Volvo Ab Class A · OMXSTO:VOLV_A
Volvo Ab Class A — Investor Day (May 2017)
86 slides from Volvo Ab Class A's investor day presentation, May 23, 2017
Slide 1: Improving Performance
Improving Performance CAPITAL MARKETS DAY, ESKILSTUNA, MAY 23, 2017
Slide 2: Agenda
10:00 WELCOME Volvo Group Capital Markets Day 10:10 DEMO AND SHOW 11:00 – 12:45 TEST DRIVING AGENDA 11:30 – 12:45 LUNCH OPEN Martin Lundstedt, President and CEO 13:00 INTRODUCTION Jan Gurander, Deputy CEO and CFO Strong global presence Claes Nilsson, President Volvo Trucks IMPROVING 13:25 PERFORMANC
Slide 3: Improving Performance
IMPROVING PERFORMANCE MARTIN LUNDSTEDT PRESIDENT AND CEO Volvo Group Headquarters Capital Markets Day 2017 3
Slide 4: Improving performance: the journey
Improving performance THE JOURNEY Acquisition- Transformation Improving driven growth to close the gap performance Volvo Group Headquarters Capital Markets Day 2017 4
Slide 5: Reinforcing the performance culture
Reinforcing the performance culture Clear leadership and profit & loss responsibility for each brand Those closest to the customer are empowered to make the right decisions More regionalized value-chain approach Simplicity, improved speed A mindset for continuous improvement Volvo Group He
Slide 6: Leverage Group assets
Leverage Group assets All business areas to deliver on P&L responsibility ... ... with ability to pull on Group-common assets: Customers and dealers Common Architecture and Shared Technology (CAST) Powertrain technology Financial services Connectivity, electromobility and automation Know
Slide 7: Improving Performance
IMPROVING PERFORMANCE JAN GURANDER DEPUTY CEO AND CFO Volvo Group Headquarters Capital Markets Day 2017 7
Slide 8: Improving performance
Improving performance WE CONTINUE TO REVIEW PERFORMANCE AND TAKE ACTIONS ILLUSTRATIVE for product lines, services, Develop market areas, segments, product projects, Examples: variants etc. High frequency Operating follow-ups income Exit Outsourcing of UD Condor Divestment of Real Estate Divest
Slide 9: Profitability per truck brand and region
Improving performance PROFITABILITY PER TRUCK BRAND AND REGION 2015 2016 EUROPE NORTH AMERICA ASIA AFRICA & OCEANIA SOUTH AMERICA WORLD NET SALES 60% 16% 13% 11% TRUCKS 100% NET SALES 45% 26% 17% 7% 5% 100% Good performance Medium performance Lower performance Volvo Group Headquarters Capital Market
Slide 10: On our way
Improving performance ON OUR WAY Increasing profitability despite Strengthened balance sheet volume decline ADJUSTED OPERATING MARGIN NET FINANCIAL DEBT* TO EQUITY, % INDUSTRIAL OPERATIONS 12 months 7.7% 9.1% *Excluding pensions 40 Target 6.1% below: 6.2% 30 35% 20 Net cash Net debt 10 0 2013 2014 2
Slide 11: What we want to achieve
What we want to achieve IMPROVING PERFORMANCE THROUGH THE BUSINESS CYCLE Gradual and Reduced Discipline consistent volatility in capital earnings in earnings allocation/ improvement and cash flow investments Volvo Group Headquarters Capital Markets Day 2017 11
Slide 12: Strategic priorities
Strategic priorities 1 Reinforce Volvo as a global premium HD truck brand and regain position and market shares of Renault, Mack and UD as regional high-end truck brands 2 Capture Asia growth through JVs and Value Truck in a separate value chain – and leverage in other emerging markets 3 Create the
Slide 13: Strategic priorities
Strategic priorities 1 IMPROVING PERFORMANCE Strong global presence Claes Nilsson, EVP and President Volvo Trucks 2 North American transformation Dennis Slagle, EVP and President Mack Trucks Regain profitable market shares Bruno Blin, EVP and President Renault Trucks UD Trucks turnaround Joachim Ros
Slide 14: Strong Global Presence
STRONG GLOBAL PRESENCE CLAES NILSSON • Increasing market share PRESIDENT VOLVO TRUCKS • Strong recovery in Russia • Growth in construction • Growth in service market Capital Markets Day 2017 14
