Page 11
    ... and sales and administrative costs. Volvo Production System (VPS) is an important tool that contains methods to make operations more efficient and reduce productivity losses. Competence development is a key part of VPS. Great effort is placed on developing employees in new, future technological...

  • Page 12
    ... on customers, the strategy now shifts direction towards product renewal and internal efficiency in order to secure competitiveness and to improve profitability. Profitable growth Required scale achieved in all business areas already during 2008 • No 2 in the world in heavy-duty trucks. • One...

  • Page 13
    ... productivity in all parts of the Group" Leif Johansson, President and CEO • Organic growth in line with market. • Focus on sales of services and aftermarket products. • Increase sales on markets new to the Group. • Acquisitions have low priority. • Go from regional to global production...

  • Page 14
    ... technological competence, the product program has been renewed and strengthened in recent years. During 2009, the Volvo Group invested SEK 13 billion in product and development. North America 18% (16) Strong market positions The Volvo Group has leading positions globally in each of its business...

  • Page 15
    Read more about our broad product offering Strong brands and strong market positions 11

  • Page 16
    ... a global service network, efficient spare parts handling, service and repair contracts, financial services and traffic information systems. City buses intercity buses Coaches Chassis Marine and industrial applications Volvo Penta manufactures engines and drive systems for marine applications, for...

  • Page 17
    ...Air Force's Gripen fighters. Volvo Aero also has a substantial aftermarket business. Engine components Engine overhaul Space Financial services Financial services such as customer and dealer financing and other services such as insurance contribute to create customer value. Providing cost effective...

  • Page 18
    ... of new emission standards for trucks, Euro V in Europe and EPA 2010 in North America. The Group has its most competitive product program to date. The customer offering will be further The Volvo Group is one of the world's largest manufacturers of heavy diesel engines for commercial use and...

  • Page 19
    ... CSeries continued. Volvo Aero also developed a vital component to the GP7000 engine for Airbus A380. The company has also developed a new nozzle for the Ariane rocket's Vulcain 2 engine. By using a new welding technology, the new nozzle is less costly to produce and at the same time more robust and...

  • Page 20
    ... and asset management Call centre services Consultancy Services information services Financial Services Dealer financing Customer financing New parts Used and remanufactured parts Extended parts Accessories Non-Volvo accessories Merchandise products Rental insurance Card and payment solutions...

  • Page 21
    ... growth strategy The strategy to increase sales of services and aftermarket products is an important element in the Volvo Group's effort to achieve targets for profitability and growth, both in mature markets and in the Group's new markets. During 2009, the services and aftermarket products business...

  • Page 22
    ... the year. however, registrations of heavy-duty trucks in India Economic growth in the U.S., Europe and Japan USA Europe Japan Annual GDP-growth Source: Consensus Economics Economic growth in Asia, % China india Asia/Pacific* Annual BNP growth Source: Consensus Economics Industrial production in...

  • Page 23
    ... construction equipment market declined Business conditions continued to be weak in the markets where Volvo Construction Equipment is present. Measured in units, the total world market for heavy, compact and road machinery equipment decreased by 39% during 2009 compared to the preceding year. Global...

  • Page 24
    ...and long-term funds equivalent to approximately SEK 6 billion. Furthermore, in early April a new 2-year revolving credit facility of EUR 775 M, backed by a large number of banks, was signed. New generation of diesel engines The Volvo Group introduced a new generation of diesel engines for trucks and...

  • Page 25
    ...30, 2009, members of the U.S. trade union, the United Auto Workers, approved a new 40-month Master Agreement with the Volvo Group's subsidiary Mack Trucks. The agreement includes the establishment of an Volvo unveils proprietary medium-heavy engine At Volvo's Capital Market Day in Eskilstuna, Sweden...

  • Page 26
    ... Trucks and Mack Trucks were the first manufacturers to have their engines certified as meeting EPA 2010 emissions standards, the most stringent in the world. On November 17, Talon Logistics, Inc. in the U.S. took delivery of the first EPA 2010-certified trucks from Volvo Trucks in North America...

  • Page 27
    ... Europe North America South America Asia Other markets Total Industrial operations 124,261 28,212 47,746 19,613 55,812 20,192 295,836 84,452 9,632 37,291 16,610 44,842 15,660 208,487 (32) (66) (22) (15) (20) (22) (30) Operating income (loss) by business area SEK M 2008 2009 Trucks Construction...

  • Page 28
    ... Operating margin % 2008 2009 Impact of exchange rates on operating income Compared with preceding year, SEK bn Trucks Construction Equipment Buses Volvo Penta Volvo Aero Industrial operations Volvo Group 6.0 3.2 (0.4) 8.1 4.7 4.9 5.2 (7.8) (11.2) (1.9) (2.8) 0.6 (7.8) (7.8) Net sales1 Cost...

