Net sales, SEK M

27,072

48,839

24,555

Operating income, excluding items affecting comparability, SEK M

1,215

1,976

1,061

Gain on sale of Volvo Cars

26,695

-

-

Operating income, SEK M

27,910

1,976

1,061

Income after financial items, SEK M

27,999

2,274

Net income, SEK M

27,557

1,581

Income per share, SEK, excluding items affecting comparability and gains on sales of shares during most recent 12-months period, SEK

13.10

13.00

Return on shareholders' equity, excluding items affecting comparability and gains on sales of shares, %

9.0

10.3

• AB Volvo's sale of Volvo Cars to Ford Motor Company was completed successfully during the first quarter.

• Net sales of the Volvo Group amounted to SEK 27,072 M, an increase of 10%, excluding Volvo Cars.

• Excluding the sale of Volvo Cars, Group operating income amounted to SEK 1,215 M (1,061)*. The increase occurred primarily in Trucks, as a result of continuing strong demand in Europe and North America and an attractive product program, but Marine and industrial engines, and Aero also reported higher income.

• The ongoing restructuring within Buses and Construction Equipment were intensified with the objective of coordinating and consolidating operations following acquisitions in North America, Mexico and South Korea.

Comments by the Chief Executive Officer

The sale of Volvo Cars was the single largest event and the most important one financially during the quarter. It is with great satisfaction that we now note its successful conclusion. Volvo Cars has been integrated in an industrially proper and financially strong environment that will favor the future development of the company, and Volvo has received satisfactory compensation that is strengthening our financial position considerably. Ford assumed financial responsibility for Volvo Cars as of January 1, 1999. As a result, Volvo Cars is not consolidated in Volvo's accounts in the first quarter of 1999.

Nineteen ninety-nine marks the beginning of a new era in our development. The starting conditions are favorable. Our business areas Trucks, Buses, Construction Equipment, Marine and Industrial Engines and Aero all have strong positions in the world market and, historically, have been more profitable than the passenger car business. It is therefore with substantial confidence and enthusiasm that we are now intensifying the work of developing the Volvo Group into a leading supplier of vehicles and systems for efficient transportation of people and goods.

During the first three months of the year sales were higher in all business areas except Construction Equipment, where they were unchanged. Group operating income contains both positive and negative elements. It is most gratifying that our largest business area, Trucks, is highly successful in Europe and North America, with a strong trend of earnings. The improvement in earnings has occurred despite a great deal of business development activity and high costs of programs in such strategically important growth markets as India, where the assembly of Volvo trucks has now begun, and Russia.

Volvo Buses' loss of SEK 67 M is unsatisfactory. Measures to restore acceptable profitability are under way. Following a number of new acquisitions in North America most recently Nova Bus and MASA (Mexico) the company is undergoing a necessary phase of consolidation. At the same time, the work of creating a more efficient industrial structure in Europe by closing down plants and concentrating production in Poland, as announced earlier, is under way. Overall, the expansion and current restructuring measures involve a charge against earnings. Over the long term, Volvo Buses will be strongly positioned in the market and will have a good platform as one of the world's leading suppliers of buses.

Despite very weak markets in Asia and South America, Volvo Construction Equipment has maintained a good level of sales. Competition in the North American market is increasing as a result of the strong dollar combined with lower demand in other regions. The decline in Volvo Construction Equipment's income was due to temporary production problems and the reduction of inventories by dealers in the United States during the early part of the year. The integration of the South Korean operations is proceeding according to plan and Volvo Construction Equipment Korea will form an efficient and competitive base for the Group's production of excavators.

Volvo Penta fills an important role in Volvo's engine strategy. As an enhancer of our engine program for marine and industrial applications, the business area serves the function of offering Volvo's diesel engines to external customers and is thereby broadening our market base. Business in the early part of 1999 has been favorable and the business area is reporting improved earnings.

