Volvo Ab Class A · OMXSTO:VOLV_A
Volvo Ab Class A — AB Volvo — Investor Day (2011)
51 slides from Volvo Ab Class A's investor day presentation, 2011
Slide 1: Capital Market Day 2011
CAPITAL MARKET Of DAY y 201 Olof Persson, CEO Volvo Group a
Slide 2: The world is changing ...
The world is changing ... AB Volvo 2
Slide 3: Future challenges
Future challenges AB Volvo 3
Slide 4: Key long-term drivers and challenges
Key long-term drivers and challenges Increasing population Increasing consumption and middle class Increasing transport needs Sustainable transports Climate Political push away change from fossil fuels Restrictions on CO2 Corporate responsibility “cradle to grave” Scarcity of commodities Recyclabili
Slide 5: Key long-term drivers and challenges
Key long-term drivers and challenges Cities leading environmental Efficient & sophisticated logistics “push” in society Restrictions on CO2 & noise Asian Product cost challenge growth Changing competitive landscape Asian competitors’ entry into the global market AB Volvo 5
Slide 6: Volvo Group Vision
Future challenges Volvo Group Vision AB Volvo 6
Slide 7: New Vision
New Vision The Volvo Group's vision is to become the world leader in sustainable transport solutions by: creating value for customers in selected segments pioneering products and services for the transport and infrastructure industries driving quality, safety and environmental care working with ener
Slide 8: Volvo Group Wanted Position
Future challenges Volvo Group Vision Volvo Group Wanted Position AB Volvo 8
Slide 9: Volvo Group wanted position
Volvo Group wanted position We are among the most profitable in our industry We are our customers’ closest business partners We have captured profitable growth opportunities We are proven innovators of energy-efficient transport solutions We are a global team of high performing people AB Volvo 9
Slide 10: Customer offering, Processes & Structures, Utilizing full potential
Future challenges Volvo Group Vision Volvo Group Wanted Position Customer Processes Utilizing offering & Structures full potential AB Volvo 10
Slide 11: We have a competitive product portfolio
We have a competitive product portfolio AB Volvo 11
Slide 12: Customer offering, Processes & Structures, Utilizing full potential
Customer Processes Utilizing offering & Structures full potential AB Volvo 12
Slide 13: Every organization is perfectly aligned to the results that it gets
”Every organization is perfectly aligned to the results that it gets” Strategy People Structure Culture Rewards Processes Drives behaviour Performance Modified Gailbrath’s Model AB Volvo 13
Slide 14: The matrix organization served us well during the acquisition phase
The matrix organization served us well during the acquisition phase Business Areas Construction Financial Trucks Buses Equipment Volvo Penta Volvo Aero Services Profit centers Volvo 3P Volvo Powertrain Business Units Volvo Parts Volvo Logistics Volvo Business Services Volvo Information Technology Vo
Slide 15: In a matrix organization most stakeholders are involved in most processes
In a matrix organization most stakeholders are involved in most processes Brand Product Product Product Assembly Sales & Sourcing positioning strategies planning development operations Marketing • Volvo • Volvo • Volvo • Volvo • Volvo • Volvo • Volvo Trucks Trucks Trucks Powertrain Powertrain Trucks
Slide 16: The top managers have a clear view on improvement areas
The top 150 managers have a clear view on improvement areas Brand management Customer management Internal efficiency • Clarify brand • Align our commercial • Improve today’s complex positioning focus and slow decision making cross Group • Clarify brand • Get structures and responsibilities systems i
Slide 17: Customer offering, Processes & Structures, Utilizing full potential
Customer Processes Utilizing offering & Structures full potential AB Volvo 17
Slide 18: New and challenging financial targets require us to deliver
New and challenging financial targets require us to deliver Key ratio Definition Target Trucks & Buses, Volvo CE & Volvo Penta Net sales growth Annual increase in net sales (organic) Equal to, or higher, than peers’ weighted average in respective industry1) Operating margin Operating income (EBIT) /
Slide 19: Trucks & Buses - sales growth historically on par with peers
Trucks & Buses - sales growth historically on par with peers Sales growth 30.0% 20.0% 10.0% 0.0% 2006 2007 2008 2009 2010 -10.0% -20.0% -30.0% Trucks & Buses Weighted peer average -40.0% AB Volvo 19
Slide 20: Trucks & Buses - profitability historically not in line with peers
Trucks & Buses - profitability historically not in line with peers Operating margin Rank 12.0% 1 2 2 8.0% 3 4 4 4.0% 5 5 0.0% 6 6 2006 2007 2008 2009 2010 7 -4.0% 8 8 9 -8.0% Trucks & Weighted peer average 10 Buses rank Trucks & Buses -12.0% 11 AB Volvo 20
