Volvo 2014 Annual Report Download - page 7

A GLOBAL GROUP 2014 CEO COMMENT
Lower volumes in Volvo CE
Our construction equipment operation had a more diffi cult year,
not least because of the impact from the further decline in the
Chinese market. Coupled with a weak development in other
emerging markets, particularly for those that are dependent on
raw materials and the mining industry, this meant that equipment
deliveries declined by 13% during the year.
In China, demand for new equipment decreased signifi cantly
due to low utilization of the existing machine population as a con-
sequence of a decline in the activity in the mining and construc-
tion industries as well as a high number of quite new secondhand
equipment in the market. This has generated pressure on liquidity
at dealers and customers, which impacts their ability to make the
installment payments on leasing contracts. Accordingly, we made
a provision of SEK 660 M for expected credit losses in China.
During the year, we adapted our production in China downwards
several times to avoid stockpiling.
Towards the end of the year, we announced additional meas-
ures in Volvo CE to adapt the cost structure and address the
profi tability of certain products. One of these was the decision to
discontinue the development and production of backhoe loaders
and motor graders under the Volvo brand and transfer the devel-
opment and manufacturing of some models to our operations in
China. This results in the closure of Volvo CE’s manufacturing in
Wroclaw and signifi cant reductions in Pederneiras and Shippens-
burg.
Improved profi tability for Volvo Buses,
Volvo Penta and VFS
The global bus market remained at a low level during the year and
our bus deliveries declined by 2%. The lower volumes and pro-
duction disturbances at one of our plants had a negative impact
on profi tability, while a favorable trend in parts of the world turned
the loss in 2013 into a small profi t. It is clear that our efforts in
hybrid buses and fully electric buses are being met by increasing
interest around the world. For example, the new Volvo 7900 Elec-
tric Hybrid commenced commercial line traffi c in Hamburg in
December. The plug-in hybrid bus reduces energy consumption
by 60% and carbon-dioxide emissions by 75% compared with an
ordinary diesel bus. In this area, we have developed our offering
to also include complete solutions, including such infrastructure
as charging poles.
Volvo Penta strengthened its profi tability during the year
thanks to improved product and customer mix. In the leisure-boat
market, there are cautiously positive signals from European and
American boat builders, while activities are increasing in the
market for commercial shipping. Industrial engines have a more
varied trend, with weak demand in the mining market. A positive
aspect is that more customers are appreciating the advantages
that Volvo Penta’s new industrial engines are based on one and the
same technical solution, making it easier for customers to develop
their own products.
Our customer fi nance operations had a good profi tability devel-
opment with low credit losses in 2014.
On the way to higher operational effi ciency
Together, we are building a Volvo Group that is strong enough to
meet the challenges of the future and takes steps toward our
vision of becoming the world leader in sustainable transport solu-
tions. I am convinced that the transport and infrastructure indus-
tries have key roles to play in this development toward a more
sustainable society, which is absolutely necessary. Therefore, I
felt very honored when I was appointed co-chairman of the UN’s
advisory panel for sustainable transport. The purpose of the panel
is to promote and accelerate development in this area and my
ambition is to contribute with concrete actions towards social,
economic and environmentally sustainable transport solutions.
I can look back at a year of signifi cant changes and numerous
improvement measures that are now paying off. It was a year that
required considerable efforts from the Group’s employees, who
did a very good job. Looking ahead, we still have a great deal of
hard work before us, but we continue to keep up the pace in the
measures to increase effi ciency, reduce costs and improve our
profi tability to a level that is among the best in our industry.
Olof Persson
President and CEO
Together, we are building
a Volvo Group that is
strong enough to meet the
challenges of the future.
EO
CO
MMENT
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