Volvo Aero is an important part of the Group as a growing unit within the aircraft industry. The business area is developing well and is successfully implementing the focus on components, maintenance and services for commercial aircraft. Acquisition of further interest in The AGES Group, an American organization, and the take-over of management responsibility in that firm, combined with the majority holding in Norsk Jetmotor, give Volvo Aero a broad network of contacts and substantial competitive advantages as a partner in the aircraft industry.

If we consider the outlook for the Group in a longer perspective, exciting opportunities become apparent. Volvo today is in a unique situation. Based on already very strong positions in our respective segments, we have an opportunity to choose to shape our future through substantial investments. We have the support of the shareholders in building an even stronger company. We in Volvo feel a strong responsibility and constructive desire to create a Company that meets the needs of society and the individual for good, efficient and environmentally compatible transports. Such a business serves a good purpose. With our technology, our long experience, our resources, our name and our employees, we have a good platform and great opportunities to create good results.

Leif Johansson

Volvo Group - First three months of 1999

Important events and structural transactions

The sale of Volvo Cars to Ford Motor Company was completed successfully during the first quarter
Following approval by the General Meeting of Volvo shareholders on March 8, and by the pertinent public authorities, AB Volvo completed the sale of Volvo Cars to Ford Motor Company on March 31, 1999. Under terms of the agreement, Ford has the right to Volvo Cars' earnings as of January 1, 1999. In addition to a dividend of SEK 17.670 M from Volvo Cars, AB Volvo received SEK 10,328 M for the shares, plus USD 2,330 M, of which USD 1,613 M will be paid on March 31, 2001. In connection with the sale, Ford assumed net liabilities of SEK 4,236 M.

Gain from the sale amounted to SEK 26.7 billion. Compared with the estimates published earlier, this income was affected positively by the trend of exchange rates for the U.S. dollar up to March 31, and was charged with a provision for restructuring costs as a consequence of a new Group structure.

Volvo Trucks formed important joint ventures
In March 1999 Volvo Trucks formed a joint venture with Schmitz Cargobull, a German manufacturer of semitrailers, making it possible for Volvo customers to purchase complete semitrailer equipment in a single dealer location. The joint venture also offers customer benefits in terms of service and financing. Schmitz Cargobull produces 18,000 semitrailers annually.

In March, Volvo Trucks and Petro Stopping Centers, an American truck-stop chain, signed a letter of intent whereby Volvo is acquiring an interest in Petro Stopping Centers. This cooperation is designed to increase the availability of Volvo Trucks service, and provide exposure, along U.S. highways. It will increase Volvo Trucks' ability to offer maintenance service around the clock, seven days a week, in 50 strategic locations in the U.S. highway network.

Divestments by Volvo Construction Equipment
In March 1999, Volvo Construction Equipment decided to divest 65% of the operations in Mecalac. The reason for the sale is that the Mecalac products are designed mainly for a limited number of markets in Western Europe and thus are not compatible with Volvo Construction Equipment's global sales strategy. In Canada, a highway construction unit SuperPac of Champion Road Machinery, a wholly owned subsidiary, was sold. Total sales of the two divested units amounted to approximately SEK 400 M in 1998.

Volvo Aero increased its holding in The AGES Group and finalized the acquisition of 67% of Norsk Jetmotor
Volvo Aero increased its holding in The AGES Group, the American organization, from 57% to 86% during the first quarter. Volvo Aero has been a joint owner of AGES since October 1992. AGES' operations include the sale and leasing of aircraft engines and aircraft, as well as the sale of spare parts for aircraft engines and aircraft. Volvo Aero is facing expansion in the area of after-market sales and service, among others. Along with the activities in the field of commercial engine maintenance, AGES constitutes a base for this expansion.