  • Page 29
    ...SEK bn 2009 Customer Finance Operations Total new financing volume in 2009 amounted to SEK 28.7 billion (44.5). Adjusted for changes in exchange rates, new business volume decreased by 41% compared to 2008 as a result of lower sales volumes of Group products. In total, 25,782 new Volvo vehicles and...

  • Page 30
    ... cash-ï¬,ow Investments and divestments of shares Acquired and divested operations, net Capital injections to/from Customer Finance operations Currency effect Payment to AB Volvo shareholders Revaluation of loans Provision UAW agreement Other Total change Net financial position at end of period...

  • Page 31
    ...Dec 31 2008 Dec 31 2009 Total Dec 31 2008 Dec 31 2009 Assets Non-current assets intangible assets Tangible assets Property, plant and equipment Assets under operating leases Financial assets Shares and participation Non-current customer-financing receivables Deferred tax assets Prepaid pensions Non...

  • Page 32
    ...in the product program. During 2009 investments continued in the dealer network and workshops, mainly in Europe, however on a lower level than the previous year. Capital investments for Construction Equipment decreased to SEK 1.0 billion from SEK 2.0 billion the previous year. The main part was made...

  • Page 33
    ... cash-ï¬,ow statements industrial operations SEK bn 2008 2009 Customer Finance 2008 2009 Eliminations 2008 2009 Volvo Group Total 2008 2009 Operating activities Operating income Depreciation and amortization Other non-cash items Change in working capital Financial items and income taxes paid Cash...

  • Page 34
    ... to repay loans. A high long-term credit rating provides access to Funding The turbulence on the global financial markets affects the availability of credit lines and loan financing, which may adversely affect customers, suppliers, distributors and the Volvo Group. Volvo is working actively to...

  • Page 35
    ... The capital structure target is set to a net debt including provisions for post-employment benefits for the Industrial operations of a maximum of 40% of shareholders' equity under normal conditions. As of December 31, 2009, the Volvo Group's industrial operations had a net financial debt position...

  • Page 36
    ... by 43% during the year In 2009, the world's leading stock markets were characterized by a recovery after the weak development in the preceding year. The Volvo share is listed on the Nasdaq OMX Nordic Exchange in Sweden. One A share entitles the holder to one vote at Annual General Meetings and one...

  • Page 37
    ..., % Sweden, 50% France, 22% USA, 14% United Kingdom, 6% Luxenbourg, 2% Switzerland, 2% Norway, 2% Others, 2% 1 Share of capital, registered shares. Non-Swedish owners, 50% Private shareholders, 13% Pension funds and insurance companies, 15% Savings funds, 11% Others, 11% More details on the Volvo...

  • Page 38
    ... the prices of new and used trucks and construction equipment. The reported amounts for contingent liabilities reflect a part of Volvo's risk exposure.Total contingent liabilities on December 31,2009, amounted to SEK 9.6 billion, an increase of SEK 0.2 billion compared to December 31, 2008. Included...

  • Page 39
    ... on Volvo's competitiveness, which over time affects the Group's earnings. Currency-associated risk in Volvo's business operations relates to changes in the value of contracted and expected future payment ï¬,ows (commercial currency exposure), changes in the value of loans and investments (financial...

  • Page 40
    ... Volvo Group's long-term profitability depends on the Company's ability to successfully launch and market its new products. Product life cycles continue to shorten, putting increased focus on the success of the Group's product development. Reliance on suppliers Volvo purchases raw materials, parts...

  • Page 41
    ... total solutions with spare parts, workshops, service packages, financing and leasing, the Volvo Group's business companies have established leading positions on a global market. Production facilities Volvo Trucks Renault Trucks UD Trucks Mack Trucks Construction Equipment Buses Volvo Penta Volvo...

  • Page 42
    ... construction work to light-duty trucks for distribution. Number of employees 37,575 Position on world market in total, the Volvo Group is Europe's largest and the world's second largest manufacturer of heavy trucks. Brands Volvo, Renault, UD, Mack and Eicher. Net sales as percentage of Volvo Group...

  • Page 43
    ...Inventories of new and used trucks was gradually reduced during the year. • First manufacturer to certify engines for the new emission regulation in USA implemented January 1, 2010. Ambitions 2010 • Capture growth in emerging markets. • increase industrial productivity in up-turn. • Control...

  • Page 44
    ... Europe and North America. it is of great importance to secure long-term competitiveness by protecting important projects and investments in product development. Total solutions with financing, leasing and service contracts grow continuously. A positive effect is that the aftermarket business...

  • Page 45
    ... the year. Production rates in VECV's factory had to be increased several times to new record levels. Europe North America South America Asia Other markets Total 63,643 494 1,172 5,252 5,918 76,479 29,396 458 574 1,794 5,263 37,485 UD Trucks 2008 2009 Europe North America South America Asia...

