AB Volvo's CEO Discusses Capital Markets Day Transcript

Nov. 8.11 | About: Volvo AB (VOLVY)

AB Volvo (OTCPK:VOLVY) Capital Markets Day Call November 8, 2011 8:30 AM ET


Olof Persson – Chief Executive Officer

Anders Osberg – Chief Financial Officer

Mikael Bratt – Chief Financial Officer


Nico Dil – JPMorgan

Fredric Stahl – UBS

Olof Persson – Chief Executive Officer

Welcome everyone to this Volvo Capital Markets Day. And as I discussed with many of you during the release of the third quarter, I will today focus my presentation around the new organization, around the financial targets, and little bit looking what that means to us as a company.

I would like to introduce some people before we start. We have with us here Mikael Bratt present CFO and Anders Osberg who then will be CFO. They are standing up as well from the 1st of January and also Christer and Per is here for support. Mikael will not make a presentation. I will do the presentation throughout, but of course, they are here also down for the Q&A session after the presentations.

I’m now starting with a quite sort of self-explanatory question, the world is changing, but the story I am going to tell you today is a little bit about what I did between the 1st of May and up until the announcement of the reorganization what was the thinking, what was the analysis behind, and why did we come to the conclusion of the new organization, then in combination with the final targets.

And it actually started here with the world is changing. And it’s changing in the way that we will create future challenges and that was sort of the first step that I took what kind of challenges do we have as a Volvo Group long-term in the environment we are working with. And here you can say that we of course can list a long list of different drivers when it comes to what will impact us business as business over long-term. We have increasing population that it last leading to increased consumption, increased transport needs, etcetera, etcetera. We are talking about climate change which is then coming into not only the way we all live on this planet, but also of course is translated into what kind of technology do we need to be producing and developing for the future.

Coming back to scarcity of commodities and raw materials, I mean, this is something that is more and more of course coming to us and something we also need to make sure that we prepare ourselves for and also make sure that we are coming into and also looking in the way those changes will impact us. Cities is going to be a major issue when we talk about the growth of population in major cities and what aspects will that have to us in terms of efficient and sophisticated logistic, but also of course, CO2 regulations, environmental regulations, but also of course then in terms of what kind of vehicles we need to produce and develop. The same goes for the Asian growth when it comes to we all see the place that Asian is taking both in terms of competitors’ entries, but also in terms of cost and market positioning.

So, by defining this, these are well-known, so I will not dwell too much about those future challenges. We actually then looked at based on those future challenges we need to have a vision going forward. And that vision we then worked on and concluded on like this where we have highlighted a few words on this one. So, the Volvo Group’s vision is to become the world leader in sustainable transport solutions. And sustainable is the broad definition of sustainability, one that not only take care of the environment, but also the social economic aspects of sustainability.

We want to create value for customers in selected segments. And I think it’s important to point out the selected end segments that we select the segments we want to be in. In those segments, we do them with great value. We want to pioneer products and services for the transport and infrastructure industries. So, that is about innovation, it’s about making sure that we are one step ahead when it comes to new technologies serving and also making sure that we face the future challenges we talked about. And, of course, our core value will always be there in quality, safety, and environmental care. Core values, that has been with us for many, many years and will also in the future be with us, and then of course I am taking real advantage of our global scale when it comes to working with energy passion and respect for the individual.

So if we then take the future challenges, the group vision and also then the group wanted position, this is a logical sequence that we have done and worked on. When it comes to the wanted position we then transform this vision into these areas. When it comes to the profitability and that is of course very much in line with what we have said in the financial targets as well, that we have got from the board, we have remained profitable in our industry.

When it comes to the customer and business partner and this is very much about how we deal with our distribution and I will come back to that a little bit later as well, but we are, our customer’s closet business partners. We have captured profit and growth opportunities, that is of course one area that we are looking into. We have talked a lot over the years about soft products and we need to look into also in the future what other revenue streams can we have, that is straight to the products.

I used to talk about the revenue streams around the track like circus, we have track, it’s all for a spare part, but if we look at the total and why there is circle over truck is actually generating a lot of revenues some of which we are into and some of which we are not today into. And there we need to look making sure that we have captured profit, growth opportunities. It’s of course also related to graphical areas and different segments.

When we say about you remember the pioneering and if you translate the pioneering as addition into the wanted position we are focusing very much on energy efficient transport solutions. We have done that in the past with our new technology coming out and we will of course in the future also then focus on energy efficient transport solutions and technologies that is helping that will come true. And again then taking care of our sort of global reach and making sure that we benefit and also take advantage of the vast majority of people that we have around the world that that can contribute to global company and global performance.