Volvo Aero also acquired a 67% interest in Norsk Jetmotor, which manufactures components for aircraft engines. The sellers were the Norwegian Government and the Kongsberg Gruppen. In connection with the acquisition, the name of the company was changed from Norsk Jetmotor to Volvo Aero Norge AS. Volvo Aero has also concluded an agreement whereby it will acquire the shares in the Norwegian company currently held by Snecma, a French manufacturer of aircraft engines. When this occurs, Volvo Aero will own 78% of Volvo Aero Norge. During 1998 Volvo Aero and Norsk Jetmotor supplied components used in 83% of all aircraft engines sold throughout the world. Volvo Aero contributes as much as 9% to the overall value of the engine programs in which it participates.

Results and financial position

Net sales of the Volvo Group in the first quarter of 1999 amounted to SEK 27,072 M, an increase of 10%, adjusted to reflect the sale of Volvo Cars. Excluding other companies acquired and divested, the increase was 4% compared with first-quarter 1998 net sales. The net sales of all business areas were higher, or on a level with, sales in the preceding year. Acquired companies contributed to increased sales in Buses, Construction Equipment and Aero.

During the first three months of the year Volvo delivered 19,800 medium-heavy and heavy trucks and 1,820 buses and bus chassis, representing increases of 3% and 2%, respectively.

The increase in net sales was attributable to Western Europe (plus 18%) and North America (plus 15%), which combined account for 88% of the Group's total sales. Sales in South America declined as a result of the economic crisis, which is also continuing to have a negative impact on sales in Asia. Sales to customers in Eastern Europe declined slightly.

Group operating income amounted to SEK 27,910 M, including the sale of Volvo Cars for SEK 26,695 M. Excluding the effects of this sale, operating income increased by SEK 154 M, to SEK 1,215 M (1,061). A positive trend of product costs and a favorable market mix mainly in Trucks compensated in terms of earnings for smaller volumes of sales in Construction Equipment and Buses, and for increased costs of product development, selling and administration in most business areas. In addition, operating income was charged to a certain degree with losses in acquired companies and the negative effects of foreign exchange movements. Excluding the effects of Volvo Car Corporation, the operating margin increased to 4.5% (4.3).

Trucks, Marine and industrial engines and Aero were the business areas that reported higher operating income and higher operating margins than in the preceding year.

Net interest expense in the first quarter amounted to SEK 58 M, compared with net interest income of SEK 179 M a year earlier. The interest expense was due primarily to significant higher funding costs in Brazil and to local financing, at high interest rates, of the expansion in South Korea. Lower interest rates in Europe, combined with an average lower net financial assets also had a negative impact on interest net.

Tax expense amounted to SEK 435 M (710). This expense consisted mainly of current taxes. In accordance with a ruling of the Council of Advance Rulings, the sale of Volvo Cars did not give rise to a taxable capital gain. This ruling may be appealed.

Net income amounted to SEK 27,557 M (1,581) and the return on equity, excluding items affecting comparability and gains on the sale of shares, was 9.0% (10.3%).

Western Europe

57

15.5

13.1

+18

Eastern Europe

2

0.6

0.7

(14)

North America

31

8.3

7.2

+15

South America

4

1.0

1.8

(44)

Asia

4

1.1

1.2

(8)

Other countries

2

0.6

0.6

+0

Total

100

27.1

24.6

+10

* excluding Cars

Net sales

27,072

48,839

24,555

Cost of sales

(21,063)

(37,015)

(18,853)

Gross income

6,009

11,824

5,702

Research and development expenses

(1,085)

(2,372)

(955)

Selling expenses

(2,120)

(4,385)

(2,017)

Administrative expenses

(1,474)

(1,754)

(1,185)

Other operating income and expenses

(115)

(1,337)

(484)

Items affecting comparability *

26,695

_

_

Operating income

27,910

1,976

1,061

Income from investments in associated companies

19

99

Income from other investments

1

79

Interest income and similar credits

667

427

Interest expenses and similar charges

(725)

(248)

Other financial income and expenses

127

(59)

