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The Volvo Group 2010
Moving ...

Table of contents

  • Page 1
    Moving ... The Volvo Group 2010

  • Page 2
    ... alone, the garbage removed by refuse trucks from the Volvo Group every week could form a line of full garbage cans that would reach the moon. These are just a few examples. In this Annual Report, you can learn more about the importance of the Volvo Group in every day life. How we are the lifeblood...

  • Page 3
    ...our customers while the supporting business units work to make efficient use of Group­wide resources. More information. 26 & +458% South America 2000 2010 5.2 29.0 Buses Construction Equipment Volvo Penta Volvo Aero Volvo Financial Services Trucks SEGMENTS Volvo 3P Volvo Powertrain BUSINESS UNITS...

  • Page 4
    ... Group sales of products and services are conducted through both wholly owned and independent dealersO The global service network handles customer demand for spare parts and other servicesO More informationO Employees The majority of the Group's employees work in Sweden, France, the 2000 2010...

  • Page 5
    ... the return of increasing numbers of our former colleagues to the Volvo Group - colleagues who sadly had to leave us in conjunction with the financial crisis but who have now been offered work again in increasing numbers. It is also pleasProposed dividend of SEK 2.50 per share THE VOLVO GROUP 2010...

  • Page 6
    ... service and distributors, Volvo Penta is strategically well-positioned to be an innovative partner to important boat builders. The industrial engine business had a good development and the aim is to further increase sales of industrial engines by breaking into new segments of the market. Volvo Aero...

  • Page 7
    ...development in the short and long term Thanks to hard work and the resolute execution of cost-cutting measures, the Volvo Group has taken itself through the collapse of the global financial system and emerged as a stronger company at a time when the economic trend is once again pointing in the right...

  • Page 8
    ... complete offerings including total solutions with spare parts, workshops, service packages, financing and leasing, the Volvo Group's companies have established leading positions on a global market. the Volvo group has an established and strong position in Europe, North america, and south america...

  • Page 9
    Share of Group's net sales trucks, 63% buses, 8% construction Equipment, 20% Volvo Penta, 3% Volvo aero, 3% customer Finance, 3% Share of Group's net sales by geography Europe, 39% North America, 18% South America, 11% Asia, 25% Rest of the world, 7% Europe Asia...(JP) * ownership ≥ 50% ...

  • Page 10
    ... network, efficient spare parts city buses intercity buses Eicher Mack trucks uD trucks renault trucks Volvo trucks handling, service and repair contracts, financial services and traffic information systems. coaches chassis Marine and industrial applications Volvo Penta manufactures engines...

  • Page 11
    ... air Force's gripen fighters. Volvo aero also has an aftermarket business that comprises repair and maintenance of select aircraft engines as well as stationary gas turbines. space Financial services Financial services, such as customer and dealer financing, and other services, such as insurance...

  • Page 12
    ...of heavy-duty trucks in North America Ever since the start, Mack trucks has focused on power and reliability, which has contributed to making the company one of the strongest heavy-duty truck brands in the North american market. in the u.s., Mack is the leading producer of trucks in the construction...

  • Page 13
    ...companies with just one refuse truck to local authorities and large cities, such as New York City, operating around 2,500 Mack refuse trucks that haul more than 11,000 tons of trash every day. Mack collaborates closely with customers to customise trucks that match their specific requirements. In New...

  • Page 14
    ...a global global grouP koNcErN 2010 2010 V isio N , M is sio N a N D Va lu E s Vision Mission Values Q uality Quality is an expression of our goal to offer reliable products and services. in all aspects of our operations, from product development and production to delivery and customer support, the...

  • Page 15
    ...and quality requirements put significant demands on the entire product development process. the group utilizes common architecture and shared technology to create synergies and reduce costs. Operational Excellence the Volvo group strives to optimize cost-efficiency and productivity in all parts of...

  • Page 16
    ...of new products and services and a favorable return to the shareholders. the group's brands shall increase customer satisfaction by offering environmentally and cost-efficient products and services. Required scale achieved During the past ten years, the Volvo group has grown on average 7.4% per year...

  • Page 17
    ... Excellence Volvo Production system (VPs) is an important tool in the effort to increase operational excellence. it 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...

  • Page 18
    ... heavy construction duties. With the new Volvo FMX and a strong service offering for the construction industry, the company has strengthened its position in this segment. During the year, Volvo trucks also focused on the development of hybrid trucks and engines for alternative fuels. Renault Trucks...

  • Page 19
    ... of the group's products. the diesel engines are used in trucks, buses and construction equipment, as well as in boats and industrial applications, such as generator units. the strongest driver of the development of drivelines is customer requirements and preferences as well as new legislation with...

  • Page 20
    ... and respected names within trucks, buses, construction equipment, marine engines, industrial engines and in the aviation industry. Mack is one of the most well-known truck brands in north America, while Renault trucks holds a special position in Southern europe. the truck market. Strong dealers UD...