If you don’t take and this one is sort of going through the basis and that was very important for me to have those base because this is the foundation and I can talk hours and hours about this foundation. But of course I want to speak more about the questions that arise, because when I saw them that we came to the group, want to position, I asked myself three questions. When do we have the right customer offering to meet the wanted position? Two, do we have the processes, instructions in place to meet the group one to position. And thirdly always really fully utilizing the potential of the Volvo Group.

So, I will walk you through now one by one those questions and give you some answer of all the conclusions with it. If we start with a customer offering and I think this picture is quite impressive actually, because this shows many things, one, it shows the enormous asset that we do have in our brands. Those assets that has been acquired and integrated into the group primarily of the last 10 years, so we have the Volvo, we have the Renault, Eisher, you can also and (indiscernible) adding the SDLG brand in China and elsewhere. So, this is of course one way of looking at the customer offering. Yes, we do have the customer offering. Another way of looking at it is the technology embedded in those brands. And there again, it’s quite impressive to see that we not only have the broad range of technology that serves all the parts of the world, but we also are very much ahead of competition and the industry in many areas of the different technologies primarily technologies then relating to our core values.

We also have a breadth and the depth when it comes to customer offering of soft products. We have the financial services, which done is now more and more global player and also adapting itself and increasing its business. We are in both in goods transportation and people transportation which is of course very important if you go back and look at what I said about and other things that comes in there. And also if you look on the truck side again, you have the whole spectrums and small medium up to load trucks.

So, I would sort of summarize the customer offering and answering the question, do we have the customer offering needed in order to meet the group wanted position. I think basically we can say, yes, of course it still needs to be developed of course, still it needs to be monitored and also develop into the future. But in general you can say with that enormously good work, we already lost ten years, both building the brands, building the platforms, building the technologies. I think that we definitely have a customer offering, that then would be for instance, help us to become the closet business partners to our customers. So, this was a very important conclusion that I drew and it’s also one of the major benefits that we have seen over the last 10 years and to build up all the Volvo Group as we see it today.

Next question, I ask myself, do we have the right structures and processes to actually meet the different requirements that we have. And in order to answer that question I took this slide because I like it so much and specifically the heading, every organization is perfectly aligned to the results that it gets. And it’s all about this sort of star picture as you can call it with strategy, structures, processes, people, and you have this in the middle called the (indiscernible) and all this is sort of interlinked into the organization which then drives performance and drives behavior. So I truly believe that this heading is probably for all companies.

And when I then looked at the organization as we have it today, we can conclude that the matrix organization that we have today has served us very well over the last year. It is an organization where you do two things one you can easily integrate companies that you acquire. And it’s easy to then integrate into the different levels when you talk about logistics, when you talk about parts, when you talk about IT because you have the platform that is going down in the matrix level which means that you actually can do that quite easily and that has served us very, very well.

As you can see there, the model we have had is that your profits, responsibility both on the sort of horizontal and vertical line, which of course then also drives performance, but it also drives a lot of interfaces because you have those profit and loss interfaces throughout this organization. But I would say very clearly that this organization has been ideal in order to build the Volvo Group as we see it today, but now we have the asset that we have and we need to look forward of course. But before jumping into conclusions we also looked at how is our processes and how do we actually work in the company when it comes to this major level one business processes, brand position, product strategies planning, sourcing, assembly and sales marketing.

And with the matrix organization, you of course get a lot of involved profits. You have as you can see a lot of interfaces that is included in each and every phase of the processes. That’s a sort of a definition of a matrix organization where you have those cross points coming all over. So, I would like you to sort of keep this picture in mind when we then take a look a little bit what we’re trying to do with a new organization.

I also asked the top 150 managers what they thought about the improvements that we could do in the organization giving the situation we are in today, what would be the major focus from going forward and brand management, customer management and internal efficiency.

We then start with brand management, the feedback was it was very much in line with my own findings, is that we need to take a look at the brand and the brand positioning and this is a key element in the new organization which I will come back to. We also had to clarify the brand responsibilities with the brands and the business areas, divided as they were of course each and everyone had a very clear ownership of the brands per se. But then it’s the question how do we make sure that we get to maximize brand positioning for the total group and then also quite clear from the 150 top managers.