Income after financial items

27,999

2,274

Taxes

(435)

(710)

Minority interests in net (income) loss

(7)

17

Net income

27,557

1,581

Excluding Cars

Condensed income statement - Sales finance
SEK M

1999

1998

1998

Net sales

1,846

2,023

1,252

Operating income

63

99

48

Income from associated companies

23

29

21

Other financial income and expenses

0

(1)

0

Income (loss) after financial items

86

127

69

Taxes

(44)

(58)

(41)

Minority interests

0

(1)

2

Net income

42

68

30

Excluding Cars

Gross and operating margin, %

1999

1998

1998

Gross margin

22.2

24.2

23.2

Research and development expenses in % of net sales

4.0

4.9

3.9

Selling expenses in % of net sales

7.8

9.0

8.2

Administrative expenses in % of net sales

5.4

3.6

4.8

Operating margin, excluding items affecting comparability

4.5

4.0

4.3

990331

981231

990331

981231

990331

981231

Assets

Intangible assets

5,954

5,678

98

100

6,052

5,778

Property, plant and equipment

18,244

36,045

76

162

18,320

36,207

Assets under operating leases

1,517

1,817

8,550

20,468

10,067

22,285

Shares and participations

11,532

9,707

687

715

8,597

3,393

Long-term finance receivables

163

171

13,861

24,375

14,024

24,546

Long-term sales interest-bearing receivables

14,236

3,293

1

20

14,237

3,313

Other long-term receivables

1,569

3,666

29

192

1,598

3,858

Inventories

21,742

31,876

246

252

21,988

32,128

Short-term sales finance receivables

366

81

14,120

22,171

14,486

22,252

Short-term interest bearing receivables

30,534

1,422

_

_

30,534

1,422

Other short-term receivables

21,536

26,880

616

2,140

22,152

29,020

Marketable securities

8,781

6,850

221

318

9,002

7,168

Cash and bank

34,979

11,969

561

1,087

35,540

13,056

Total assets

171,153

139,455

39,066

72,000

206,597

204,426

Shareholders' equity and liabilities

Shareholders' equity

95,631

68,056

3,622

7,029

95,631

68,056

Minority interests

493

804

_

56

493

860

Provision for post-employment benefits

2,137

2,906

5

30

2,142

2,936

Other provisions

13,819

21,886

1,701

3,301

15,520

25,187

Loans

32,265

5,909

32,017

58,321

64,282

64,230

Other liabilities

26,808

39,894

1,721

3,263

28,529

43,157

Shareholders' equity and liabilities

171,153

139,455

39,066

72,000

206,597

204,426

The Group's total assets increased by SEK 2.2 billion during the first three months of the year. As a result of the sale of Volvo Cars, assets related to operations decreased by SEK 75.6 billion, which was offset by increases in liquid funds and interest-bearing receivables attributable to the dividend and purchase price received, and to financial transactions with Volvo Cars. The Volvo Group's net financial receivables from Volvo Cars, which at the end of March were substantial in amount, are being settled during the second quarter of 1999, in which connection external borrowing will be amortized.

Liquid funds are invested with low exposure to risk and in a manner that permits substantial freedom of action.

Shareholders' equity increased by SEK 27.6 billion. Net income provided SEK 27.6 billion and a change in accounting principles pertaining to deferred taxes, yielded SEK 1.3 billion. Shareholders' equity was reduced in a total amount of SEK 1.3 billion attributable to translation differences.