  • Page 21
    ..., operating margin and capital structure vor the Group's Industrial Operations. Financial goals for Industrial Operations Growth the growth target is that net sales should increase by a minimum of 10% annually. During 2000- 2010, the average growth rate was 7.4% annually. Operating margin the Volvo...

  • Page 22
    ... and upgrades service contracts extended coverage Transport management driver time management vehicle management security, safety & environment driver info and support competence development Fleet and asset management call centre services consultancy services information services dealer financing...

  • Page 23
    ... group's new markets. During 2010, the services and aftermarket products business represented approximately 35% of net sales in the Industrial operations, of which roughly half was attributable to spare parts and workshop services. Develop and increase interface with customers the majority of Volvo...

  • Page 24
    ... generator. Several of the Volvo hybrid auxiliary systems are powered by independent electric motors. these measures all contribute to high fuel savings on routes with frequent braking and acceleration, like city bus traffic. the parallel hybrid technology reduces fuel consumption and co2 emissions...

  • Page 25
    ... technology has been positive and all our staff, from mechanics to drivers, are pleased to be involved,"says Ian Tarran, engineering director at Arriva London. Transport for London, the body responsible for London's transport system, has made the hybrid buses a key part of their strategy for public...

  • Page 26
    ... fuel prices, the implementation of new emission regulations, interest rates, etc. From a historical perspective, despite the recovery in the truck and construction equipment markets in 2010, demand was below the longterm trend in Europe, North america and Japan. The Volvo group sees no development...

  • Page 27
    ... preceding year. The Indian market for heavy-duty trucks rose by 69% to 211,543 vehicles (125,173). The market for construction equipment in asia rose by a total of 60%, primarily driven by continued strong growth in china and India. after a weak second half in 2010, demand for heavyduty trucks is...

  • Page 28
    ... segment. Sales of the new Volvo FMX will begin in Europe in September, 2010. Detailed information about the events is available at www.volvogroup.com Production of new medium-duty engine in India The Volvo group's Indian joint venture company, VE commercial Vehicles (VEcV) is to invest a total of...

  • Page 29
    ... program. as a WWF partner, the Volvo group's truck companies undertake to reduce the co2-emissions from vehicles manufactured between 2009 and 2014 by 13 million tons. Independent technical experts will oversee the results. Events after balance-sheet date Volvo part of investigation by European...

  • Page 30
    ... commercial Vehicles (50% ownership) in India. The product offer stretches from heavy-duty trucks for long-haulage and construction work to light-duty trucks for distribution. Number of employees: 38,533 (37,575). Number of delivered trucks: 179,989 (127,681). NET SALES AS PERCENTAGE OF VOLVO GROUP...

  • Page 31
    ...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: 2,863 (2,991). Volvo Financial Services conducts operations in customer and dealer financing. Number of employees: 1,235...

  • Page 32
    ... renault Trucks, uD Trucks, Mack Trucks and VEcV in India (50% direct and indirect ownership). The product offer stretches from heavyduty trucks for long-haulage and construction work to light-duty trucks for distribution. Number of employees 38,533 Position on world market In total, the Volvo group...

  • Page 33
    ...market shares in the u.S. • The new Quon truck with group engine well-received by customers in Japan. Ambitions 2011 • Manage to ramp up production in line with demand. • Increase productivity in all parts of the business. • continued cost control. • Secure delivery of product development...

  • Page 34
    ... launched the uD genuine after Market program to provide customers with access to original service and original spares, which will help customers reduce their operating expenses. Deliveries by market Volvo Trucks Europe North america South america asia other markets Total 19,749 8,028 10,349 5,573...

  • Page 35
    ...of trucks and buses. key investments are currently being made in painting, expansion of capacity, a new engine plant, in the wholly-owned distribution network and in a product development center for developing the next generation of trucks and buses. Increased market shares In 2010, the total market...

  • Page 36
    ... reported during the year for the total market for Volvo Buses' key markets in Europe and the coach market in North America, Volvo succeeded in increasing deliveries compared with 2009. During the year, 10,229 buses and bus chassis (9,857) were delivered. Sales increased in several locations in Asia...

  • Page 37
    ... of Volvo Group sales 8% (8) Net sales SEK bn Operating income (loss) and operating margin Deliveries by market Buses Europe North America South America Asia Other markets 2009 3,164 1,539 690 3,839 625 9,857 2010 2,395 2,092 1,174 3,477 1,091 10,229 Net sales by market Buses, SEK M Europe North...

  • Page 38
    ..., spare parts and services are available in more than 125 countries. The products are mainly used in such segments as general construction, road construction and maintenance, as well as in the refuse, mining and forestry industries. Recovery Measured in units sold, the total world market for heavy...

  • Page 39
    ...ahead with its plans to deliver turnkey solutions adapted for various customer groups. At the same time, the investment in soft products continues and Volvo CE will continue to launch new value-adding products and services for customers. Product launches in 2010 include compact excavators EC15, EC17...

