Volvo 2011 Annual Report Download - page 121

retired employees. The trust was approved by the U.S. District Court for
the Eastern District of Pennsylvania in September 2011. The Volvo Group
will fund the trust with USD 525 M, whereof a significant part has been
paid during the fourth quarter 2011. The remaining funding obligation is
recognized as a financial liability and the remaining amortizations will be
recognized as cash flow from financing activities.
In July 1999, Volvo Truck Corporation (VTC) and Volvo Construction
Equipment (VCE) entered into a Consent Decree with the U.S. Environ-
mental Protection Agency (EPA). The Consent Decree stipulated, among
other provisions, that new stricter emission requirements for certain
engines that would come into effect on January 1, 2006, should be
applied by VTC and VCE from January 1, 2005. The Consent Decree was
later transferred from VTC and VCE to Volvo Powertrain Corporation. Dur-
ing 2008, the EPA demanded stipulated penalties from Volvo Powertrain
Corporation in the amount, including interest, of USD 72 M, alleging that
the stricter standards under the Consent Decree should have been applied
to engines manufactured by Volvo Penta during 2005. Volvo Powertrain
disagrees with EPA’s interpretation and is defending the case vigorously
based on, among other grounds, the fact that the Volvo Penta engines
were not subject to the Consent Decree. The dispute was referred to a
U.S. court. The amount requested by the EPA is included in other contingent
liabilities.
Nissan Diesel Thailand Co. Limited (the “NDT”) on November 30, 2009
filed a claim at the Pathumthani Provincial Court of First Instance, Thai-
land, against AB Volvo and three of its employees, claiming damages in
the sum of Baht 10.5 billion (equivalent to approximately SEK 2.3 billion).
NDT was one of UD Trucks Corporation’s (UDT), a wholly-owned subsidiary
of AB Volvo, private dealers. NDT claims that AB Volvo’s actions caused
UDT to unlawfully terminate two agreements dated December 27, 2002
between UDT and NDT. In September 2011, a settlement was reached´,
finally settling the submitted claims. The settlement had an insignificant
impact on the consolidated operating income and financial position of the
Volvo Group.
Volvo is subject to a number of investigations initiated by competition
authorities. The Volvo Group is cooperating fully with the respective
authority.
In September 2010, Volvo Trucks’ and Renault Trucks’ UK subsidiaries
have, together with a number of other international truck companies,
become the subject of an investigation initiated by the OFT (Office of Fair
Trading), the British Competition Commission. Volvo Trucks’ and Renault
Trucks’ British subsidiaries have received letters from the OFT as part of
the investigation.
In January 2011, the Volvo Group and a number of other companies in
the truck industry became part of an investigation by the European Com-
mission regarding a possible violation of EU antitrust rules.
In April 2011, the Volvo Group’s truck business in Korea and a number
of other truck companies became the subject of an investigation by the
Korean Fair Trade Commission.
In May 2011, Volvo Penta became part of an investigation by the European
Commission regarding a possible violation of EU antitrust rules.
In August 2011, Volvo Penta became part of an investigation by the
Swedish competition authority regarding a possible violation of antitrust
rules. In December 2011, the Swedish Competition Authority closed the
investigation, without further actions.
Given the nature of the ongoing investigations initiated by competition
authorities, the Volvo Group cannot exclude that they may affect the
Group’s result and cash flow with an amount that may be material. How-
ever, as regards the investigations initiated in Europe, it is too early to
assess whether and when such effect may occur and hence if and when
it could be accounted for. The Volvo Group has therefore not reported any
contingent liability or any provision for any of the investigations initiated in
Europe. Concerning the investigation initiated in Korea a contingent liability
has however been registered.
Global companies such as Volvo are occasionally involved in tax pro-
cesses of varying scope and in various stages. Volvo regularly assesses
these tax processes. When it is probable that additional taxes must be
paid and the outcome can be reasonably estimated, the required provision
is made.
Volvo is also involved in a number of other legal proceedings. Volvo
does not believe that any liabilities related to such proceedings are likely
to entail any risk, in the aggregate, of having a material effect on the
financial position of the Volvo Group.
TRANSACTIONS WITH RELATED PARTIES
25
NOTE
The Volvo Group engages in transactions with some of its associated
companies. The transactions consist mainly of sales of vehicles to deal-
ers. Commercial terms and market prices apply for the supply of goods
and services to/from associated companies.
2011 2010
Sales to associated companies 1,296 1,082
Purchase from associated companies 60 50
Receivables from associated companies,
Dec 31 186 174
Liabilities to associated companies,
Dec 31 129 125
The Group’s holdings of shares in associated companies are presented in
Note 5, Shares and participations.
The Volvo Group also engages in transactions with Renault s.a.s. and
its subsidiaries. Sales to and purchases from Renault s.a.s. amounted to
53 (52) and 2,321 (1,654). Receivables from and liabilities to Renault
s.a.s. totalled 11 (15) and 372 (291), respectively, at December 31, 2011.
Sales were mainly from Renault Trucks to Renault s.a.s. and comprised
components and spare parts. Purchases were mainly made by Renault
Trucks from Renault s.a.s. and primarily comprised light trucks. Renault
Trucks has a license from Renault s.a.s. for the use of the trademark
Renault.
Equipment of minor value was divested to a former member of Group
management after valuation by an independent valuer.
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