  • Page 46
    ..., global position with an increasing share of its sales in Asia. The product program comprises complete buses, chassis, transport solutions, telematics, financial solutions and service and maintenance contracts. The com- Operating income1 Operating margin1 1) years starting 2006 are reported...

  • Page 47
    ...financial solutions for customers. • Volvo 9700 launched in North America and new city bus factory in the U.S. • Product and warranty costs have been lowered. Ambitions 2010 • Profitable growth in all regions. • Continued focus on cost-cutting and lower inventory levels. • Increased sales...

  • Page 48
    ...-steer loaders. Net sales as percentage of Volvo Group sales 16% (18) Asia leads the recovery Measured in units, the total world market for heavy, compact and road machinery equipment decreased by 39% compared to 2008. In Europe the market was down 50% and in North America by 49%. China increased...

  • Page 49
    ... business line is complete. During 2010, the synergies between Volvo CE and the Chinese wheel loader manufacturer Lingong will continue to develop. ABG8820B pavers for medium and largescale applications. Net sales by market Construction Equipment, SEK M 2008 2009 Europe North America South America...

  • Page 50
    ...with new and larger drive units linked to the Volvo Group's 11-liter and 13-liter engines, which means that Volvo Penta can offer drive systems for boats up to 100 feet. Total market The global financial crisis and economic downturn meant that the market for leisure boats in Europe and North America...

  • Page 51
    ... in a new, global logistics system that fully implemented will enable substantial efficiency improvements in the entire chain from order to delivery. Net sales by market Volvo Penta, SEK M 2008 2009 Europe North America South America Asia Other markets Total Engine volumes Volvo Penta, No. of units...

  • Page 52
    ... fuel accounts for a large part of the total Net sales1 Using Volvo Aero's knowledge of lightweight design, simulation and new, patented production methods, engine manufacturers can shorten the development process at the same time as engines become lighter and less noisy. Many of the technologies...

  • Page 53
    ...and supply test hardware for the new engine programs Trent XwB and PwG1000G. • increase productivity in carried-out investments, shorten lead times and reduce costs. • Continue to gain market share within engine services. • Conduct a strategic overhaul of the American aftermarket business. 49

  • Page 54
    ... value-added services to customers and dealers. Conducts operations in customer and dealer financing. Number of employees 1,234 Position on world market Volvo Financial Services operates exclusively to support the sales and leasing of vehicles and machines which are produced by the other Business...

  • Page 55
    ... in 2009 amounted to SEK 28.7 billion (44.5). Adjusted for changes in exchange rates, new business volume decreased by 41% compared to 2008 as a result of lower sales volumes of Group products. In total, 25,782 new Volvo vehicles and machines (47,986) were financed during the year. In the markets...

  • Page 56
    ...a vital condition for long-term profitability and increased customer and shareholder value. hybrids Alternative fuels Carbon dioxide neutral T he Volvo Group's vision is to be valued as the world's leading supplier of commercial transport solutions. Transports are necessary for the development of...

  • Page 57
    ... towards both the Group's own business and the use of the products. The goals are closely linked to business plans. During the years 2004-2008, the Volvo Group focused on energy reduction in the manufacturing operations. This resulted in a 43% decrease of energy use per produced unit. • The goal...

  • Page 58
    ... during use. Climate change and access to energy sources may affect the Volvo Group. It is therefore vital to prepare for use of fuels other than crude oil. These efforts focus largely on the development of new drivelines, energy efficiency and alternative fuels. More efficient engines lead to...

  • Page 59
    ... as fitness programs, Key figures Number of employees at year-end Share of women, % Share of women, Board Members, % Share of women, Presidents and other senior executives, % Absence due to illness in the Group's Swedish companies Total absence due to illness of regular working hours, % of which...

  • Page 60
    ... external auditors. The Board is responsible for the Group's long-term development and strategy as well as controlling and evaluating the company's operations. in addition, the Board appoints the President of AB Volvo, who is also the Chief Executive Officer (CEO). The duties of the Board are partly...

  • Page 61
    ... of the Board. The Board in 2009, AB Volvo's Board of Directors consisted of nine members elected by the Annual General Meeting. in addition, the Board had three members and two deputy members appointed by employee organizations. AB Volvo's CEO, Leif Johansson, was a member of the Board. On January...

  • Page 62
    ...as of the company's major shareholders. Leif Johansson, as Volvo's CEO, is independent of the company's major shareholders but not of the company and company management. Louis Schweitzer is Chairman of the Board of Directors of Renault S.A. and Jean-Baptiste Duzan is employed by Renault S.A. Both of...

  • Page 63
    ...the external audit plan and risk management. The Audit Committee held three meetings during 2009. Remuneration Committee Group Executive Committee, and principles for variable salary systems, share-based incentive programs, pensions and severance payment for other senior executives in the Group. in...