  • Page 40
    BOARD OF DIRECTORS' REPORT 2010 VO LVO PEN TA Improved profitability despite weak leisure boat market Volvo Penta conducts its operations in two overall business segments: Marine and Industrial. For a broader general public, Volvo Penta is mostly known for its marine engines and world-leading ...

  • Page 41
    ... of Volvo Group sales 3% (4) Net sales SEK bn Operating income (loss) and oprating margin Engine volumes Volvo Penta, No. of units Marine engines Industrial engines Total 2009 25,755 19,228 44,983 2010 28,965 22,623 51,588 Net sales by market Volvo Penta, SEK M Europe North America South America...

  • Page 42
    ...offered. Number of employees 2,863 Position on world market Volvo Aero holds a leading position as an independent producer, with engine components in about 90% of all large commercial aircraft delivered in 2010. • Manage the continued development responsibility and supply test hardware for the new...

  • Page 43
    ...Outcome 2010 • Volvo Aero has implemented development and delivery in the main according to plan. • Successful work with higher productivity, shorter lead times and reduced costs. • Increased market shares during 2010. • Review implemented, resulting in the divestment of Volvo Aero Services...

  • Page 44
    ...tied to U.S.-based loans on trucking and construction equipment assets were issued. Ambitions 2010 c onducts operations in customer and dealer financing. Number of employees 1,235 Position on world market Volvo Financial Services operates exclusively to support the sales and leasing of vehicles and...

  • Page 45
    ... 20 Volvo Renault Mack Trucks Trucks Trucks 16 11 Buses 34 35 Volvo CE 4 12 UD Trucks % 1 Share of business financed by Volvo Financial Services in markets where financial services are offered. Outcome 2010 • Re-established positive portfolio trends and maintained strong customer and dealer...

  • Page 46
    BOARD OF DIRECTORS' REPORT 2010 MOV ING T H E WO RL D Volvo trucks are the backbone in the long-haul transports that deliver mail to an entire continent From the earth to the moon and back - 32 times over Distances in Australia are huge. From Sydney on the east coast to Perth on the west coast, ...

  • Page 47
    ... the Christmas peak period. 125 Volvo BH trucks make up the core of the line haul transports. 65 of the trucks pull double semi trailers, so called B-doubles. By using larger rigs, many smaller trucks can be replaced. This means more fuel-efficient transportation, lower emissions, less congestion...

  • Page 48
    Board of directors' report 2010 susta in a B l e de v elo pm en t A responsibility that is the continuous focus of the Group To be a responsible company with the ability to adapt to changes in the surrounding world is becoming increasingly important to the success of the Volvo Group. The Group is ...

  • Page 49
    ... positive social development. 6,868 1,519 899 Number of suppliers, total Number of replies Total TSR approved Volvo Group expect its suppliers to be compliant with the Group's TSR requirements. The requirements are an integrated part of the Group's sourcing process. Potential and existing suppliers...

  • Page 50
    ... and optimization of products and components to produce the most efficient driveline. the volvo Group's development program comprises city buses and distribution trucks, as well as construction equipment. measurements on customers' hybrid buses show significantly lower fuel consumption of up...

  • Page 51
    ...well as to monitor current suppliers. during 2010, volvo worked on evaluating the processes' efficiency and this will be used as the basis for the way in which the csr program will develop in the future. approximately 35,000 companies deliver products and services to the volvo Group. of these, about...

  • Page 52
    ...of regular working hours) by age 29 years or younger, % 30-49 years, % 50 years and older, % 2009 2010 drive change," wrote ceo leif Johansson in a letter to all managers introducing the new volvo Way in october 2009. the new volvo Way reflects an ambitious endeavor of creating a cohesive culture...

  • Page 53
    ... employees in production units were working in accordance with the certified environmental management system, primarily iso 14001:2008. at each production unit, there is an environmental coordinator. the Group's environmental goals are used to control, develop and monitor the environmental culture...

  • Page 54
    ... covering 700 hectares is cleared between 10 and 50 times daily during a typical winter's day. arlanda has among the world's largest snow blowers, and they are powered by volvo. there are 17 volvo a25d articulated haulers, nine wheel loaders of various volvo models and a number of volvo trucks. 50

  • Page 55
    ...are called in the language of international aviation are an integrated part of traffic planning and are in constant contact with the control tower. Just as an aircraft gets its take-off and landing times, so too do the sweepers get a slot to clear the snow and ice off the tarmac. "We have a total of...

  • Page 56
    ... shareholders with a favorable return and offering creditors reliable security. Volvo's goals are strong and stable credit ratings a long-term competitive market position requires availability of capital to implement investments. the financial strategy ensures that the Group's capital is used...

  • Page 57
    ... in asia, particularly in china. these new competitors are mainly active in their domestic markets, but are expected to increase their presence in other parts of the world. Prices may change the prices of commercial vehicles have, at times, changed considerably in certain markets over a short period...

