Nine months ended September 30, 1997

First nine months
	1997	1996
Net sales, SEK M	130,948	113,640
Operating income, SEK M	5,775	2,324
Income after financial items, SEK M	10,721	12,029
Net income, SEK M	9,253	10,668
Income per share during most recent 12-month period, SEK	24.20	26.70
Return on shareholders' equity during most recent 12-month period, %	18.8	24.3

Comment by the Chief Executive Officer

The new products, which Volvo now are introducing on the market in rapid succession, are meeting a strong response. Sales and order bookings are favorable. Volvo's profile has been developed further and strengthened. An essential task now is to achieve the profitability made possible by the market successes. Accordingly, the work to create effective industrial and costs structures is being further intensified. Despite the improvements, productivity must increase further. The aim is to establish Volvo as a profitable, "pure" transport-vehicle company whose products are attracting an ever-broader spectrum of quality, safety- and environment-conscious customers in selected segments.

Group sales and income are continuing to develop in a favorable manner. Most All operating sectors are reporting improvements for the first nine months of the year. Demand for our products has gradually increased in many markets and the fourth quarter began with a strong order backlog. The trend of sales in the markets in Asia is weaker than was foreseen at the beginning of the year, however.

The trend of income in Volvo Cars is most gratifying. The very weak profitability that began in 1995 has turned to stable earnings and an operating margin that is dose to the target set as the average for the Group.

The strategy of broadening the line of products to include a number of versions of the three model series has proved successful. Sales of the S40/V40 are good and it has been decided to increase production capacity to meet the strong demand. The S70/V70 series is replacing the 800 series in a strong manner and is meeting expectations well. The new product mix, combined with higher productivity, have increased earnings capacity at the same time that a favorable foreign exchange situation has strengthened income. However, 1998 will be a demanding year, involving the major and complex changeover which the introduction of a new car model entails.

Volvo Trucks' new products -- the Volvo VN for the American market, in particular -- have been very well received. Structural measures and cutbacks in personnel in the United States have reduced the rate of losses in the United States. On the whole, order bookings for Volvo Trucks were high entering the fourth quarter. But it is of greatest importance for the sector to maintain market shares and good profitability in Europe, which is today characterized by hard competition and strong pressure on prices.But it is of high importance to maintain market shares and achieve good profitability in Europe, which is today characterized by hard competition and pressure on prices.

Volvo Construction Equipment is expanding globally through acquisitions and organic growth. Its operating marginprofitability is the highest in the Group. Income was charged with costs for restructuring and development of the excavator operations and there has been a slight weakening in the operating margin.

Volvo Buses is expanding and its operating margin has more than doubled. Volvo Penta's operating margin has risen strikingly. Volvo Aero has achieved good profitability as a result of increased demand in the commercial aviation market and the acquisition of AGES.

The improvements in the Group's main operations are gratifying, but profitability is still below the Group target. Further efforts must be made to ensure our "durability" in a less favorable economic and foreign exchange environment. The Group's financial condition is strong and gives us freedom of action to participate in the restructuring that is under way in the area of vehicles for commercial use, in particular. The completely overshadowing objective , however, is to use our internally generated funds to create a stable base in established markets and to maintain the strong confidence of customers.

The growth that the now streamlined Volvo Group requires in order to develop is to be created through continuing aggressive product renewal, a higher degree of integration, and measures designed to utilize synergies more effecftively. Accordingly, the Group Executive Committee has been changed and its membership is partly new. At the same time, the number of decision-making bodies has been reduced, all with the objective of accelerating the pace of decision-making, achieving more effective cooperation and reducing bureaucracy. Work during the autumn in being focused on achieving agreement with respect to high objectives in terms of product renewal, growth, productivity and internal efficiencyutilization of resources during the coming three-year period. I have great confidence in our ability to continue the program of improvement and continue to benefit from our strong brand name, the quality of our products and the strong motivation of Volvo employees.

First nine months 1997

Summary of operating results

Volvo Group sales, excluding acquired companies, increased 15% during the first three quarters of the year. Adjusted to also reflect foreign exchange movements, the increase was 8%. The increase was attributable mainly to Volvo Cars which, as a result of larger volumes, increased its sales by 11%, adjusted for the effects of foreign exchange movements.

Operating income, for the automotive operations, amounted to SEK 5,764 M, which was SEK 3,379 M higher than income in the year-earlier period, excluding the acquisition of Champion Road Machinery Ltd and the AGES Group ALP.

Larger volumes of sales and a more favorable product mix in most operating sectors contribute with SEK 2,700 M to the increase, and changes in foreign exchange rates with SEK 1,600 M, while higher costs for research and development, as well as for marketing and administration, had a negative impact. However, these costs have declined in relation to sales.

The Volvo Group's operating margin increased from 2.0% to 4.4%. All operating sectors except Volvo Construction Equipment reported higher operating margins. The figure for Volvo Construction Equipment -- 8.3% -- is, however, the highest in the Group. The operating margins of Volvo Cars (4.7%) and Volvo Buses (4.6%) was close to the "target range" of 5% to 7%, while the margin for Volvo Trucks (2.8%) was still unsatisfactory.