Operating income excluding items affecting comparability

1.1

1.,9

0.1

0.1

1.,2

2.0

Depreciation and amortization

0.8

1.3

0.4

0.6

1.2

1.9

Change in working capital

(1.8)

(1.4)

(0.5)

(2.0)

(2.3)

(3.4)

Cash flow pertaining to financial items and income taxes

(0.2)

0.1

0.0

0.0

(0.2)

0.1

Cash flow from operations

(0.1)

1.9

0.0

(1.3)

(0.1)

0.6

Capital expenditures

(0.9)

(1.9)

0.0

0.0

(0.9)

(1.9)

Investments in leasing assets

0.0

(0.3)

(0.9)

(2.9)

(0.9)

(3.2)

Disposals of tangible assets

0.2

0.2

0.2

0.4

0.4

0.6

Investments in shares, net

(5.3)

0.0

-

-

(5.3)

0.0

Long-term receivables, net

0.2

0.8

(0.2)

(1.9)

0.0

(1.1)

Acquisitions and sales of companies

32.4

(0.8)

-

-

32.4

(0.8)

Remaining after net investments

26.5

(0.1)

(0.9)

(5.7)

25.6

(5.8)

Change in loans, net

(1.1)

7.6

Change in liquid funds, excluding, translation differences

24.5

1.8

Translation differences in liquid funds

(0.2)

(0.1)

Change in liquid funds

24.3

1.7

* In the cash flow analysis, the effects of major acquisitions and divestments of subsidiaries are excluded from "Other receivables" in the balance sheet. The effects of foreign exchange movements in connection with the translation of the accounts of foreign subsidiaries to Swedish kronor have also been excluded since they do not affect cash flow.

The Volvo Group's cash flow after net investments amounted to SEK 25.6 billion (negative of SEK 5.8 billion). The Group's operating cash flow, excluding sales financing operations, was negative in the amount of SEK 0.8 billion during the first three months of the year, due primarily to the increase in working capital tied up in the business. The dividend received and the payment from the sale of Volvo Cars provided liquid funds totaling SEK 33.9 billion. Investments in shares reduced liquid funds by SEK 5.3 billion, of which the acquisition of Scania shares accounted for the greater part.

Capital expenditures for property, plant and equipment amounted to SEK 0.9 billion, which was on a level with expenditures in the year-earlier quarter, excluding Volvo Cars.

981231

14.8

Operating cash flow, excluding Sales Financing

(0.8)

Sale of Volvo Cars

46.4

Acquisition of shares in Scania

(5.2)

Other acquisitions of companies and shares*

(1.1)

990331

54.1

* Including purchase price and net debt in purchased subsidiaries

Income per share, SEK

78.40

19.60

Income per share, excluding items affecting comparability and gain on sales of shares, SEK

13.10

14.40

Return on shareholders' equity, %

50.6

13.7

Return on shareholders' equity excluding items affecting comparability and gain on sales of shares, %

9.0

10.3

Net financial assets at end of period, SEK billion

54.1

14.8

Net financial assets at end of period as percentage of shareholders' equity and minority interests

56.3

21.5

Shareholders' equity and minority interests as percentage of total assets

46.5

33.7

Shareholders' equity and minority interests excluding sales financing, as percentage of total assets

56.2

49.4

Financial Review by Business Area

Trucks

15,767

14,419

+9

65,185

63,837

Buses

2,791

2,352

+19

14,725

14,286

Construction equipment

4,115

4,142

(1)

19,442

19,469

Marine and industrial engines

1,230

1,142

+8

5,019

4,931

Aero

2,167

1,964

+10

8,787

8,584

Other

3,023

2,550

+19

12,245

11,772

Eliminations

(2,021)

(2,014)

-

(8,032)

(8,025)

Volvo Group

27,072

24,555

+10

117,371

114,854

Cars

-

25,546

-

Eliminations

-

(1,262)

-

Volvo Group including Cars

27,072

48,839

(45)

Operating incomeSEK M

First three months

1999

1998

Apr 1998 -
March 1999

Jan-Dec
1998

Trucks

917

636

3,342

3,061

Buses

(67)

75

243

385

Construction Equipment

183

297

1,435

1,549

Marine and industrial engines

45

25

115

95

Aero

139

94

572

527

Other

(2)

(66)

(351)

(415)