  • Page 58
    ...financial assets and liabilities (price risks). Market risk from investments in shares or similar instruments the volvo Group is indirectly exposed to market risks from shares and other similar instruments, as a result of managed capital transferred to independent pension plans being partly invested...

  • Page 59
    ... control of the company is changed are also included in some of the agreements whereby renault trucks' has been given the right to sell renault s.a.s.' and nissan motor co. ltd's light-duty trucks as well as in some of the Group's purchasing agreements. Complaints and legal actions the volvo Group...

  • Page 60
    ....4). at year-end 2010, volvo's market capitalization totaled seK 238 billion (124). an increasing portion of the trading in volvo shares is carried out on alternative exchanges such as Bats europe, Burgundy and chi-X. Ownership changes in october 2010, aB volvo's main shareholder, renault, sold its...

  • Page 61
    ... annual report 2009, march 17 10 investor day in shanghai, china, may 12 5 truck deliveries for february, march 24 Ownership by country1 Sweden , 57% Great Britain, 14% USA, 13% France, 7% Luxenbourg, 2% Switzerland, 2% Norway, 1% Others, 4% 1 Share of capital, registered shares. 11 capital markets...

  • Page 62
    ... seK 158 M during the fourth quarter. Income taxes Operating income (loss) by business area seK M 2009 2010 trucks construction equipment Buses Volvo penta Volvo aero eliminations and other Industrial Operations customer finance Volvo Group Operating margin % (10,805) (4,005) (350) (230) 50 (994...

  • Page 63
    ... positive effects from forward exchange rate contracts in 2010 compared to major negative effects in 2009. Income Statement Volvo Group seK M 2009 2010 Net sales Volvo Group Operating Income (loss) Volvo Group O perating income (loss) Industrial Operations Operating income (loss) Customer Finance...

  • Page 64
    Board of directors' report 2010 Customer Finance Operations total new financing volume in 2010 amounted to seK 35 billion (29). adjusted for changes in exchange rates, new business volume increased by 26% compared to 2009 as a result of increased sales volumes of the Volvo Group products and good ...

  • Page 65
    61

  • Page 66
    ... total assets by seK 12.9 billion during 2010. other changes are mainly a result of higher working capital due to increased inventories, accounts receivable and account payable offset by decreased customer financing receivables due to lower levels of financial leasing, installment credits and dealer...

  • Page 67
    ... 31 2010 Volvo Group dec 31 2009 Dec 31 2010 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-current...

  • Page 68
    .... capital investments for construction equipment increased to seK 1.4 billion from seK 1.0 billion previous year. a majority of the investments refer to expansion of the excavator business in the Bric countries, during 2010 especially in china. it includes product offerings as the new ec200B Volvo...

  • Page 69
    ... 2009 2010 Volvo Group 2009 2010 Operating activities operating income depreciation tangible assets amortization intangible assets depreciation leasing vehicles other non-cash items total change in working capital, of which Change in accounts receivables Change in inventories Change in trade...

  • Page 70
    ... companies income from other investments interest income and expenses other financial income and expenses allocations income taxes intangible and tangible assets investments in shares and participations other short-term receivables Untaxed reserves Provisions for pensions non-current liabilities...

  • Page 71
    ...investments Operating income interest income and similar credits interest expenses and similar charges other financial income and expenses Income after financial items income taxes Income for the period attributable to: Equity holders of the Parent company minority interests Basic earnings per share...

  • Page 72
    ... inFormation 2010 conSoliDatED BalancE SHEEt SEK m Assets non-current assets intangible assets tangible assets Property, plant and equipment investment property assets under operating leases Financial assets associated companies other shares and participations non-current customer-financing...

  • Page 73
    ... to income available-for-sale investments: Gains/losses at valuation to fair value change in cash flow hedge reserve other comprehensive income for the period Total income for the period Transactions with shareholders Dividends capital contribution Share based payments changes in minority interests...

  • Page 74
    ... and other business units, net interest-bearing receivables including marketable securities Cash-flow after net investments Financing activities increase/(decrease) in bond loans and other loans cash payment to aB Volvo shareholders' Dividends to minority shareholders other Change in cash...

  • Page 75
    ...reported as current or non-current in the balance sheet. exchange rate differences on loans and other financial instruments in foreign currency, which are used to hedge net assets in foreign subsidiaries and associated companies, are offset against translation differences in the shareholders' equity...

  • Page 76
    ... assets are recognized in the income statement. short-term investments that are reported at fair value through profit and loss mainly consist of interest-bearing financial instruments and are reported in note 21. derivatives used for hedging interest-rate exposure in the customer financing portfolio...

  • Page 77
    ...will henceforth be reported in the income statement in the segment group headquarter functions and other. during 2010 Volvo has partly applied hedge accounting for financial instruments used to hedge interest and currency risks on loans only for cases when hedge accounting requirements are fulfilled...