  • Page 64
    ... applicable legislation as well as to listing rules to timely disclose to the financial market all share price sensitive information. The Committee comprises the heads of the departments Corporate Finance, internal Audit, investor Relations, Corporate Legal, Business Control and Financial Reporting...

  • Page 65
    ...part of Volvo's internal control over financial reporting. Information and communication Policies and instructions relating to the financial reporting are updated and communicated on a regular basis from management to all affected employees. in addition, there are a number of committees and networks...

  • Page 66
    CORPORATE GOVERNANCE REPORT 2009 Group Management 62

  • Page 67
    ...CEO of North American Trucks since November 1, 2009. President and CEO of Mack Trucks, Inc. since 2008. President and CEO of Volvo Construction Equipment North America 2003-2008. Previously President of L.B. Smith, inc. Member of the Group Executive Committee since 2008. with Volvo since 2000. Board...

  • Page 68
    CORPORATE GOVERNANCE REPORT 2009 Board of Directors and Auditors 13 7 14 4 11 10 12 8 6 1 3 5 9 2 64

  • Page 69
    ... and Managing Director, Renault Nissan Purchasing Organization. 5. Leif Johansson Born 1951. Master Sc Engineering. President of AB Volvo and Chief Executive Officer of the Volvo Group since 1997. With Volvo since 1997. Chairman: ERT (European Round Table of industrialists). Board member: Bristol...

  • Page 70
    ...The Volvo Group Accounting principles Key sources of estimation uncertainty Change of accounting principles Acquisition and divestments of shares in subsidiaries Joint ventures Associated companies Segment reporting Other operating income and expenses income from investments in associated companies...

  • Page 71
    ... M 2008 Note 7 2009 Net sales Cost of sales Gross income Research and development expenses Selling expenses Administrative expenses Other operating income and expenses income from investments in associated companies income from other investments Operating income interest income and similar credits...

  • Page 72
    ... and equipment investment property Assets under operating leases Financial assets Associated companies Other shares and participations Non-current customer-financing receivables Deferred tax assets Prepaid pensions Non-current interest-bearing receivables Other non-current receivables Total non...

  • Page 73
    Changes in consolidated Shareholders' equity SEK M Balance at December 31, 2007 Shareholders' equity attributable to equity holders of the parent company Share Other Translation Retained reserve earnings Total capital reserves1 2,554 435 1,711 77,502 82,202 Minority interests 579 Total equity 82,781...

  • Page 74
    ... Shares and participations, net Acquired and divested subsidiaries and other business units, net interest-bearing receivables including marketable securities Cash-ï¬,ow after net investments Financing activities increase/(decrease) in bond loans and other loans Cash payment to AB Volvo shareholders...

  • Page 75
    ... shareholders' equity of the respective companies. Exchange rate gains and losses The consolidated financial statements for AB Volvo and its subsidiaries have been prepared in accordance with international Financial Reporting Standards (iFRS) issued by the international Accounting Standards Board...

  • Page 76
    ... are credited to, or charged against, income in the year they arise. The more important exchange rates applied are shown in the table. Net sales and revenue recognition The Group's reported net sales pertain mainly to revenues from sales of goods and services. Net sales are reduced by the value of...

  • Page 77
    ... protects the underlying position against changes in the fair value. Financial instruments used for the purpose of hedging future currency ï¬,ows are accounted for as hedges if the currency ï¬,ows are considered highly probable to occur. - During 2009 Volvo has partly applied hedge accounting...

  • Page 78
    ...so called qualifying assets from January 1, 2009. investment property is reported at acquisition cost. information regarding estimated value of investment property is based on discounted cash ï¬,ow projections. The estimation is performed by the Group's Real Estate business unit. The required return...

  • Page 79
    ...Financial Reporting Board in calculating the Swedish pension liabilities. For defined contribution plans premiums are expensed as incurred over the income statement according to function. Provisions for residual value risks Residual value risks are attributable to operating lease contracts or sales...

  • Page 80
    ... the consolidated operating income. high inventories in the truck industry and the construction equipment industry and low demand may have a negative impact on the prices of new and used trucks and construction equipment. in monitoring estimated net realizable value of each product under a residual...

  • Page 81
    ... and actuarial calculations are made separately for the respective countries of Volvo's operations which result in obligations for postemployment benefits. The assumptions include discount rates, health care cost trends rates, inï¬,ation, salary growth, long-term return on plan assets, retirement...

  • Page 82
    ... quarter 2008, the deal with Eicher Motors for the establishment of a new indian joint venture, VE Commercial Vehicles Ltd. The joint venture comprises Eicher Motors' entire truck and bus operations and the Volvo Group contributed its indian truck sales operations and service network for trucks and...

  • Page 83
    ... reclassification, Volvo wrote down assets by 515 to the corresponding estimated fair value less costs to sell, whereof 147 has been realized. Depending on the progress with the sales process, changes in the business environment, access to liquidity, market outlook etc, the fair value of remaining...