Now when we have acquired all these brands and have done the integration, the patron work on engine side and chassis, how do we make sure that we go on and utilize these assets in a better way than we have done before.

On the customer management side, one key there is of course to align our commercial focus. Again, very much coming to the notion that we have reached a critical mass in terms of size and number of brands and again not only on the brand positioning side, but also on the customer management side align our commercial focus. And then you have also then the common surrounded structures to improve our already very good customer service and improve authority and accountability, more efficiently and this is also something that we need to, the feedback we got is in the matrix organization, always that they have multiple context points and focal points to the customers, and that was something that we got feedback that we also need to address.

And then of course if you have an organization for 10 years as we have had it, you’re building in some internal inefficiency that’s by the fact irregardless, it was a good or bad organization, you actually do get that. So, we got some comments around the internal efficiency when it then came back to the complex organization and decision speed which was also something that we address in the new one.

The corporation between the business area and the business is internal sort of doing and living that you also get within big corporations. You’re also looking at the business units, what is the roll of a business unit as you saw on the slide before, we do have this profit centers, and of course, again, accountability and making sure that we have speed in our decision process.

So, when I had all this up I put the red mark and say, now we don’t have the processes, instructions in place to meet the future challenges. We need to be with the group one to position, we have pulled forward. We need to look into and see how we can deal with a process and structure that is in a better alignment and since we have announced in the organization, you know the answer to it, but I would like to come back to it a little bit more lately to this drag in more detail.

Then the final question, if we are utilizing the full potential of the Volvo Group as it is today. I then started by looking at a new financial targets, you are well aware of them, that was present in one and half month ago and that is of course a target setting that is now really telling us to and also require us to deliver, it’s from a external point of view targets that are very tangible, is number one or number two. It’s growth on par or better than our competitors. So, sort of a tick off, yes or know. So, from an external point of view, but it is also very easy to explain internally what our board is expecting from us. That we have to deliver in or better than our competitors and this is the world that we of course are living in.

It takes away a little bit about the discussion where in the business cycle are we because we had a previous target over a business cycle, you could easily run into discussion, when actually pass the peak and when do we have the bottom. This one is taking that uncertainty way, and we’re now focusing on reality that we are living and we get a competitive edge too that we want to be up there on the podium and not only on the podium but normally the two places that are highest order or the one that is to the left number one or number two on the podium.

So how have we sort of deliver on those targets in the past and I will say in terms of sales growth it depends on what’s period of time are we looking at, but we have been on par, you can see we have been a little bit up and down. Then in trucks and buses you can see now that we do have a growth that is basically on par over the last years and also in the downturn we didn’t loose out more than our competitors.

When it comes to the trucks and buses under profitability you can see that we have not been in line. And here is of course the big challenge that we have and in particular you can see that drop during the bad times, when you have the drop in the 2009, 2010 crisis, we dropped from a 4, 5 position down to an 8. Of course we have come back very rapidly, up to number 2 position which is of course due to a number of reasons, one is of course that we have sort of reduced our structural cost quite a bit, but still we are sort of coming up and down a little bit too fast and I am coming back to that, a little bit later. So here definitely we have work to be done.

On the sea side and Penta, basically it’s the same picture on the growth side we are on par with competition. We have as you see now lately been a little bit better than competition mainly driven I would say, also by our successes in China, by having China and big part in China is of curse helping us compared to our competitors. But in general you can say that we are following our own par.

But again, here we have the same sort of historical position little bit more sort of less volatile, you can see we are at number four, five position, but again the same principle when we really drop into the bad times, we’re dropping more down to competitors and we don’t drop to place number 7, again coming back very nicely after the crisis up to the number two position.

And this shows when I discussed that internal as well, that we have a leverage issue that we need to address. This is our historical position basically we are very fast in coming back out of the crisis, but then the leverage on the top ten of the cycle we don’t get the leverage increasing or improving. So, what we need to do and run, the area that we need to look at is to start to look at the leverage for the group that looks more like this. That we can actually been there ourselves a better buffer bad times, because we are in a cyclical business.

By having a leverage curve that actually carry those higher up before it’s sweating out on the high side. But that also means in order to sort of making sure that we have more way room we need to lower the cost. So, we need to work on both sides, both on lowering the structural cost to get a lower breakeven and at the same time making sure that we get a leverage curve that is carrying us higher up over the cycles.