Operating income*

1,215

1,061

5,356

5,202

Cars**

-

915

2,893

3,808

Operating income including Cars

1,215

1,976

8,249

9,010

Items affecting comparability

26,695

-

24,364

(2,331)

Operating income

27,910

1,976

32,613

6,679

*Excluding items affecting comparability
** For the period April 1998 - March 1999 Volvo Cars is included for nine months

Trucks

5.8

4.4

Buses

(2,4)

3.2

Construction Equipment

4.4

7.2

Marine and industrial engines

3.7

2.2

Aero

6.4

4.8

Operating margin*

4.5

4.3

Cars

-

3.6

Operating margin including Cars

4.5

4.0

Items affecting comparability

98.6

-

Operating margin

103.1

4.0

Trucks
The total markets for heavy trucks in Western Europe and North America continued to strengthen during the first quarter of the year, compared with the corresponding period in 1998. Demand in Brazil and Asia was still weak. The world market for heavy trucks in 1999 is expected to be slightly larger than in the preceding year.

During the first three months of the year Volvo delivered 19,800 medium-heavy and heavy trucks, an increase of 3% compared with deliveries in the first quarter of 1998. Total deliveries in Europe rose by 16%, and by 11% in North America, to 10,750 and 7,450 trucks, respectively. Deliveries in South America declined by 52%, to 890 trucks, during the first quarter.

At the end of February Volvo's share of the market for heavy trucks in Europe was 15.5% (16.1) and its share of the market for Class 8 trucks in the United States was 12.5% (9.7). The company's share of the market in Brazil was 22.9% (25.0). The order backlog at the end of the quarter was one percent larger than on the year-earlier date. The backlog of orders has increased by 3% since the first of the year.

Net sales rose to SEK 15,767 M, an increase of slightly more than 9% compared with the first quarter of 1998. Volvo Trucks' operating income in the first quarter amounted to SEK 917 M (636). The increase was attributable to larger volumes of sales and improved margins in both Western Europe and North America. The operating margin was 5.8% (4.4).

Buses
The market for heavy buses was slightly weaker in Europe but remained unchanged in North America. In South America, in contrast, the total market decreased sharply and the market in Asia continued to be weak. The world market for heavy buses is expected to be smaller in 1999.

Volvo Buses delivered 1,820 buses and bus chassis (1,790) during the first quarter this year, a marginal increase compared with deliveries in the first quarter of 1998. The percentage of deliveries of complete buses manufactured by Volvo increased substantially, from 23% to 49%. Excluding deliveries from Mexicana de Autobuses S.A. (MASA) and Nova BUS, which were acquired in 1998, the number of vehicles sold in the first quarter this year was smaller than in the comparable period a year earlier. This was due primarily to reduced deliveries in Great Britain and Brazil.

The backlog of orders at the end of the quarter was slightly smaller than on the same date of the preceding year. The number of orders declined sharply in South America and in parts of Asia, but increased in Europe and North America.

Net sales increased to SEK 2,791 M (2,352) as a result of the acquisitions in North America and Mexico, which also resulted in increasing the percentage of sales of complete buses. Excluding acquisitions, sales decreased by 15%. The company incurred an operating loss of SEK 67 M, compared with operating income of SEK 75 M a year earlier; this was due primarily to delayed introductions of products in Great Britain, to production problems in the units acquired in North America in 1998, and to higher product development costs. The operating margin was negative, compared with a margin of 3,2% in the 1998 period.

Construction Equipment
The world market for construction equipment in the first quarter of 1999 declined, compared with the year-earlier period. However, the total markets in Volvo Construction Equipment's two most important regions, Western Europe and North America, increased by 5% and 1%, respectively. The market in Asia is still weak, although some stabilization can be seen in South Korea, which is an important market for Volvo Construction Equipment. The market in Brazil is very depressed at the present time.