  • Page 84
    FiNANCiAL iNFORMATiON 2009 Notes to consolidated financial statements Note 5 Joint ventures Volvo's share of joint ventures' balance sheets Non-current assets Current assets Total assets Shareholders' equity Provisions Long-term liabilities Current liabilities Total shareholders' equity and ...

  • Page 85
    ... cost of sales, including calculated interest and product improvement expenses. internal sales from service companies are generally made at market prices. Operating income Trucks Construction Equipment Buses Volvo Penta Volvo Aero Other Industrial operations Customer Finance Volvo Group Depreciation...

  • Page 86
    FiNANCiAL iNFORMATiON 2009 Notes to consolidated financial statements Income from investments in associated companies Trucks Construction Equipment Buses Volvo Penta Volvo Aero Other Industrial operations Customer Finance Volvo Group total 2008 2009 40 0 8 0 0 (25) 23 2 25 (22) 0 12 0 0 (5) (...

  • Page 87
    ... venture-capital company. 2 Volvo has during 2009 made write-down of 36 of financial assets availablefor sale for which a market value can not be calculated. Note SEK M 11 Other financial income and expenses 2008 2009 Financial instruments at fair value through profit or loss Exchange rate...

  • Page 88
    ... 2009, % Swedish corporate income tax rates1 Difference in tax rate in various countries Capital gains Other non-taxable income Other non-deductible expenses Adjustment of current taxes for prior years Recognition and derecognition of deferred tax assets Other, net Income tax rate for the Group 28...

  • Page 89
    ... as in Nissan Diesel South Africa (Pty) Ltd (20%). Note Intangible and tangible assets Entrance fees, industrial programs Product and software development Other intangible assets2 Total intangible assets Intangible assets, acquisition costs Value in balance sheet 2008 Capital expenditures3 Sales...

  • Page 90
    ... and other Value in balance sheet 2009 Net carrying value in balance sheet 20085 Net carrying value in balance sheet 20095, 8 Buildings Land and land improvements Machinery and equipment 6 Construction in progress, including advance payments Assets under operating leases Total tangible assets...

  • Page 91
    ... section. Goodwill per Business Area Volvo Trucks Renault Trucks Trucks Asia Mack Trucks Construction Equipment Buses Other business areas Total goodwill value 2008 2009 Goodwill Volvo verifies annually, or more frequently if necessary, the value of its operations to secure that they do not...

  • Page 92
    ...non-Group companies Shares in associated companies, equity method of accounting Blue Chip Jet ii hB, Sweden UD Trucks Doto Corporation, Japan UD Trucks Niigata Corporation, Japan Merkavim Metal works Ltd, israel JV Fonderie Venissieux, France PK-UD Axle Co.,Ltd. (hangZhou), China Diamond Finance Ltd...

  • Page 93
    ... year Change in Group structure Acquisitions and divestments, net write-downs of associated companies Capital contribution Share of income in associated companies Revaluation of shares to fair value Translation differences Dividends Re-classification of holdings of Volvo Technology Transfer...

  • Page 94
    FiNANCiAL iNFORMATiON 2009 Notes to consolidated financial statements Note 18 Inventories 2008 2009 Finished products Production materials, etc. Total inventories recognized as cost of sale during the period amounted to 170,107 (223,986). Increase (decrease) in allowance for inventory ...

  • Page 95
    ... for use by the Volvo Group and SEK 5.3 billion (2,7) that are liquid funds in countries where exchange controls or other legal restrictions apply. Note 23 Shareholders' equity out issuance of new shares through the transfer of 426 from unrestricted shareholders' equity to share capital which...

  • Page 96
    ...scal year. Similarly, the employee stock option program creates a dilution effect by taking into account the difference between the exercise price and the share's average market price to determine how many shares that are assumed to be issued without any payment. it is solely this number of shares...

  • Page 97
    ...ect the time-value of money but not the actuarial or investment risk. 2008 2009 41,171 22,105 (19,066) 9,320 482 (9,264) 38,070 22,610 (15,460) 9,155 303 (6,002) Assumptions applied for actuarial calculations, % Sweden Discount rate Expected return on plan assets1 Expected salary increases in...

  • Page 98
    ... Exchange rate translation Benefits paid Obligations at December 31, 2008 of which Funded defined benefit plans by about 144 and reduce costs by approximately 10. Calculations made as of December 31, 2009 show an annual increase of 9% in the weighted average per capita costs of covered health...

  • Page 99
    ...,070 29,103 Fair value of plan assets in funded plans Plan assets at January 1, 2008 Acquisitions, divestments and other changes Expected return on plan assets Actuarial gains and (losses) Employer contributions Employee contributions Exchange rate translation Benefits paid Plan assets at December...

  • Page 100
    ....0). Volvo's subsidiaries in the United States mainly secure their pension obligations through transfer of funds to pension plans. At the end of 2009, the total value of pension obligations secured by pension plans of this type amounted to 13,007 (13,322). At the same point in time, the total value...