This one is also something I looked into and this is then if I take the profit, loss line by line, and see, if I don’t sort of just look at it and see where do I believe that we can improve and this is what you see on the screen here is the conclusion. By taking the comments that we have in assets of brands, that is not 100% fully utilized, it’s integrated and we have build the platforms, but we have not yet taken the full step to fully maximize the brands. We have opportunities there.

We have a very good distribution, but we also brought on a lot of distribution. Again, improving and developing distribution is probably something that we also by just working on the footprint we do have there are I am quite sure and certain that we have improvement in potential there as well. And then of course as I talked before on the, want to position and on the vision, new segments and penetrative segments both from a product point of view but also from a graphical point of view.

I believe that we definitely have potential on the top line growth. And I want to send that message immediately, the reorganization that we are going to discuss a little bit later to me is very much focusing on actually improving top-line. We do have of course as in all companies, potential also if you look in cost of good sales. And again there I think that by the split up of the activities we have had in different business area and business units, by combining forces and really take the advantage of the scale that we now have got over the last 10 years, we do have on the purchases side definitely pretentious.

We started a couple of years ago with the Volvo production system and it’s rolling and it’s implemented but we still have ways to go before we can say that all over the place, world class production system. We are working on it but I think again with the new organization that we’re going to have a better focus on that and also more coordination around that.

On the R&D side, we are spending a lot of money on R&D and the question I have is of course do we have the right efficiency on every krona and into the R&D till we get the right result out on the result of it. And there we have now a R&D program which is running, where we also see a lot of pretentious, that can be used in either taking on more R&D or actually done, streamlining the R&D in which way we want to go.

Selling and admin again pretentious stare coming back to the consolidation of dealer development activities on the back office side, that we’re more stringent by having a more sort of overall view on the development on the dealer side. And in particular, they’re on the systems, which is a big cost for the dealers, can we do something there and the answer is probably, yes. And again, then support functions, the business units as you saw it before focusing very much on efficiency rather than perhaps the internal profitability.

So if I would summarize, before I do the cliff hanger and ask you to take a short break. What I did and what we did in a team, since this May, is basically we’re going through the steps in order to create two things, one is the platform, based on division, based on the wanted position and they should all be anchored on the main challenges that we do have in front of us. That gives a solid foundation in order to ask the questions, about the customer offering, about the processes and structures, and on utilizing the full potentials.

So this gives me and also the rest of the management team and that’s why I show that the answer is coming back on what we want to do is not just an idea that I have been dreaming off, this is a commitment and also the feedback from 150 in the Volvo Group, which also plays into account in terms of stability in the platform when you do such major reorganization as we’re going to do from the first of January next year.

So all in all then it’s of course the big question, what do we do then. And that is exactly what I am going to talk to you after this coffee break. And Chris, I kept it exactly 30 minutes. So, we’re keeping the time and then I am going to talk about the answers, what we’re going to do and what it mean for the future.

And then just sort of making sure, you didn’t forget everything over the coffee break here.

(Coffee Break)

Okay. Just sort of making sure you didn’t forget everything over the coffee break here. So, this was where we are in the future challenges, the big trends that we are living, the new Volvo Group vision, and new I should say both of these are new position, answering the questions about customer offering, processes and structures and utilize some potential where we say that we need to focusing on processes and structures and utilizing the full potential.

So, then looking at what is it that we are actually going to do and one of these is of course a very bad cap secret and that is of course the reorganization, but let me give some flavor to it in terms of the organization. One of the key issues with this new organization is of course the focus and the realization of the Volvo Group today is 65% trucks. And that also gives the focus and sort of not tilting but the focus of the organization has been and what I would talk about going forward now is very much on the truck side.

By doing a (indiscernible) in that organization, you achieve a couple of things, primarily is that you get a clear responsibility on different areas that sort of self giving. In this case, we now have three regions was only responsibility if you think all that only is to take care about the customer – taking care about the sales making sure that we attack the market in the correct way and they don’t have necessarily to think too much about other things in a value chain.

Now, coming back to that is a little bit of a statement with some exceptions. But it gives a very much focusing in on certain areas. And if you remember the questions I was putting to myself and to the organization, these are actually addressing in the sales and marketing organization exactly about the brand and the asset of the brand. So, I have got some questions about this when it comes to say some marketing and brand ownership, say some marketing from the region is done, complete session marketing and sales responsibility for that region, plus the worldwide responsibility for the brand allocated as we can see here.