Slide 15: Capital Markets Day 2017
Ves i, The woridimnoat desired truck Brand wl hte ae @ | ¥ industry leading performance and the most successful customers. Capital Markets Day 2017 \ oes 15 Volvo Trucks. Driving Progress
Slide 16: Europe
MARKET SHARE EU28, HD EUROPE Market demand ona high level Growing share in several segments and markets PARTS PER VEHICLE IN OPERATION, % Commercial activities to grow service business Retail performance program Growing in the construction segment Capital Markets Day 2017 16 Volvo Trucks. Driving Pr
Slide 17: Growing in construction
Growing in construction Improving our customers’ business with a competitive product line-up CONSTRUCTION SALES VOLUME • Extensive feature development 12,000 – I-Shift with crawler gears 10,000 – Automatic traction control 8,000 – Tandem axle lift 6,000 10,300 – Volvo Dynamic Steering 4,000 9,000 5,
Slide 18: Latin America
DELIVERIES BRAZIL LATIN AMERICA Weak Brazil, good demand in neighboring countries Profitable business Sales and service network coping well DELIVERIES PERU, ARGENTINA & CHILE with downturn Improving mining business Capital Markets Day 2017 18 Volvo Trucks. Driving Progress
Slide 19: International
INTERNATIONAL Markets recovering in 2017 DELIVERIES ASIA, AFRICA & OCEANIA Capturing opportunities with the European truck range — higher demand in mining — e-commerce in China Capturing service market growth Combining growth with profitability Capital Markets Day 2017 19 Volvo Trucks. Driving Progr
Slide 20: North America
NORTH AMERICA Market bottoming out Successful captive engine and transmission strategy Network investing to capitalize on service. potential New truck and feature launches Capital Markets Day 2017 20 Volvo Trucks. Driving Progress
Slide 21: New truck and feature launches
New truck and feature launches NEW REGIONAL HAUL FAMILY IN NORTH AMERICA Capital Markets Day 2017 21
Slide 22: North American Transformation
NORTH AMERICAN TRANSFORMATION DENNIS SLAGLE PRESIDENT MACK TRUCKS Volvo Group Headquarters Capital Markets Day 2017 22
Slide 23: North American transformation
North American transformation CONTINUOUS IMPROVEMENT JOURNEY SINCE 2008 Right-size, restructure & manage brands Consistent strategic direction Price optimization & customer mix Restructured used truck operations Continuous dealer network improvement Proprietary driveline penetration Se
Slide 24: North American transformation: key metrics
North American transformation KEY METRICS Captive Captive Parts per Engines Transmissions Vehicle in for Volvo (AMT) Operation 97% 100 100 91% 90 80 80 70 126% 87% 60 60 50 Volvo 40 40 I-shift 36% 30 Mack 20 20 highway Parts per VIO 10 mDRIVE Truck population (10 year) 0 0 07 08 09 10 11 12 13 14 15
Slide 25: Proven strength through the cycle
North American transformation PROVEN STRENGTH THROUGH THE CYCLE 2016 - Volumes down 34% Lowered break-even unit volume by 40% - Profitable Lowered break-even unit volume by 40% Service business fully absorbing sales & marketing costs Firmly established lean organization mindset Volvo Group Headquart
Slide 26: Regain Profitable Market Shares
REGAIN PROFITABLE MARKET SHARES BRUNO BLIN PRESIDENT RENAULT TRUCKS Capital Markets Day 2017 26
Slide 27: Fundamentals in place
FUNDAMENTALS IN PLACE Lean and dedicated organization Right-sized cost base High service network density New model for market management in Europe Competitive and acclaimed product ranges Capital Markets Day 2017 27
Slide 28: Next step: drive sales to gain positive momentum
NEXT STEP – DRIVE SALES TO GAIN POSITIVE MOMENTUM INCREASED SALES IMPROVES A FUTURE PROFIT IMPROVES WE ALL & IMAGE BELIEVE IN MARKET & PRESENCE ENGAGEMENT >> USE AND SELL THE GREAT OFFER WE HAVE Capital Markets Day 2017 28
Slide 29: Key levers to increase sales