Income from investments in associated companies amounted to SEK 3,165 M (205), of which SEK 3,027 M represented the gain on the sale of the holding in Pripps Ringnes AB.

Income from other shares and participations, which amounted to SEK 1,179 M, included gains of SEK 783 M on the sale of the 11% holding in Renault and SEK 221 M on the holding in SAS Sverige.

Net interest, which amounted to SEK 659 M, was lower than in the corresponding period of 1996. The lower yield was due to falling interest rates and the fact that liquid funds were invested in interest-bearing securities with short terms.

Tax expense pertained largely to current taxes in foreign subsidiaries. The sale of the shareholding in Renault resulted in a tax-deductible loss that reduced the Group's tax expense by slightly more than SEK 500 M.

The Group's total assets increased by SEK 12.6 billion, excluding foreign exchange movements and acquisitions of companies, during the first three quarters of the year.

As of September 30, total assets in the sales-finance operations amounted to SEK 38.3 billion, an increase of SEK 15.6 billion since January 1. The greater part of the increase was attributable to activity in North America, where the operations are being built up in both Volvo Cars and Volvo Trucks.

Volvo's entire holding of shares in Renault was divested in the third quarter; this, together with the divestment of the holding in Pripps Ringnes earlier in the year, reduced long-term financial assets by SEK 7.9 billion.

In addition to the changes noted above, liquid funds, inventories and tangible fixed assets in the industrial operations increased.

Capital expenditures for property, plant and equipment in the industrial operations amounted to SEK 6.9 billion (5.9). The greater part pertained to change-over investments in Volvo Cars' Torslanda plant and investments in type specific tools for future models. Investments in Volvo Trucks pertained to the continuing globalization of the industrial structure for assembly of the FH series. Investments in leasing vehicles within sales-financing operations amounted to SEK 6.1 billion (2.5).

Consolidated net financial assets, which are calculated for the Volvo Group excluding the sales-finance operations, and which amounted to SEK 12.0 billion at year-end 1996, increased to SEK 21.0 billion. (A specification of the change appears in the table on page 8.)

Shareholders' equity increased by SEK 0.9 billion. Net income for the period, together with a new issue of shares, yielded SEK 9.4 billion, while the redemption of shares, dividends to Volvo's shareholders and foreign exchange differences reduced shareholders' equity by SEK 8.5 billion. Shareholders' equity and minority interest as a percentage of total assets declined to 37.8% (41.4). Excluding the sales-finance operations, the figure was 47.6% (48.0).

Sales and operating income by operating sector

Volvo Cars

The total market for passenger cars showed a marginal increase during the first three quarters of 1997, compared with the corresponding period a year earlier. The North American market decreased by nearly 3%, while the market in Europe increased by just under 3%. The Japanese market was largely unchanged, among other things as a result of the consumption taxes introduced during the second quarter.

Volvo Cars' sales rose by 17%, to SEK 70,005 M, compared with sales in the first nine months of 1996. Adjusted for changes in exchange rates the increase was 11%. The number of cars invoiced was 281,710 (264,270), an increase of close to 7%.

Volvo's sales and market shares increased in many markets in Europe. The favorable trend of sales for the Volvo S70 and V70, as well as the successes with the Volvo S40 and V40 contributed to a high degree to the increase. The turbo version, the Volvo S40 and V40 T4, which was introduced at the end of the period, has also attracted new groups of customers. The total number of Volvo cars registered in the largest markets -- Sweden, Great Britain, Germany and Italy -- increased by 25%, The Volvo S40 and V40 accounted for approximately half of the Volvo cars sold in Great Britain.

Despite a declining total market, Volvo's sales in North America increased by nearly 5% and the company's shares of the markets rose in both the United States and Canada, A 4-wheel drive version of the Volvo V70 -- the Volvo V70 AWD -- was introduced at the close of the period. Volvo's sales in the Japanese market declined by 19%. Some recovery could be noted during the latter part of the period, however.

Because of very high quality specifications in a new production process and delays in receiving components from suppliers, deliveries of the Volvo C70 Coupé could not be made on schedule.

Operating income amounted to SEK 3,273 M (573). The increase was attributable to larger volumes, higher margins and the positive effects of foreign exchange movements which, to a certain extent, were offset by higher costs of research and development and marketing. The operating margin increased to 4.7% (1.0).

Volvo Trucks

The total market for heavy trucks in Europe declined by 8% during the first three quarters of 1997, compared with the corresponding period a year earlier. The downturn in Great Britain and France -- Volvo Trucks' largest markets in Europe -- was sharper, while demand in Germany strengthened.

The total market for Class 8 trucks in the United States was unchanged, compared with 1996. The total market in Brazil increased substantially during the first none months of 1997.

During the first three quarters of the year Volvo delivered 47,340 medium-heavy and heavy trucks, approximately the same as in the year-earlier period. Volvo's deliveries in Europe fell by 10% in a weakened market, while deliveries in North America rose 11%. Deliveries in South America were up 32%.