Net sales in the first quarter amounted to SEK 4,115 M (4,142). Excluding acquired and divested companies net sales decreased by 17%. Operating income amounted to SEK 183 M (297), and the operating margin was 4,4% (7.2). The decline in income can be attributed to the situation at the beginning of the year, when dealers, mainly in North America, reduced their large inventories of construction equipment - and to problems with certain components, including axles. Excavators produced in the unit acquired from Samsung in South Korea were presented for Volvo dealers at the end of 1998 and the beginning of 1999. There is substantial interest in the excavators, which are judged to be highly competitive. The machines will initially be sold under the Samsung brand name but will gradually be provided with Volvo identification and sold under the Volvo name.

Marine and industrial engines
Volvo Penta's sales increased by 8%, to SEK 1,230 M, compared with first-quarter 1998 sales. Sales of marine engines were higher in both Europe and North America, while demand in Asia was unchanged. Volvo Penta's sales of industrial engines rose strikingly in Asia, but from a low level.

A favorable trend of sales plus lower overhead costs resulted in higher operating income, SEK 45 M (25) and in an improvement in the operating margin to 3.7% (2.2).

Aero
Air traffic throughout the world increased by 4% in the beginning of 1999, compared with the same period a year earlier. The rate of growth is still below the long-term trend, but the increase in recent months has been the strongest in a year.

Net sales increased 10% to SEK 2,167 M (1,964) due to higher sales in Commercial Aircraft Engine and in Aviation Support. Operating income improved to SEK 139 M (94). The improvement in income was due primarily to higher profitability in Commercial Aircraft Engines, but the acquisition of Norsk Jetmotor also contributed to the increase. The operating margin rose to 6.4% (4.8).

Sales-financing
The sales-financing business continued to expand during the first quarter. Total assets, excluding Volvo Cars, increased by SEK 1.1 billion, to SEK 39.1 billion. The increase was attributable primarily to the North American market. Net sales increased to SEK 1,846 M, compared with SEK 1,252 M in the year-earlier quarter, excluding Cars. Net income amounted to SEK 42 M, compared with SEK 30 M in 1998, excluding Volvo Cars.

New millennium
As a result of the sale of Volvo Cars during the first quarter of 1999, cost estimates related to the advent of the new millennium have been revised. The cost of Volvo's change-over program, excluding Volvo Cars, is estimated to amount to SEK 525 M for the period from mid-1997 to mid-2000. This amount is distributed as follows: applications, SEK 300 M, manhours, SEK 85 M and investments for imbedded systems, SEK 75 M. The reserve for unforeseen costs amounts to SEK 65 M. Costs are expensed as incurred. The work of planning for the changeover was intensified during the quarter.

Number of employees
With the sale of Volvo Cars, the number of Volvo Group employees declined by 27,360. The acquisition of Norsk Jetmotor added 540 persons, while slightly more than 1,100 employees mainly in Trucks and Buses left the Group, partly as a result of dismissals in connection with restructuring measures announced earlier. As of March 31, 1999, the total number of employees was 51,880, compared with 79,820 at December 31, 1998.

The Annual General Meeting of AB Volvo will be held April 28, 1999. May 3 has been proposed as the record date for the right to receive a cash dividend, which is scheduled to be paid out May 10, 1999.

Göteborg, April 19, 1999

AB Volvo (publ)
The Board of Directors

This interim report has not been audited.