Slide 21: Volvo CE & Volvo Penta - sales growth historically on par with peers
Volvo CE & Volvo Penta - sales growth historically on par with peers Sales growth 60.0% 40.0% 20.0% 0.0% 2006 2007 2008 2009 2010 -20.0% -40.0% Volvo CE & Weighted peer average Volvo Penta -60.0% AB Volvo 21
Slide 22: Volvo CE & Volvo Penta - profitability historically not in line with peers
Volvo CE & Volvo Penta - profitability historically not in line with peers Operating margin Rank 15.0% 1 2 2 10.0% 3 5.0% 4 4 0.0% 5 5 5 2006 2007 2008 2009 2010 -5.0% 6 -10.0% 7 7 Volvo CE & Weighted peer average Volvo Penta rank Volvo CE & Penta -15.0% 8 AB Volvo 22
Slide 23: We need to improve leverage – up and down
We need to improve leverage – up and down Schematic Wanted position Operating margin Leverage also at high sales volumes Historical position Breakeven Lower breakeven level b a Lower decremental leverage Sales AB Volvo 23
Slide 24: Profit improvement potential through growth & efficiency
Profit improvement potential through growth & efficiency, based on strong business portfolio • Better utilizing our brand assets Sales • Develop distribution • Penetrate new market segments • Better leverage purchasing scale COGS • Productivity improvements through Volvo Production System R&D • Full
Slide 25: Customer offering, Processes & Structures, Utilizing full potential
Customer Processes Utilizing offering & Structures full potential AB Volvo 25
Slide 26: Coffee
Coffee AB Volvo 26
Slide 27: What needs to be done?
What needs to be done? Processes & Structures Customer offering Utilizing full potential AB Volvo 27
Slide 28: New organization to drive speed and efficiency
Processes & Structures New organization to drive speed and efficiency CEO CEO office coordination Group Trucks Truck Joint Ventures Group Trucks Group Trucks Group Trucks Sales & Sales & Sales & Group Trucks Group Trucks Volvo CE Business Finance & Marketing Marketing Marketing Operations Technology
Slide 29: Consolidation into few functional organizations
Processes & Structures Consolidation into few functional organizations Group Trucks Volvo Powertrain: manufacturing Operations Volvo Logistics Volvo Parts: logistics and remanufacturing Volvo 3P: product planning, product development & purchasing Group Trucks Technology Volvo Powertrain: product dev
Slide 30: Now with clear process ownership
Processes & Structures Now with clear process ownership CEO CEO office coordination Truck Joint Ventures Group Trucks Group Trucks Group Trucks Sales & Sales & Sales & Group Trucks Group Trucks Volvo CE Business Finance & Marketing Marketing Marketing Operations Technology Areas Business Americas EM
Slide 31: Now with simplified process structure
Processes & Structures Now with simplified process structure Today Brand Product Product Product Assembly Sales & Sourcing positioning strategies planning development operations Marketing • Volvo • Volvo • Volvo • Powertrain • Powertrain • Volvo • Volvo Trucks Trucks Trucks • Volvo 3P • Volvo 3P Tru
Slide 32: Now with simplified process structure
Processes & Structures Now with simplified process structure Tomorrow Brand Product Product Product Assembly Sales & Sourcing positioning strategies planning development operations Marketing Global Brand ownership Technology & Purchasing excellence Efficient Commercial manufacturing ownership AB Vol
Slide 33: Moving decisions into the line organization
Processes & Structures Moving decisions into the line organization Fast and efficient governance Internal boards removed Several governance bodies to coordinate Group-wide issues removed Decision moved to executive management teams with clear mandate and accountability Efficient internal set-u
Slide 34: High pace in decision making
Processes & Structures High pace in decision making Weekly Group Truck Business Area Executive Management Teams Executive Management Teams Monthly Cross functional fora Business Review Meeting per Business Area (2 hrs) Quarterly Extended Trucks Executive Group Executive Team Management Teams (2 days
Slide 35: Clear accountability and metrics
Clear accountability and metrics Processes & Structures Group Trucks Financial KPIs • Sales • Operating Margin • Cash flow • CCC (Cash Conversion Cycle) • ROC • Etc. Truck J–Vs Group Trucks Group Trucks Group Trucks Group Trucks Group Trucks Finance & Sales & Sales & Sales & Operations Technology Bu
Slide 36: A more agile organization
Processes & Structures A more agile organization Increased customer focus Strengthen the brands Clearer responsibilities and mandates Speed in execution of strategies and decisions Improved efficiency Improved accountability AB Volvo 36
Slide 37: What needs to be done?