  • Page 101
    ...American pension plans. During 2009 Volvo has made extra contributions to the pension plans in Great Britain in the amount of SEK 113 M (147). in 2010, Volvo estimates to transfer an amount not exceeding SEK 1 billion to pension plans. Note 25 Other provisions Value in balance sheet 2008 Acquired...

  • Page 102
    ...3,540 34,105 Current liabilities also include trade payables that amounted to 35,955 (51,025), current tax liabilities that amounted to 623 (1,204) and non interest-bearing liabilities held for sale reported within Note 4. Secured bank loans at year-end 2009 amounted to 329 (312). The corresponding...

  • Page 103
    ... 1999 Volvo Truck Corporation and Volvo Construction Equipment entered into a Consent Decree with the U.S. Environmental Protection Agency (EPA). The Consent Decree included, among other provisions, that new stricter emission requirements for certain engines that would come into force on January...

  • Page 104
    ... business units: Acquired subsidiaries and other business units Divested subsidiaries and other business units 2008 2009 (1,853) 536 (1,317) (56) 205 149 Important increase/decrease in bond loans and other loans During 2009, the Volvo Group completed a number of important funding transactions...

  • Page 105
    ...The Volvo Group has transactions with some of its associated companies. The transactions consist mainly of sales of vehicles to dealers. Commercial terms and market prices apply for the supply of goods and services to/from associated companies. 2008 2009 Sales to associated companies 1,222 Purchase...

  • Page 106
    ...the Volvo Group. The share-based incentive program was based on financial goals for 2009, as these goals was not met no incentives were paid. Other benefits, mainly pertaining to car and housing, amounted to SEK 583,125 in 2009. Leif Johansson is covered by the Volvo executive pension plans, Volvo...

  • Page 107
    ... Volvo Group. 2 No allotment has been made under the incentive program decided by the Annual General Meeting 2009. Employee stock options program Allotment was made from May 2, 2006 to May 1, 2008, and thereby the employee stock options program was closed in 2008. Cost for the long-term incentive...

  • Page 108
    ... year-end women, % 2009 Number at of which year-end women, % 11 18 885 1,701 9 6 10 17 12 18 880 1,330 8 6 11 19 Wages, salaries and other remunerations, SEK M AB Volvo Sweden Subsidiaries Sweden western Europe Eastern Europe North America South America Asia Other countries Group total Board...

  • Page 109
    ... of these contracts are used to hedge interest-rate levels for short-term borrowing or investment. Cash-ï¬,ow risks The effect of changed interest-rate levels on future currency and interest-rate ï¬,ows refers mainly to the Group's customer financing operations and net financial items. within the...

  • Page 110
    ... term, negative effects on Volvo's earnings and financial position stemming from exchange-rate changes. Commercial currency exposure in order to hedge the value of future payment ï¬,ows in foreign currencies, Volvo uses forward contracts and currency options. During 2008, 75% of the forecasted net...

  • Page 111
    ... the long-term customer finance receivables and the short-term customer receivables, refer to Note 16 and 19. Age analysis of portfolio value - Accounts receivable and Customer financing receivables 2008 2009 >90 Total not due 1-30 31-90 >90 Total Accounts receivable not due Accounts receivable...

  • Page 112
    ... business operations of the Volvo Group together, industrial operations and Customer finance. The credit portfolio within Customer Finance is principally matched in respect of payments from customers and amortization of loans. The future payments in 2010 and 2011 mainly relates to Customer Finance...

  • Page 113
    ... Financial liabilities valued at amortized cost Long term bond loans and other loans Short term bank loans and other loans Trade Payables 1 Refers to Volvo's ownership in Deutz AG valued at market value and UD Trucks' holdings in listed shares. 2 Unlisted shares, for which a reliable fair value...

  • Page 114
    ... value December 31, 2008 December 31, 2009 Total Level 1 Level 2 Level 3 Total Assets Financial assets at fair value through profit and loss Currency risk contracts - commercial exposure Raw materials contracts interest risk contracts - financial exposure Marketable securities Available for sale...

  • Page 115
    ... cost - Volvo internal Loans originated by the company and Financial liabilities value at amortized cost - External Effect on income Various categories of financial instruments are treated separately in specific notes. See note 15 for Shares and participations, notes 16 and 19 for Customer...

  • Page 116
    FiNANCiAL iNFORMATiON 2009 Notes to consolidated financial statements Below is a presentation of derivative instruments and options. Outstanding derivative instruments for dealing with currency and interest-rate risks related to financial assets and liabilities Dec 31, 2008 Notional Carrying ...

  • Page 117
    ... in the Group's income statement. For 2009, Volvo reported 36 (positive 22) as a loss related to the ineffectiveness of cash-ï¬,ow hedging. From the fourth quarter in 2009 hedge accounting is not applied on new financial instruments used for hedging commercial ï¬,ows. however for the major part of...