KEY LEVERS TO INCREASE SALES PARTNERSHIPS Right and optimized set up for DEEPER MARKET Increase number of dedicated International markets salesmen PRESENCE Rebuild partnership with markets Strict management of our dealers and dealers based on performance Close monitoring of our commercial
Slide 30: Key levers to increase sales
KEY LEVERS TO INCREASE SALES PARTNERSHIPS Right and optimized set up for DEEPER MARKET Increase number of dedicated International markets salesmen PRESENCE Rebuild partnership with markets Strict management of our dealers and dealers based on performance Close monitoring of our commercial
Slide 31: Partnerships & market presence
PARTNERSHIPS & MARKET PRESENCE Iran – Arya Algeria – Souakri Capital Markets Day 2017 31
Slide 32: Key levers to increase sales
KEY LEVERS TO INCREASE SALES PARTNERSHIPS Right and optimized set up for DEEPER MARKET Increase number of dedicated International markets salesmen PRESENCE Rebuild partnership with markets Strict management of our dealers and dealers based on performance Close monitoring of our commercial
Slide 33: Used truck operations
USED TRUCK OPERATIONS Dubai Capital Markets Day 2017 33
Slide 34: Key levers to increase sales
KEY LEVERS TO INCREASE SALES PARTNERSHIPS Right and optimized set up for DEEPER MARKET Increase number of dedicated International markets salesmen PRESENCE Rebuild partnership with markets Strict management of our dealers and dealers based on performance Close monitoring of our commercial
Slide 35: UD Trucks Turnaround
UD TRUCKS TURNAROUND JOACHIM ROSENBERG CHAIRMAN UD TRUCKS Volvo Group Headquarters Capital Markets Day 2017 35
Slide 36: Capture Asia growth
Capture Asia growth 1 Reinforce Volvo as a global premium HD truck brand and regain position and market shares of Renault, Mack and UD as regional high-end truck brands 2 Capture Asia growth through JVs and Value Truck in a separate value chain – and leverage in other emerging markets 3 Create the m
Slide 37: UD Trucks on clear path towards profitability
UD Trucks on clear path towards profitability Unsatisfactory profitability for years Integrated value-chain setup yields clear accountability, simplicity and speed in decision-making Clear direction and a lean organization prioritizing competence and ‘local’ creates energy and motivation Det
Slide 38: Group Trucks Asia & JV Strategy
GROUP TRUCKS ASIA & JV STRATEGY MARTIN LUNDSTEDT PRESIDENT AND CEO Asian ecosystem Volvo Group Headquarters Capital Markets Day 2017 38
Slide 39: Croner and Quester – UD growth engines
Croner and Quester – UD growth engines Integrated value-chain setup Accelerate Quester HD and secure Croner MD ramp-up Continue to accelerate service business, leveraging captive components, e.g. engine Reduce product cost significantly Ramp-up Thailand plant volumes and gradually scale-up
Slide 40: Product range upgrade and service sales in focus
Product range upgrade and service sales in focus Profitable growth through: – strong brand image – focus on HD and in particular tractors – retail excellence & service sales Competitive product offer with renewal of HD and MD range, including CN5 and CN6 powertrains Improve cost structure and
Slide 41: VECV – profitable growth with HD breakthrough
VECV – profitable growth with HD breakthrough Third largest truck & bus producer in India with good growth trajectory past decade Next level of profitable growth through: − strong brand image LD/MD − HD breakthrough − retail excellence & service sales Commercial activities to improve HD brand
Slide 42: Asian ecosystem
Strengthen competitiveness through cooperation Asian ecosystem UD Quester VE Commercial Vehicles Ownership 46% TECHNOLOGY COMPONENTS SUPPLIERS COMPETENCE UD Croner Dongfeng Commercial Vehicles Ownership 45% Volvo Group Headquarters Capital Markets Day 2017 42
Slide 43: Continuous Improvement