What needs to be done? Processes & Structures Customer offering Utilizing full potential AB Volvo 37
Slide 38: Competitive products but a need to optimize the positioning of our brands
Customer offering Competitive products but a need to optimize the positioning of our brands Globally maximize New and fully aligned Revised brand positions product strategies product plans • Optimize the brand • Define brand distinction: • Creat cost efficiency portfolio from a Group Unique vs. Simi
Slide 39: Align commercial strategies to drive market share and profits
Customer offering Align commerical strategies to drive market share and profits • Fully utilize each brand in each market • Optimize and develop distribution channels – single or multibrand depending on market • Commercial strategies better aligned with Financial Services • Efficiency in sales and m
Slide 40: Example - taking care of the opportunities in Asia
Customer offering Example - taking care of the opportunities in Asia Developing competitive product portfolios UD brand - Japanese market - South East Asia and Ongoing export out of Asia - Develop Chinese DND-JV Ongoing Eicher brand - 3rd largest CV producer in India - Complete product renewal with
Slide 41: What needs to be done?
What needs to be done? Processes & Structures Customer offering Utilizing full potential AB Volvo 41
Slide 42: Realizing the hidden potential
Utilizing full potential Realizing the hidden potential • New organizations dedicated to sales and marketing • Optimized brand positioning for each brand Revenue • Right products in the right markets to the right segments growth • Asian opportunity Potential operating margin improvement of at least
Slide 43: Shifting focus from acquisitions to organic growth
Shifting focus from aquisitions to organic growth AB Volvo 43
Slide 44: 15 years of building a global #3 position through acquisitions
15 years of building a global #3 position through aquisitions Volvo Construction Equipment today • Broad and competitive product portfolio • Committed and aligned distribution • Dual brands to penetrate both high-end and low-end Excellent basis • Good Tier4i-engines based on Volvo Group for organic
Slide 45: Push for organic growth
Significant growth potential Push for organic growth Example: Volvo and SDLG positioned to capture both high-end and low-end of the market Brand position Continued execution of the dual brand strategy – Number 1 among Chinese Wheel Loader brands in Brazil Illustrative – Expansion of SDLG to other ma
Slide 46: Push for organic growth
Cost efficiency Push for organic growth Example of how to leverage brand platforms Western technology Low cost solutions • Aligned brand positioning and revised product plans • 55 new or upgraded products in the next few years AB Volvo 46
Slide 47: Push for organic growth
Significant growth potential Push for organic growth Example: Capturing new customers in Brazil with SDLG Chinese manufacturers account for ~40% of Brazil wheel loader market SDLG #1 Chinese wheel loader in Brazil with ~21% market share 92% of the SDLG Brazil customers are new to Volvo CE Products b
Slide 48: Push for organic growth
Push for organic growth Example: Excavator expansion Kaluga, Russia Shippensburg, US Linyi, China Excavator SOP Q2, 2013 Excavator SOP Q4, 2014 Excavator SOP Q4, 2010 Pederneiras, Brazil Shanghai, China Excavator SOP Q1, 2011 Excavator SOP Q1, 2003 Konz, Germany Bangalore, India Changwon, Korea Exca
Slide 49: There is still potential for growth and profit improvement
There is still potential for growth and profit improvement • Dual brand strategy: Volvo & SDLG Growth • Leverage brand platforms potential • BRIC expansion • Leverage from existing industrial footprint • Volvo Production System for productivity Cost • Efficiency in R & D efficiency AB Volvo 49
Slide 50: Capture the full potential of a strong business portfolio
-— VOLVO GROUP CAPTURE THE FULL it __ OF A'STRONG BUSINESS PORTFOLIO. VOLVO
Slide 51: AB Volvo
AB Volvo 51