  • Page 78
    ...the asset's recovery value. see note 14 for goodwill. Depreciation periods capitalized type-specific tools operational leases machinery Buildings and investment property land improvements trademarks distribution networks product and software development aircraft engine projects 2 to 8 years 3 to...

  • Page 79
    ... the employees' average remaining service period to the extent they exceed the corridor value for each plan. deviations between expected return on plan assets and actual return are also treated as actuarial gains or losses. provisions for post-employment benefits in Volvo's balance sheet correspond...

  • Page 80
    ...KeY sources of estimatioN uNcertaiNtY by Volvo. in certain cases Volvo enters into a buy-back agreement or residual value guarantee after Volvo has sold the product to an independent party or in combination with an undertaking from the customer that in the event of a buy-back to purchase a new Volvo...

  • Page 81
    ...balance sheet. Volvo has significant tax-loss carryforwards which are related to countries with long or indefinite periods of utilization, mainly sweden and france. of the total deferred tax asset for loss carryforwards 7,327 (8,939), an amount of 3,665 (4,653) relates to sweden with indefinite time...

  • Page 82
    ...changes in share ownership made from the application date. in addition to the above-mentioned, the below amendments to standards and new interpretations from ifric have been applicable for the Volvo group from January 1, 2010, but have not had a significant impact on the group's financial statements...

  • Page 83
    ...year 2009, the Volvo group reported assets amounting to 1,692 and liabilities to 272 as assets and liabilities classified as held for sale. Assets and liabilities held for sale intangible assets tangible assets inventories accounts receivable other current receivables other assets Total assets trade...

  • Page 84
    ... sales financial income and expense Income before taxes income taxes Income of the period 2009 2010 dec 31, 2009 dec 31, 2010 4,027 (3,991) (7) 29 (28) 1 3,794 (3,840) (32) (78) (46) (124) Balance sheet data Non-current assets current assets Total assets shareholders' equity provisions long-term...

  • 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
    ...600 (38) 15,205 Reporting by market Net sales europe North america south america asia other markets Volvo Group total* *of which: sweden united states france 2009 2010 1 defined as total assets less interest-bearing financial assets and tax receivables. Total shareholders' equity and liabilities...

  • Page 87
    ... entirely to financial assets available for sale for which a market value can not be calculated.. 1 investments held by the Volvo venture-capital company. Note seK m 11 otHer fiNaNcial iNcome aNd eXpeNses 2009 2010 financial instruments at fair value through profit or loss exchange rate gains...

  • Page 88
    fiNaNcial iNfoRmatioN 2010 Notes to coNsolidated fiNaNcial statemeNts Note 12 iNcome ta xes at year-end 2010, the Group had unused tax-loss carryforwards amounting to 25,000 (30,200). these loss carryforwards expire according to the table below: Due date 2011 2012 2013 2014 2015 2016- Total 2009...

  • Page 89
    ... Ud trucks 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 2009 capital expenditures3 sales/scrapping...

  • Page 90
    ...value in balance sheet 2030 4 Goodwill entrance fees, industrial programs Product and software development other intangible assets Total intangible assets 23,827 22,936 1,762 59 0 0 (1) 0 3,820 2,073 3,980 13,739 2,857 (45) 0 (285) 5 36,273 33,409 33,580 Total investment property, property...

  • Page 91
    ... to maintain stable capital efficiency over time. the evaluation is made on nominal values and a general rate of inflation in line with the european target is used. Volvo uses a discounting factor calculated to 12% (12) before tax for 2010. during 2010, the value of Volvo's operations has exceeded...

  • Page 92
    ... Blue chip Jet HB, sweden Quingdao sunwin Bus corp, china arabian Vehicle & truck industry ltd, saudi arabia effpower aB, sverige Powercell sweden aB, sweden other holdings Total shares and participations in associated companies3 Shares and participations in other companies deutz aG, Germany Nippon...

  • Page 93
    ... Volvo technology transfer Reclassifications other Balance sheet, December 33 2009 2010 1,953 (15) 45 (48) 2 12 92 (74) (21) 80 - 18 2,044 2,044 - 104 (119) 31 (75) 148 22 (1) - (42) (14) 2,098 Note 36 NoN-cURReNt cUstomeR-fiNaNciNG ReceiVaBles 2009 2010 installment credits financial leasing...

  • Page 94
    ... fiNaNcial statemeNts Note 38 iNVeNtoRies 2009 2010 finished products Production materials, etc. Total inventories recognized as cost of sale during the period amounted to 170,723 (153,014). Increase (decrease) in allowance for inventory obsolescence Balance sheet, december 31, preceding year...

  • Page 95
    ... use by the Volvo Group and seK 7.4 billion (5.3) that are liquid funds in countries where exchange controls or other legal restrictions apply. Note 23 sHaReHoldeRs' eQUitY 0.00 (2.00) per share or total of seK 0.0 million (4,054.8). Unrestricted equity in the Parent company at december 31, 2010...