CONTINUOUS IMPROVEMENT JAN OHLSSON EVP GROUP TRUCKS OPERATIONS Volvo Group Headquarters Capital Markets Day 2017 43
Slide 44: From industrial restructuring to continuous improvement
From major industrial restructuring to customer driven continuous improvement 100% 90% 8 plants closed and 2 outsourced Process development 80% 2 new plants 10 logistics centers closed 70% and 4 outsourced 3 new logistics centers 60% Continuous improvement 50% reinforced Continuous improve
Slide 45: Result through continuous improvement
Result through continuous improvement • Continuous introduction • Use regional supply approach chains • Standardized ways of • Develop program working planning • Reinforce local and • Develop site capacity regional levels agility SPARE PARTS • Grow business with • Closer dialogue with market compani
Slide 46: Global scale and regional agility
Global scale and regional agility CAST* enables two dimensions: - brand and application - commonality for scale Use regional value chains - decentralization of resources and decisions - end-to-end responsibility Manufacturing plants, spare parts distribution centers and *Common architecture and
Slide 47: Continuous improvement site by site
Continuous improvement site by site – good progress and still potential to capture Volvo Production System Leadership and team structure Involvement by idea generation Assessment for coaching and to secure progress ~300,000 implemented ideas per year Targeting 5% gross productivity Volvo G
Slide 48: Transformation and Focus on Core Products
TRANSFORMATION AND FOCUS ON CORE PRODUCTS MARTIN WEISSBURG PRESIDENT VOLVO CONSTRUCTION EQUIPMENT Volvo Group Headquarters Capital Markets Day 2017 48
Slide 49: Internal transformation activities to improve performance
Internal transformation activities to improve performance Focus on core products and segments Product portfolio Continuous improvement: - Quality - Delivery precision - Cost Taking market share, growing field population Volvo Group Headquarters Capital Markets Day 2017 49
Slide 50: Transformation yielding result
Transformation yielding result 10.0% in Q1-17 VOLUMES AND OPERATING MARGIN (adjusted for credit losses in China) 12 months rolling Operating margin 80 000 8,0% Volumes 70 000 7,0% 60 000 6,0% 50 000 5,0% 40 000 4,0% 30 000 3,0% 20 000 2,0% 10 000 1,0% 0 0,0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 20
Slide 51: Strong positions in core products and markets
Strong positions in core products and markets GAINING MARKET SHARES (2016) NORTH AMERICA EUROPE 30% 61% CHINA 11% 30% 5% 7% 16% 18% ASIA AFRICA & SOUTH AMERICA OCEANIA 34% 46% 27% 7% 11% 10% 7% Note: Market shares are according to Volvo CE 8% 7% estimation Volvo Group Headquarters Capital Markets Da
Slide 52: Growing the service business
Growing the service business Record high Customer Support Agreement penetration 70% 60% Fuel Productivity Safety 50% Efficiency 40% 30% 20% Finance Uptime Rental 10% 0% 2012 2013 2014 2015 2016 Attachments Parts New Life Phase-in of Group 8L engine Roll-out of proactive monitoring and operator
Slide 53: Industry leadership in new technologies
Industry leadership in new technologies Volvo Group Headquarters Capital Markets Day 2017 53
Slide 54: Growing Services: Capture Untapped Potential
GROWING SERVICES: CAPTURE UNTAPPED POTENTIAL MARTIN LUNDSTEDT PRESIDENT AND CEO Volvo Group Headquarters Capital Markets Day 2017 54
Slide 55: Growing services
Growing services MAKING OUR CUSTOMERS SUCCESSFUL CUSTOMER’S CUSTOMER MARKET SERVICE REDUCED UPTIME AND POPULATION PRODUCTIVITY RETENTION SHARES SALES VOLATILITY Volvo Group Headquarters Capital Markets Day 2017 55
Slide 56: Untapped service potential
Growing services UNTAPPED SERVICE POTENTIAL Products/ services Uptime services Insurance Untapped potential on Untapped market existing fleet share potential Financing Workshop Parts Vehicles / Machines Market share Volvo Group Headquarters Capital Markets Day 2017 56