  • Page 118
    ... in the consolidated accounts. The portion of shareholders' equity in associated companies accruing to AB Volvo totaled 300 (303). Shares and participations in non-Group companies include listed shares in Deutz AG with a carrying value of 286, corresponding to the quoted market price at year-end. in...

  • Page 119
    ... assets Short-term receivables from Group companies Current tax receivables Other short-term receivables Cash and bank accounts Total current assets Total assets Shareholders' equity and liabilities Shareholders' equity Restricted equity Share capital (2,128,420,220 shares, quota value SEK 1:20...

  • Page 120
    FiNANCiAL iNFORMATiON 2009 Changes in Shareholders' equity Restricted equity Share capital Statutory reserve Share premium reserve Unrestricted equity Fair value reserve Retained earnings SEK M Total Total shareholders' equity Balance at December 31, 2007 income for the period Other ...

  • Page 121
    ...in Group companies, net Shares and participations in non-Group companies, net interest-bearing receivables including marketable securities, net Cash-ï¬,ow after net investments Financing activities increase/(decrease) in loans Cash payment to AB Volvo shareholders Change in liquid funds Liquid funds...

  • Page 122
    ...to preceding year. intra-Group transactions Of the Parent Company's net sales, 578 (707) pertained to Group companies while purchases from Group companies amounted to 357 (406). Fees to external auditors Fees and other remunerations paid to PricewaterhouseCoopers for the fiscal year 2009 totaled 19...

  • Page 123
    ...6 7 8 9 Income from investments in Group companies Volvo Group Finance Europe BV (VGFE) were written down by 1,003. Transfer price adjustments and Group contributions total a net of neg 16,859 (1,521). in 2008, the liquidation of VGFE resulted in a gain of 2,662. Of the income reported, 10,275 (15...

  • Page 124
    ... assets Value in balance sheet 2008 Value in balance sheet 2009 Acquisition cost Rights Other intangible assets Total intangible assets Buildings Land and land improvements Machinery and equipment Total tangible assets 52 116 168 6 3 45 54 52 116 168 6 3 45 54 Net carrying value in balance...

  • Page 125
    .... Shareholders' contributions were made, during the year, to Volvo Treasury AB, SEK 10 billion, Volvo information Technology AB, 500 and Volvo China investment Co Ltd, 355. in 2008 the shares in Volvo Korea holding AB, with a book value of SEK 2,655, were transferred from Volvo Group Finance Europe...

  • Page 126
    .... AB Volvo's pension costs amounted to 55 (95). The accumulated benefit obligation of all AB Volvo's pension obligations at year-end 2009 amounted to 601, which has been secured in part through provisions in the balance sheet and through transfer of funds to pension foundations. Net asset value in...

  • Page 127
    ...19 Cash-ï¬,ow 2008 2009 Other adjustments of operating income Revaluation of shareholdings Gain/loss on sale of shares Group contributions and transfer price adjustments, current year Payments of previous years Group contributions and transfer price adjustments Other Total 1,061 (2,661) (1,351...

  • Page 128
    ...of employees at year-end was 190 (196). information on the average number of employees, wages, salaries and other remunerations including option programs as well as Board members and senior executives by gender is shown in note 34 to the consolidated financial statements. 2008 2009 wages, salaries...

  • Page 129
    ... Group UK Ltd, Great Britain Volvo Otomotiv Turk Ltd STi, Turkey Volvo india Ltd, india Volvo Holding Sverige AB, Sweden Volvo Logistics AB, Sweden BRS Ltd, Great Britain Volvo Construction Equipment North America, Canada Volvo Polska Sp. O.O., Poland Volvo (Southern Africa) Pty Ltd, South Africa...

  • Page 130
    ...Volvo Aero AB, Sweden Volvo Aero Norge AS, Norway VNA Holding Inc., USA Volvo Group North America inc, USA Arrow Truck Sales, inc., USA Mack Trucks inc, USA Volvo Construction Equipment North America inc., USA Volvo Penta of The Americas inc., USA Volvo Aero Services LP, USA Volvo Commercial Finance...

  • Page 131
    ...Finance (China) Ltd, China Volvo Group UK Ltd, Great Britain2 Volvo holding Mexico, Mexico Volvo Technology Transfer AB, Sweden Volvo Powertrain AB, Sweden Volvo information Technology AB, Sweden Volvo Parts AB, Sweden Volvo Group insurance Försäkrings AB, Sweden Volvo Business Services AB, Sweden...

  • Page 132
    FiNANCiAL iNFORMATiON 2009 Proposed remuneration policy Proposal by the Board of Directors of AB Volvo to be adopted by the Annual General Meeting April 14, 2010 This Policy concerns the remuneration and other terms of employment for the Group Executive Committee of the Volvo Group. The members of ...