  • Page 96
    ... in the average number of shares used to calculate the earnings per share after dilution. the share-based incentive program creates a dilution effect when the non-market-based financial goals are achieved for the fiscal year. the requirement for 2009 was not met. for 2010 aB Volvo had no share-based...

  • Page 97
    ... for salaried employees in sweden (mainly through the swedish itP pension plan) and employees in france and Great Britain. see note 1 for further information about the accounting principles. the following tables disclose information about defined-benefit plans in the Volvo Group. Volvo reports the...

  • Page 98
    ...exceeds the so called corridor. the income or expenses are then recognized over the expected average remaining service period of the employees. Costs for the period, post-employment benefits other than pensions current year service costs interest costs expected return on plan assets actuarial gains...

  • Page 99
    ... and (losses) employer contributions employee contributions exchange rate translation Benefits paid of which reclassification to financial liability in Mack Trucks sweden Pensions United states Pensions france Pensions Great Britain Pensions Us other benefits other plans total Plan assets at...

  • Page 100
    ... balance sheet provisions or pension fund contributions. furthermore, a credit insurance must be taken for the value of the obligations. in addition to benefits relating to retirement pensions, the itP plan also includes, for example, a collective family pension, which Volvo finances 2009 % 2010...

  • Page 101
    ...-rate risks using derivative instruments. see Note 36. the listing below shows the Group's non-current liabilities in which the largest loans are distributed by currency. most are issued by Volvo treasury aB. information on loan terms is as of december 31, 2010. Bond loans eUR 2007-2010/2012...

  • Page 102
    ...-term loans mature as follows: 2012 23,530 2013 13,836 2014 17,591 2015 10,190 2016 6,476 2017 or later 12,471 Total 84,094 see note 16 for maturities of long-term customer financing receivables. of other non-current liabilities the majority will mature within five years. at year-end 2010, credit...

  • Page 103
    ... Group will fund the trust with Usd 525 m, paid out during a fiveyear period as from 2010. the funding obligation is reported as a financial liability and amortizations will be reported as cash flow from financing activities. in July 1999, Volvo truck corporation and Volvo construction equipment...

  • Page 104
    ... of funding from the customer finance operations. during 2009, the Volvo Group completed a number of important funding transactions. a five year eUR 700 m bond was issued, followed by a three year seK 4.2 billion bond. the Group also received a seven year loan from the european investment Bank...

  • 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. 2009 2010 sales to associated companies Purchase from...

  • Page 106
    ...to 64% of the fixed annual salary. other benefits, mainly pertaining to car and housing, amounted to seK 609,542 in 2010. leif Johansson is covered by the Volvo executive pension plans, Volvo management Pension (VmP) and Volvo executive Pension (VeP). the retirement benefit is a defined-contribution...

  • Page 107
    ... for members of the Gec include social fees on salaries and benefits, special pension tax and additional costs for other benefits. the remuneration model of the Volvo group is to a main part designed to follow changes in the profitability of the group. Incentive programs the annual General meeting...

  • Page 108
    fiNaNcial iNfoRmatioN 2010 Notes to coNsolidated fiNaNcial statemeNts Average number of employees AB Volvo sweden Subsidiaries sweden Western europe eastern europe North america south america asia other countries Group total 2009 Number of of which employees women, % 2010 Number of of which ...

  • Page 109
    ...-rate agreements). most of these contracts are used to hedge interest-rate levels for short-term borrowing or investment. cash-flow risks the effect of changed interest-rate levels on future currency and interest-rate flows refers mainly to the Group's customer financing operations and net financial...

  • Page 110
    ... reported balance sheet may be affected by changes in different exchange rates. currency risks in Volvo's operations are related to changes in the value of contracted and expected future payment flows (commercial currency exposure), changes in the value of loans and investments (financial currency...

  • Page 111
    ... regarding the long-term customer-financing receivables and the short-term customer receivables, refer to note 16 and 19. age analysis of portfolio value - accounts receivable and customer financing receivables (days/seK m) 2009 2010 >90 Total not due 1-30 31-90 >90 Total Accounts receivable not...

  • Page 112
    ... market europe North america asia other markets Percentage of customer financing portfolio 47.0 27.3 9.9 15.8 Liquidity risks Volvo assures itself of sound financial preparedness by always keeping a certain percentage of its sales in liquid assets. a sound balance between short- and long-term...

  • Page 113
    ... risk contracts - financial exposure 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 trucks asia's holdings in listed shares. the carrying...

  • Page 114
    ...december 31, 2010 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 financial assets shares and...

  • Page 115
    ... the Volvo group with 676 (neg: 3,322). Various categories of financial instruments are treated separately in specific notes. see note 15 for shares and participations, notes 16 and 19 for customer-financing receivables, note 20 for other short- term receivables, note 21 for marketable securities...

  • Page 116
    fiNaNcial iNfoRmatioN 2010 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, 2009 Notional carrying ...

