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| The Volvo Group now being formed is a more focused unit, which for many years has demonstrated its ability to successfully compete in the world market for commercial products and services – a market that is growing. |
| At
an Extraordinary General Meeting held on March 8, 1999, Volvo´s shareholders
approved the sale of Volvo Cars to Ford Motor Company. As a result
of this decision, Volvo becomes a Group focused entirely on the commercial
products segment and related services. The background to the sale
is that a thorough analysis of the future demands that will be placed
on car manufacturers shows that Volvo Cars would benefit from being
integrated in a larger automotive entity, where it could enjoy the
subsequent economies of scale, and that for some time we have expressed
the ambition to expand in the commercial products field. As a result of the sale, Volvo Cars is incorporated in an industrially correct and financially strong environment. Concurrently, Volvo´s commercial vehicle operations gain the full attention of management and improved financial conditions to pursue its strategy of securing a position as a world-leading supplier in a growing market for products and services for commercial transport. The sale marks the close of an era in Volvo´s history, and we are moving into a new one. Prior to this, I wish to express my greatest respect for the work carried out within Volvo Cars, as a result of which the company today stands strongly equipped with an attractive product program that appeals to customers worldwide. The employees of Volvo Cars have every reason to be proud of their accomplishments. In the case of the Volvo Group, there is another side to the sadness that normally accompanies when breaking up an entity. The Volvo Group now being formed is a more focused unit, which for many years has demonstrated its ability to successfully compete in the world market for commercial products and services - a market that is growing. Historically, Volvo´s profitability in the area of commercial products has been higher than in the car operations. We are now facing a stimulating task of applying our combined industrial and financial resources to build the future of a Volvo which is strong as a result of a unique breadth in product range, highly technical skills, broad geographic coverage, a respected trademark and years of experience in the transport vehicle field. In other words, we have a strong foundation to build on. However, this does not imply that we can rest on our laurels. The transport vehicle industry is in a phase of heavy consolidation, in both the supplier and customer segments. Increasingly larger and more cost-efficient units are being formed and price pressure is intensifying. Our intention is to meet the economies of scale problem on several fronts. The overriding goal is to create the necessary expansion through organic growth, that is, increase sales in the existing operations and on markets where we are already established. We will also invest in new products and services as well as in broadening our geographical base. It is also particularly important to further strengthen our relations in those major markets that are experiencing growth. In order to achieve higher cost efficiency, we intend to intensify efforts to systematically identify and capitalize on the synergies inherent in our existing operations. This process is under way. There are integration gains to be realized, particularly in such areas as diesel technology, driveline components, purchasing, marketing, logistics and after-sales. Sales financing is becoming increasingly important and represents an area which will increase in scope but also one in which synergistics gains can be acheived. It is also our intention to make a concerted effort and develop our expertise in the area of efficient and environmentally sound transportation solutions, a rapidly growing market in highly industrialized countries and in developing economies. We will also participate in a considered manner in the ongoing restructuring of the industry through acquisitions. The financial freedom of action gained through the sale of Volvo Cars provides us the opportunity to play an active role and methodically seek new partners who can best contribute to securing the strategic positions we want to achieve. We have announced our interest in expanding the truck and bus operations, but there are similar expansion strategies in the other business areas, particularly Construction Equipment. The Volvo now being created has a homogeneous and, commercially, a more logical structure than previously. It is also a group with the financial freedom of action to invest in its own future. I view this as a major task involving great responsibility to apply our mandate to further develop the significant segment of Swedish industry that Volvo represents and to manage the value that has been built-up over the years. I am fully convinced that we have the capability to meet the expectations placed by the shareholders and the employees on a partly new, stronger and, in the long-term, more profitable company. Leif Johansson March 8, 1999 |