  • Page 133
    ...and the companies in the Group face. Göteborg, February 26, 2010 Louis Schweitzer Board Chairman Peter Bijur Board member Jean-Baptiste Duzan Board member Leif Johansson President, CEO and Board member Anders Nyrén Board member Ravi Venkatesan Board member Lars westerberg Board member ying...

  • Page 134
    FiNANCiAL iNFORMATiON 2009 Audit report for AB Volvo we have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the President of AB Volvo for the year 2009. The company's annual accounts and the consolidated accounts ...

  • Page 135
    ...Consolidated income statements Industrial operations SEK M Net sales Cost of sales Gross income Research and development expenses Selling expenses Administrative expenses Other operating income and expenses income from Financial Services income (loss) from investments in associated companies income...

  • Page 136
    FiNANCiAL iNFORMATiON 2009 Eleven-year summary Consolidated balance sheets SEK M 1999 intangible assets 6,618 Property, plant and equipment 19,788 Assets under operating leases 12,337 Shares and participations 29,213 inventories 21,438 Customer...321,647 579 1,556 8,153 2008 2009 43,958 41,628 57,...

  • Page 137
    ...equipment 17,318 Assets under operating leases 1,611 Shares and participations 35,296 inventories 21,053 Customer-financing receivables 9 interest-bearing receivables 18,617 Other receivables 21,075 Non-current assets held for sale - Liquid funds...,468 2004 2005 2006 2007 2008 2009 17,570 20,348 19,...

  • Page 138
    ....9) Acquired and divested subsidiaries and other business units, net 31.0 interest-bearing receivables including marketable securities (16.9) Cash-ï¬,ow after net investments (18.1) increase (decrease) in loans Repurchase of own shares Cash dividend/payment to AB Volvo's shareholders Other Change in...

  • Page 139
    Exports from Sweden SEK M Volvo Group, total 1999 52,719 2000 46,251 2001 50,394 2002 52,730 2003 49,300 2004 62,653 2005 71,133 2006 80,517 2007 88,606 2008 96,571 2009 41,829 Key ratios 1999 20.3 Gross margin, %1 Research and development expenses as percentage of 3.9 net sales1 Selling expenses ...

  • Page 140
    ... LP AFA insurance AMF Pension and Funds Alecta (pension funds) SEB fonder (savings funds)/ Trygg Försäkring Skandia Liv Swedbank Robur fonder Total Following the repurchase of its own shares, AB Volvo held 4.7% of the Company´s shares on Dec. 31, 2009. 1 Based on the number of outstanding...

  • Page 141
    ... Construction Equipment Volvo Penta western Europe Eastern Europe North America South America Asia Other markets Total Other and eliminations Net sales Industrial operations Volvo Aero Customer Finance western Europe Eastern Europe North America South America Asia Other markets Total Eliminations...

  • Page 142
    ... 10.3 4.4 7.9 7.9 2007 8.1 7.9 1.4 10.0 6.9 7.8 7.8 2008 6.0 3.2 (0.4) 8.1 4.8 5.2 5.2 2009 (7.8) (11.2) (1.9) (2.8) 0.6 (7.8) (7.8) Number of employees at year-end Number1 Trucks Buses Construction Equipment Volvo Penta Volvo Aero Financial Services Other Volvo Group, total 1999 23,330 8,860 8,900...

  • Page 143
    Employees Number Sweden Europe, excluding Sweden North America South America Asia Other markets Volvo Group total 1999 24,840 11,900 11,880 1,930 2,480 440 53,470 2000 25,030 12,320 11,410 2,100 2,570 840 54,270 2001 24,350 27,800 12,670 2,090 2,550 1,460 70,920 2002 25,420 27,130 12,440 2,020 2,590...

  • Page 144
    ...control together with one or more external parties. Net financial position Cash and cash equivalents, marketable securities and interestbearing short- and long-term receivables reduced by short- and long-term interest-bearing liabilities and provisions for postemployment benefits. Operating margin...

  • Page 145
    ...so called voting-right registration, at the bank or broker holding the shares. Preliminary publication dates Report for the first three months 2010 Report for the first six months 2010 Report for the first nine months 2010 Report on 2010 operations Annual Report 2010 April 23, 2010 July 22, 2010...

  • Page 146
    ... SwEDEN SiGNS AGREEMENT ON ShORTENiNG OF wORK hOURS FOR SALARiED EMPLOyEES iN SKöVDE. 06-15-2009 TRUCK DELiVERiES iN MAy 2009. 06-16-2009 VOLVO UNVEILS PROPRIETARY MEDIUM-HEAVY ENGINE. 06-222009 VOLVO iT SiGNS NEw AGREEMENT wiTh CiTy OF GöTEBORG. 06-22-2009 MAJOR AGREEMENT FOR VOLVO BUSES iN ChiNA...