  • Page 117
    ... operations. current earnings from such hedging shall be accounted for in a separate item within shareholders' equity. a total of negative 202 (neg 314) in shareholders' equity relating to hedging of net investments in foreign operations was reported in 2010. The Volvo Group's outstanding forward...

  • Page 118
    ... Directors' report aB molvo is Parent Company of the molvo Group and its operations comprise the Group's head office with staff together with some corporate functions. Income from investments in Group companies includes dividends amounting to 8,145 (10,275) and Group contributions and transfer price...

  • Page 119
    ... 2010 Assets non-current assets Intangible assets tangible assets Financial assets Shares and participations in Group companies other shares and participations Deferred tax assets other long-term receivables total non-current assets Current assets Short-term receivables from Group companies Current...

  • Page 120
    FInanCIal InFormatIon 2010 CHanGeS In SHareHolDerS' eQUIty restricted equity Share capital Statutory reserve Share premium reserve Unrestricted equity Fair value reserve retained earnings total shareholders' equity SeK m total Balance at December 31, 2008 Income for the period Other ...

  • Page 121
    ... Investing activities Investments in fixed assets Shares and participations in Group companies, net Shares and participations in non-Group companies, net Cash-flow after net investments Financing activities Increase/(decrease) in loans Cash payment to aB molvo shareholders Change in liquid funds...

  • Page 122
    ... income applied as of 2010, from January 1, 2009. the share-based incentive programs adopted at the annual General meeting from 2004-2009 are covered by ifrs 2 share-based payments. the Volvo Group has adopted ias 19 employee Benefits in its financial reporting. the Parent company is still applying...

  • Page 123
    ... operating income and expenses include profit-sharing payments to employees in the amount of 1 (1). Note iNcome from iNVestmeNts iN GroUP comPaNies transfer price adjustments and Group contributions total a net of 5,126 (neg 16,859). of the income reported, 8,145 (10,275) pertain to dividends...

  • Page 124
    ... 3,657 Note 12 iNtaNGiBle aNd taNGiBle assets Value in balance sheet 2009 investments Value in balance sheet 2010 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 22...

  • Page 125
    ... 2010, aB Volvo transferred the company's holding of preference shares in Ud trucks corporation, with the book value of 3,493, as shareholders' contribution to Volvo Group Japan corporation. shareholders' contribution was also made to Kommersiella fordon europa aB, 1,801, Volvo financial services aB...

  • Page 126
    ... benefit obligation of all aB Volvo's pension obligations at year-end 2010 amounted to 611, which has been secured in part through provisions in the balance sheet and through transfer of funds to pension foundations. Net asset value in the Pension foundation, marked to market, accrued to aB Volvo...

  • Page 127
    ...to share capital as well as voting rights. Percentage holding dec 31, 2009 carrying value, seK m dec 31, 2010 carrying value, seK m AB Volvo's holding of shares and participations in major Group companies Volvo Lastvagnar AB, Sweden Volvo truck center sweden aB, sweden Volvo finland aB, finland...

  • Page 128
    ... AB Volvo Penta, Sweden 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 commercial finance...

  • Page 129
    ...seK m dec 31, 2010 carrying value, seK m AB Volvo's holding of shares and participations in major Group companies (cont.) Volvo Financial Services AB, Sweden Vfs international aB, sweden Vfs Nordic aB, sweden Vfs financial services BV, the Netherlands Vfs financial services Belgium NV, Belgium Vfs...

  • Page 130
    FINANCIAL INFORMATION 2010 PROPOSED REMUNERATION POLICY The proposal by the Board of Directors of AB Volvo to be adopted by the Annual General Meeting April 6, 2011. This Policy concerns the remuneration and other terms of employment for the Group Executive Committee of the Volvo Group. The members...

  • Page 131
    ... calculated as per year end 2010. The Board of Directors has the view that the Company's and the Group's shareholders' equity will, after the proposed dividend, be sufficient in relation to the nature, scope and risks of the business. Had the assets and liabilities not been estimated at their market...

  • Page 132
    ...the group's financial position and results of operations. The Board of Directors' Report is consistent with the other parts of the annual accounts and the consolidated accounts. We recommend to the annual meeting of shareholders that the income statements and balance sheets of the Parent Company and...

  • Page 133
    ... 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 volvo Financial services Income (loss) from investments in associated companies Income...

  • Page 134
    FInanCIal InFOrmaTIOn 2010 ElEvEn-yEar summary Consolidated balance sheets sEK m 2000 2001 2002 Intangible assets 6,925 17,525 17,045 Property, plant and equipment 22,231 33,234 30,799 assets under operating leases 14,216 27,101 23,525 shares and participations 30,481 27,798 27,492 Inventories 23,...