Volvo's share of the market for heavy trucks in Europe declined to 15.7% (16.4), based on preliminary data. Its share of the Class 8 market in the U.S. amounted to 9.4% (9.3). The company's share of the market in the heavy truck class in Brazil was 23.1% (24.8). The order backlog at the close of the nine-month period was 33% larger than a year earlier. Order bookings were notably strong in the U.S., Brazil and Eastern Europe.

Volvo Trucks' operating income amounted to SEK 990 M (413). Income in the 1996 period included an appropriation totaling SEK 700 M for restructuring costs in the North American operations. Income in the first three quarters of 1997 was affected adversely by lower sales and depressed margins in Europe, as well as by the continuing negative results in the North American business, where the rate of losses is, however, declining gradually. The operations in South America were profitable. The operating margin was 2.8% (1.3).

Volvo Buses

Volvo Buses shipped 5,930 (5,140) buses and bus chassis during the first three quarters of 1997. Orders booked rose by 2%. In Western Europe where the total market decreased with 7%, Volvo's share of the market increased to 20.3% (19.0), according to the latest available statistics.

Volvo Buses' sales increased by 26%, to SEK 7,469 M. Operating income rose SEK 344 M (155), primarily the result of larger volumes, a higher percentage of complete buses, and favorable foreign exchange rates. The operating margin increased to 4.6% (2.6).

Volvo Construction Equipment

The trend of demand in important market areas continued to follow the same pattern apparent earlier in the year, except for the leveling off caused by the economic turbulence in certain markets in Asia. The market in North America strengthened further, and signs of stabilization were noted in certain countries in Europe, where the market as a whole was weaker.

Volvo Construction Equipment's sales increased to SEK 12,028 M (9,631). Western Europe, with 45% of the total sales, continued to be the largest single market area for Volvo Construction Equipment. As a result of strong growth in the market in North America, and the effect of the acquisition of Champion Road Machinery Ltd., the Canadian company, earlier in the year, the percentage of total sales attributable to the North American market increased to 36% (28). As an effect of the operating sector's expansion and globalization efforts, the percentage of total sales in other market areas outside Western Europe -- notably in South America -- was higher.

Operating income increased to SEK 996 M (928). A favorable product and market mix, together with larger volumes and beneficial exchange rates, had a positive impact on income, while continuing aggressive product and business-development programs resulted in higher costs. Income was also charged with costs related to the restructuring of excavator operations in Eslöv, where a comprehensive program to develop a new generation of machines is under way at the same time that production facilities are being adapted to meet future needs. Volvo Construction Equipment's operating margin was 8.3% (9.6).

Volvo Penta

Volvo Penta's sales were 15% higher than in the year-earlier period. A large part of the increase was attributable to the favorable effects of foreign exchange rates and increases in volume in Europe and the Middle East. Operating income, which increased substantially, amounted to SEK 205 M (63). The operating margin rose to 6.1% (2.2).

Volvo Aero

Volvo Aero's sales amounted to SEK 5,062 M (2,862). Excluding the AGES Group, which deals in aircraft engine and spare parts and which has been part of Volvo Aero since January 1, 1997, the increase in sales was 22%. The boom in international air traffic continued, resulting in larger volumes of business for all engine programs within the Commercial Engine business area. Sales in the Military Engine business area were also higher, with a sharp increase in invoicing of RM 12 engines for Sweden's JAS 39 Gripen multirole aircraft. Operating income rose to SEK 343 M (110), of which AGES contributed SEK 159 M. The operating margin increased to 6.8% (3.8).

Employees

As of September 30, the number of employees in the Volvo Group had increased by 1,860, to 72,190, since the first of the year. Acquisitions of companies, mainly the AGES Group and Champion Road Machinery, increased the number of employees by approximately 1,200, while the number was reduced by 500 through the transfer of personnel to the newly formed joint-venture company ABB Automation. Approximately 1,100 persons were hired during the first three quarters of the year,

Changes in Volvo's Group Executive Committee

In June, 1997, Sten Langenius resigned his position as Executive Vice President of AB Volvo and a member of the Volvo Group Executive Committee. Until his retirement at year-end 1997, he will serve as Chairman of AB Volvo Penta and Volvo Aero Corporation, Vice Chairman of Volvo Construction Equipment Corporation and remain as a member of the Board of Volvo Car Corporation.

In August, Arne Wittlöv, formerly president of Volvo Aero, was appointed a new executive vice president of AB Volvo, with responsibility for technical matters within the Group, and Per Löjdquist was named a new member of Volvo's Group Executive Committee, responsible for information and investor relations.

Fred Bodin became the new president of Volvo Aero on October 1. He was succeeded by Eva Persson, who was named chief legal counsel of AB Volvo, a member of the Group Executive Committee, and secretary of Volvo's Board of Directors.

Leif Åke Nilsson and Per-Erik Mohlin left their positions as members of Volvo's Group Executive Committee and as vice president responsible for personnel relations and executive vice president, respectively.

The report on full-year 1997 operations will be released on February 18, 1998.

Gothenburg, October 22, 1997

AB Volvo (publ)

Leif Johansson

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