Slide 57: New operating model for Trucks in Europe
New operating model for Trucks in Europe CLEAR PRIORITIES FOR MARKET AND OEM MARKET OEM focus on services focus on vehicles Rolling fleet Product offering Customer mix Pricing strategies Parts & service Optimize factories contract penetration Parts availability Workshop utilization
Slide 58: Case: Retail Development
CASE: RETAIL DEVELOPMENT MARTIN MERRICK SVP RETAIL DEVELOPMENT VOLVO TRUCKS Volvo Group Headquarters Capital Markets Day 2017 58
Slide 59: Case: Volvo Truck and Bus Centre in North England & Scotland
CASE: Volvo Truck and Bus Centre in North England & Scotland REBUILT POPULATION WITH THE RIGHT CUSTOMER MIX TO GROW SERVICE PROFITABILITY Inverness EMPLOYEES 420 Aberdeen DEALERSHIPS & WORKSHOPS 12 ANNUAL NEW TRUCK SALES 700 ANNUAL LABOUR HOURS SOLD 310,000 Perth Glasgow West Glasgow East Edinburgh
Slide 60: The challenge of a declining truck population
The challenge of a declining truck population North England and Scotland (0-10 yrs) 9,600 8,900 9,000 9,000 8,600 8,300 8,100 8,100 7,800 2008 2009 2010 2011 2012 2013 2014 2015 2016 Volvo Group Headquarters Capital Markets Day 2017 60
Slide 61: Our customer relationship management journey
Our customer relationship management journey Sales Machine Model EMPOWER SALES Insight Driven Sales ‘Process Oriented ‘ TEAM ‘Judgement Oriented’ 100% 1. Data Gathering 2. Knowledge 3. Truck Sales- 4. Service Market- 5. Customer Obtained Insight Driven Insight Driven Focused 80% Sales Sales % of Pot
Slide 62: Insight driven sales rendering results
Insight driven sales rendering results 2017 North England and Scotland 2014 2015 2016 Pace Customer satisfaction 85 84 87 88 Employee satisfaction (sales) 90% 98% 100% 100% Earnings growth (YoY) -21% +8% + 93% +101% New truck sales (registrations) 512 714 667 776 Used truck sales (registrations) 286
Slide 63: Importance of individual customer strategy
Importance of individual customer strategy SHARE OF PROFITABLE BUSINESS (STRIVE FOR VOLVO LOYAL CUSTOMER) Vehicle Fleet Volvo (75%-100%) Retain customer business Sell service Mixed (25%-74%) Sell trucks Competitor (0%-24%) Acquire Service Customers customers Small Medium Large (0%-24%) (25%-74%) (75
Slide 64: Key Takeaways
Key Takeaways Need optimum truck population to deliver high profitability Sell right solution to the right customers Way of working and tools are fully aligned to the new Operating Model Unique to see total business of one customer Local ownership to deliver potential, supported by central
Slide 65: Case: Uptime Center North America
CASE: UPTIME CENTER NORTH AMERICA DENNIS SLAGLE PRESIDENT MACK TRUCKS Volvo Group Headquarters Capital Markets Day 2017 65
Slide 66: Drivers of North American Uptime Focus
Drivers of North American Uptime Focus Industry-wide service bay and technician shortage 1 One unplanned “Down Day” can erase 2 two years of fuel economy savings Volvo Group Headquarters Capital Markets Day 2017 66
Slide 67: Drivers of Uptime Center success
Drivers of Uptime Center success Co-location and Web-based Right mix of technology, Ongoing culture of collaboration case management live expert support, improvements to Connectivity North American system proactive communication dealer network Volvo Group Headquarters Capital Markets Day 2017 67
Slide 68: Leading in Technology
LEADING IN TECHNOLOGY LARS STENQVIST EVP GROUP TRUCKS TECHNOLOGY Volvo Group Headquarters Capital Markets Day 2017 68
Slide 69: Product leadership: For customer success
Product leadership: For customer success Volvo Group Headquarters Capital Markets Day 2017 69
Slide 70: Leverage years of creating CAST system
Leverage 15 years of creating a Common Architecture and Shared Technology system (CAST) Volvo Group Headquarters Capital Markets Day 2017 70
