Truck operations' focus areas and strategic objectives

Among the activities to increase the gross margin are the coordination of the brand and product positioning (Read more), the launch of a new truck series for the lower price segments in emerging markets (Read more) and the phase-out of unprofitable products and markets (Read more about UD Trucks in North America).

Focus area 1: Secure number 1 or 2 in profitability

We operate in a capital-intensive industry. Significant investments are necessary to simply comply with new regulations. Furthermore, a strong financial position affords us the opportunity to act, and to fund innovation and development, and our own expansion. To achieve this, we must excel in turning “volumes into profit” and capture the potential for efficiency that is associated with being a truly global player.

1.1 Increase vehicle gross profit margin per region by 3 percentage points
To increase the vehicle gross profit margin we must sell our products at the optimal price level and offer the right product mix in various markets. It also requires that we understand our customers – and their customers – and that we continuously improve the sales process.

1.2 Reduce actual standard cost of sales on total cost for current offer by 10%
Reducing the actual standard cost of sales will improve the bottom line, lower the break-even point and enable profitable growth. The main components of standard cost of sales include the material cost, manufacturing cost, logistics cost, warranty and technical goodwill.

1.3 Decrease wholesale selling expenses to 5% of sales
To reduce selling expenses we must align our wholesale organizations – from region to end customers – to drive productivity and efficiency. Sharing best practice and fine-tuning our processes will play an important role.

1.4 Increase own dealer soft offer absorption rate by 10 percentage points
A healthy aftermarket business with a total offer approach will reduce the vulnerability of our dealers to the cyclical demand for new trucks. A first-rate dealer network is also an important driver of customer loyalty and a way for us to become a real solutions provider. We need an appropriate number of workshops in the right locations, with the right tools, methods, and personnel skills, working according to the Genuine Service Process.

1.5 Reduce R&D cost (spending pace) to 11.5 BSEK
A flexible, scalable research and development structure is key to increasing R&D efficiency. This will help us to more effectively manage multiple demands in various markets. An optimized project portfolio is another key factor.

1.6 IT cost on 2% of Volvo Group total cost by 2015
This strategic objective is to optimize the business value from IT over time. The use of global processes enables the deployment of a larger proportion of common applications and the phasing out of redundant applications. One goal is to improve the balance between running and development cost. It is crucial that we keep a tight rein on IT costs even in an upturn when margins are better.