Net sales

48,839

52,867

48 614

62 616

27,072

Cost of sales

(37,015)

(40,717)

(37,306)

(48,838)

(21,063)

Gross income

11,824

12,150

11,308

13,778

6,009

Research and development expenses

(2,372)

(2,472)

(2,468)

(2,792)

(1,085)

Selling expenses

(4,385)

(4,528)

(4,533)

(5,596)

(2,120)

Administrative expenses

(1,754)

(1,991)

(1,993)

(2,353)

(1,474)

Other operating income and expenses

(1,337)

(438)

(693)

(345)

(115)

Items affecting comparability

-

(1,150)

-

(1,181)

26,695

Operating income

1,976

1,571

1,621

1,511

27,910

Income from investments in associated companies

99

136

105

104

19

Income from other investments

79

2,098

(15)

2,364

1

Interest income and similar credits

427

552

170

353

667

Interest expenses and similar charges

(248)

(438)

(216)

(473)

(725)

Other financial income and expenses

(59)

(84)

13

(27)

127

Income after financial items

2,274

3,835

1,678

3,832

27,999

Taxes

(710)

(920)

(594)

(715)

(435)

Minority interests

17

(21)

(1)

(37)

(7)

Net income

1,581

2,894

1,083

3,080

27,557

Depreciations included above

1,933

2,264

2,286

3,143

1,188

Income per share, SEK *

3.60

6.50

2.50

7.00

62.40

Average number of shares, million

441.5

441.5

441.5

441.5

441,5

* Income per share is calculated as net income divided by the weighted average number of shares outstanding during the period.

Net sales

24,555

29,246

26,530

34,523

27,072

Cost of sales

(18,853)

(22,615)

(20,677)

(27,160)

(21,063)

Gross income

5,702

6,631

5,853

7,363

6,009

Research and development expenses

(955)

(1,087)

(1,057)

(1,166)

(1,085)

Selling expenses

(2,017)

(2,094)

(2,188)

(2,630)

(2,120)

Administrative expenses

(1,185)

(1,392)

(1,436)

(1,639)

(1,474)

Other operating income and expenses

(484)

(262)

(266)

(489)

(115)

Items affecting comparability

-

(1,150)

-

(500)

26,695

Operating income

1,061

646

906

939

27,910

Gross and operating margin excluding Cars
%

1/1998

2/1998

3/1998

4/1998

1/1999

Gross margin

23.2

22.7

22.1

21.3

22.2

Research and development expenses in % of net sales

3.9

3.7

4.0

3.4

4.0

Selling expenses in % of net sales

8.2

7.2

8.2

7.6

7.8

Administravie expenses in % of net sales

4.8

4.8

5.4

4.7

5.4

Operating margin, excluding items affecting comparability

4.3

6.2

3.4

4.2

4.5

Operating margin

4.3

2.2

3.4

2.7

103.1

Trucks

636

802

500

1 123

917

Buses

75

225

45

40

(67)

Construction Equipment

297

564

273

415

183

Marine and industrial engines

25

96

32

(58)

45

Aero

94

141

114

178

139

Other

(66)

(32)

(58)

(259)

(2)

Operating income

1 061

1 796

906

1 439

1 215

Change in accounting principles pertaining to deferred taxes
Volvo has reported deferred tax receivables pertaining to so-called temporary differences and loss carryforwards to the degree that these items could be offset against deferred tax liabilities in the same tax area. Effective in 1999, Volvo is adapting its accounting policies to generally accepted international and Swedish accounting practice and deferred tax receivables will thereby be reported, subject to that it is probable that the amounts can be offset against future taxable income. The change in accounting results in a deferred tax receivable as of January 1, of SEK 1.3 billion that is largely attributable to so-called temporary differences and is reported as a corresponding increase in shareholders' equity.

Europe

10,750

9,250

+16

- Western Europe

10,320

8,350

+24

- Eastern Europe

430

900

(52)

North America

7,450

6,700

+11

South America

890

1,860

(52)

Asia

450

1,020

(56)

Other markets

260

470

(44)

Total trucks

19,800

19,300

+3

Volvo bus/bus chassis, units invoiced

Europe

750

870

(14)

North America *

610

130

-

South America

160

410

(61)

Asia

260

350

(26)

Other markets

40

30

+33

Total, buses

1,820

1,790

+2

* Figures for the first quarter of 1999 include 243 units sold through Nova BUS and 223 sold through MASA; both companies were acquired in 1998.