  • Page 135
    ... 35,145 Inventories 22,998 30,557 Customer-financing receivables 15 114 Interest-bearing receivables 19,286 12,426 Other receivables 24,882 38,815 non-current assets held for sale - - liquid funds 10,958 24,874 Assets 146,183 204,687 shareholders' equity Provision for postemployment benefits Other...

  • Page 136
    ... divested subsidiaries and other business units, net Interest-bearing receivables including marketable securities Cash-flow after net investments Increase (decrease) in loans repurchase of own shares Cash dividend/payment to aB volvo's shareholders Cash payment to minority Other Change in cash and...

  • Page 137
    Exports from Sweden sEK m volvo Group, total 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 2010 72,688 Key ratios Gross margin, %1 research and development expenses as percentage of net sales1 selling expenses as percentage ...

  • Page 138
    ... & Funds aFa Insurance alecta (pension funds) swedbank robur Funds sEB Funds/Trygg life Insurance skandia liv Total aB volvo held 4.7% of the Company's shares on December 31, 2010. 1 Based on the number of outstanding shares. 2 Comprises shares held by sHB, sHB Pension Fund, sHB Employee Fund, sHB...

  • Page 139
    Business area statistics Net sales1 sEK m Trucks Buses Construction Equipment Volvo Penta Volvo Aero Western Europe Eastern Europe north america south america asia Other markets Total Western Europe Eastern Europe north america south america asia Other markets Total Western Europe ...

  • Page 140
    ...2007 8.1 7.9 1.4 10.0 6.9 7.8 2008 6.0 3.2 (0.4) 8.1 4.8 5.2 2009 (7.8) (11.2) (1.9) (2.8) 0.6 (7.8) 2010 6.0 11.5 3.8 6.6 3.7 6.9 Number of employees at year-end number1,2 Trucks Buses Construction Equipment volvo Penta volvo aero Financial services Other Volvo Group, total 2000 24,320 9,060 8,830...

  • Page 141
    E mployees number 1 sweden Europe, excluding sweden north america south america asia Other markets Volvo Group total 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 ...

  • Page 142
    CmRPmRATE GmVERNANCE REPmRT 2010 GRmUP MANAGEMENT mlof Persson Leif Johansson Pär Ã-stberg Dennis Slagle Jan-Eric Sundgren Satoru Takeuchi Stefano Chmielewski Staffan Zackrisson Per Löjdquist Mikael Bratt Stefan Johnsson Göran Gummeson Staffan Jufors HÃ¥kan Karlsson Eva ...

  • Page 143
    ... of the Volvo Group's customer finance company, Volvo Financial Services (VFS). Weissburg assumed his new position on May 15, 2010 and replaced Salvatore L Mauro, who was appointed new head of the Volvo Group's representation office in New York. mn December 8, 2010 Leif Johansson informed his...

  • Page 144
    CmRPmRATE GmVERNANCE REPmRT 2010 BmARD mF DIRECTmRS AND AUDITmRS In October 2010, the Board visited UD Trucks in Ageo, Japan. 13 10 6 1 11 12 4 8 14 2 5 3 7 9 140

  • Page 145
    ...a-connect (group) ag. Board member: Sandvik AB. Member of the Volvo Board since 2010. Holdings in Volvo, own and related parties: 3,000 Series B shares. Principal work experience: Credit Analyst Den Norske Creditbank in Luxemburg 1984, various positions within brand management and controlling within...

  • Page 146
    ... E GmV ERN A N CE REP m R T During 2010, the Board focused specifically on the Group's business development taking into account the earlier uncertainty primarily on the North American and European markets and the recovery that occurred in 2010 regarding demand for the Group's products. In addition...

  • Page 147
    ... company and company management as well as to major shareholders in the company and further to comment on their material assignments and holding of shares in Volvo. Moreover, the Committee shall report on how it conducted its work. In accordance with existing instructions, the Annual General Meeting...

  • Page 148
    ... business development taking into account the earlier uncertainty primarily in the North American and European markets and the recovery that occured in 2010 regarding the demand for the Group's products. Furthermore, the Board focused on development of the Group's operation in China, Japan and India...

  • Page 149
    ... the quality, relevance and efficiency of the Group's system for internal control over financial reporting, internal audit and risk management. At the statutory Board meeting following the 2010 Annual General Meeting, Lars Westerberg, Peter Bijur and Jean-Baptiste Duzan were appointed members of...

  • Page 150
    ...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. Chairman of the Disclosure Committee is the company...

  • Page 151
    ...and maintenance are a key 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...

  • Page 152
    ...attributable to shareholders of the Parent Company divided by the weighted average number of shares outstanding during the period. Capital expenditures Capital expenditures include investments in property, plant and equipment, intangible assets and assets under operating leases. Investments in fixed...

  • Page 153
    ..., 2012 The reports are available on www.volvogroup.com on date of publication and are also sent electronically to shareholders who have advised Volvo that they wish to receive financial information. Historical and current time series reflecting the Volvo Group's market information and share data...

  • Page 154
    AB Volvo, Investor Relations