Tax claims amounting to 861 (521) pertain to charges against the Volvo Group for which provisions are not considered necessary.
Other contingent liabilities include for example bid and performance clauses and legal proceedings.
The recognized amounts for contingent liabilities reflect the Volvo Group's risk exposure on a gross basis. The recognized amounts have thus not been reduced because of counter guarantees received or other collaterals in cases where a legal offsetting right does not exist. As of December 31, 2012, the estimated value of counter guarantees received and other collaterals, for example the estimated net selling price of used products, amounted to 4,216 (3,726) and mainly pertains to credit guarantees and residual value guarantees.
For more information regarding residual value guarantees, see note 21.
In July 1999, Volvo Truck Corporation (VTC) and Volvo Construction Equipment (VCE) entered into a Consent Decree with the U.S. Environmental 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. During 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. On April 13, 2012, The United District Court of the District of Colombia handed down a decision in favor of EPA, and ordered Volvo Powertrain to pay penalties and interest of approximatley USD 72 M. Volvo Powertrain has appealed the decision. As of December 31, 2012, an amount of SEK 65 M has been set as a provision and SEK 404 M has been retained as a contingent liability.
Volvo Group is subject to investigations by competition authorities. 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 Office of Fair Trading (OFT), the British competition authority. In June 2012, OFT decided to close its investigation on the grounds that it considers the European Commission to be best placed to act in the matter. The OFT has reserved its right to reopen 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 Commission 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.
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. However, as regards the investigation 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 the investigation initiated in Europe. Concerning the investigation initiated in Korea, a contingent liability has however been recongnized.
In May 2011 Volvo Penta became part of an investigation by the European Commission regarding a possible violation of EU antitrust rules. In June 2012, the European Commission closed the investigation without further actions.
Global companies such as the Volvo Group are occasionally involved in tax processes of varying scope and in various stages. Volvo Group 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 Group is also involved in a number of other legal proceedings. Volvo Group 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.