Slide 71: New tailor-made UD Quon
New tailor-made UD Quon BASED ON GROUP COMMON ARCHITECTURE AND SHARED TECHNOLOGIES (CAST) Volvo Group Headquarters Capital Markets Day 2017 71
Slide 72: UD Croner – designed to excel in the MD segment
UD Croner – designed to excel in the MD segment BASED ON GROUP COMMON ARCHITECTURE AND SHARED TECHNOLOGIES (CAST) Volvo Group Headquarters Capital Markets Day 2017 72
Slide 73: Asian ecosystem
Strengthen competitiveness through cooperation Asian ecosystem UD Quester VE Commercial Vehicles Ownership 46% TECHNOLOGY COMPONENTS SUPPLIERS COMPETENCE UD Croner Dongfeng Commercial Vehicles Ownership 45% Volvo Group Headquarters Capital Markets Day 2017 73
Slide 74: Focus on well-known and new technologies
Focus on well-known and new technologies LEVERAGE CAST SYSTEM TO ENABLE FUTURE INVESTMENTS Volvo Group Headquarters Capital Markets Day 2017 74
Slide 75: Still a lot to explore in well-known technologies
Still a lot to explore in well-known technologies THE FOUNDATION OF OUR BUSINESS FOR MANY YEARS TO COME Wave piston RECENT EXAMPLES OF 13L Turbo PERFORMANCE IMPROVEMENTS Mack mDRIVE Compound engine creeper gear ratios Volvo Group Headquarters Capital Markets Day 2017 75
Slide 76: New technologies: On our way
New technologies: On our way TODAY’S OFFER FUTURE SOLUTIONS CONNECTIVITY ELECTROMOBILITY AUTOMATION Volvo Group Headquarters Capital Markets Day 2017 76
Slide 77: 600,000 connected vehicles
600,000 connected vehicles CONNECTIVITY ENABLER OF NEW PRODUCTS & SERVICES AND NEW WAYS OF WORKING ELECTROMOBILITY AUTOMATION Connected vehicles Western Europe – real data Volvo Group Headquarters Capital Markets Day 2017 77
Slide 78: Competitive edge in electromobility
Competitive edge in electromobility CONNECTIVITY ELECTROMOBILITY AUTOMATION HYBRID BUSES ELECTRIC HYBRID BUSES FULL ELECTRIC BUSES Energy -30% to -40% reduction: -60% -80% Volvo Group Headquarters Capital Markets Day 2017 78
Slide 79: Truck electrification – next steps
Truck electrification – next steps CONNECTIVITY ELECTROMOBILITY AUTOMATION FULL ELECTRIC HYBRID SOLUTIONS ELECTRIC HIGHWAYS Volvo Group Headquarters Capital Markets Day 2017 79
Slide 80: Construction equipment electrification
Construction equipment electrification CONNECTIVITY ELECTROMOBILITY AUTOMATION HYBRID SOLUTIONS FULL ELECTRIC Volvo Group Headquarters Capital Markets Day 2017 80
Slide 81: Automation levels over time - stepwise
Automation levels over time - stepwise CONNECTIVITY ELECTROMOBILITY 5 AUTOMATION No driver 4 No head 3 No eyes 2 No hands 1 No feet Volvo Group Headquarters Capital Markets Day 2017 81
Slide 82: Partnership with Boliden
Partnership with Boliden AUTOMATION BUSINESS DRIVERS AND OPPORTUNITIES Volvo Group Headquarters Capital Markets Day 2017 82
Slide 83: All three technologies converging
All three technologies converging CONNECTIVITY HIGHLY EFFICIENT AND INTEGRATED TRANSPORT SYSTEM ELECTROMOBILITY AUTOMATION Volvo Group Headquarters Capital Markets Day 2017 83
Slide 84: Leverage CAST to invest in the future
Leverage CAST to invest in the future CONNECTIVITY, ELECTROMOBILITY AND AUTOMATION - ALSO TO BE LEVERAGED IN THE GROUP Volvo Group Headquarters Capital Markets Day 2017 84
Slide 85: Strategic priorities
Strategic priorities 1 Reinforce Volvo as a global premium HD truck brand and regain position and market shares of Renault, Mack and UD as regional high-end truck brands 2 Capture Asia growth through JVs and Value Truck in a separate value chain – and leverage in other emerging markets 3 Create the
Slide 86: We are the Volvo Group
We are the Volvo Group IMPROVING PERFORMANCE THROUGH THE BUSINESS CYCLE Continue to strengthen the performance culture: clear leadership and P&L responsability for each brand IMPROVING Continuous improvement PERFORMANCE Improve volume flexibility to reduce earnings volatility Discipline in c