That means that brand ownership and the role of the brand ownership is that you cannot in another region do something with a Volvo truck for instance in Asia that is not approved by the brand owner in the European organization. So that is to make sure that we have a consistency around the brand and the brand values, the brand promise, the differentiation and all of that to make sure that we don’t slip into regionalized solutions. But other than that is a full focus on exactly what they should doing sell, sell, sell. The same goes of course for air group truck operations. In there, you will have all the operation activities, you will have everything that is related to production, but also logistics and other costs that is a complete value chain when it comes to operation and the same goes for technology.

So, this is what you get with a functional organization in that respect. What we also get here is of course the fact that I will be as you can see I am the CEO of the group and the CEO of the truck business and if you really look at it from an extended room I am also the salesman actually because there is in between the regions and so on and so forth. SO my time and I will come back to that will be very much devoted and the team will be very much devoted into the truck. And the reason why we then put in the business area is exactly that, because within the business areas, the companies underneath the sanction business area, there we have of course lot of very sort of interesting companies that we want to grow, that we want to make sure, that they don’t get trapped in a process which is limiting their development and limiting their ability to grow. So therefore, we have to make sure that there is a business area sanction with full mandate to take care of strategic issues, taking care of investment plans, taking care of operational issues, and run those companies and make sure that develop according to the strategy we have.

The same with Volvo CE is reporting to me, but we have the Chairman of the CE, the same person as head of business, who can call so. This is in order to make sure that Volvo CE, as you know has grown substantially as a big part of the Group now and we also want to show that it is very important part of the Group and also if you look at it from distribution and strategic issues, you see a lot of connections between the Volvo CE and the truck side.

So this is the one dimensional non-matrix organization and to me this is important. An organization that is one dimensional with only boxes where you have your boss, you have your salary set and you have your development plan, but today you come into work, you start to work in a process and that will come back to that a little later.

We have done a lot of moving around as you can see. So, we’re actually moving in the business units now into the respective functions. We’re taking away the profit and loss responsibility, we are as I’ll come back taking away the internal invoicing. We are taking away unnecessary cost allocations. So, now we’re moving, if you take the Powertrain manufacturing, logistic part goes into truck operations.

You can see that 3P Powertrain technology, Volvo technology, Volvo parts when it comes to product support and Volvo Group NAP, then goes into Group trucks technology. And if you look at it on a high level, the Volvo IT, you have the Volvo Business Service, Volvo Group goes into the financial business. We have a clear allocation now in all activities and they are all done, allocated into the respective functions in a cost base way.

This also means that we have created a clear ownership of the processes. So, if we take the sales order and deliver it to repurchase which is the aftermarket service is clearly all now by the Group truck sales and marketing regions. So, we have a clear ownership on the processes and we also have a clear functional organization. These two together means that, you can focus on the complexity in the processes, not the complexity in the organization.

Matrix organization can very easily be without having election in organizational theory will over time add on too many layers. So, you get too many dimensions in the organization before even come to the processes that makes it very difficult to working. And this is two dimensions, flat one dimensional functional organization and then you take the complexity which you have in the rework into the processes with the clear ownership.

Then there are order to deliver, clearly owned by Group Trucks technology and you have the product planning and development process that are owned by group trucks technology. We also then put everything that has to do with business administration, business effort into finance and business support functions. So, it’s all collected there. Again, the whole line of processes is now clearly allocated together with all the resources in the whole company.

If we then look what this means in terms of simplification on the process structure this was the page that I asked you to remember, this is where we have the old matrix organization where you do have a lot of people involved in all the steps of the different processes. And schematic and a little bit of a simplification, you can say that in the future it looks like this, where you’ve basically done, have the functions clearly taking take of Global brand ownerships within the brand positioning and product that you deal in sales and marketing. You have the ownership of the three next coming step with the technology and purchasing and efficient manufacturing and commercial ownership on the assembly. So simplification, simplification, simplification, that is the name of the game when you look into it in terms of describing the processes.

So if the decisions we’re taking then is to basically moving decisions into the line organization. So, we are now moving, we’re taking away internal board, we’re running this and I will come back to that on a review meeting schedule instead of the internal board structure. We have several governance bodies to coordinate Group wise issue that in the matrix organization has been taken well and then of course the decision moved to executive management teams with clear mandate to accountability.

And then what I said before, no internal proficenters, no discussion about internal contracts, no discussion about internal invoicing, we are taking that way and that was actually a quite a substantial amount of flow of invoices and internal transactions build up over the years as we’ve grown bigger and bigger with the metrics organization and we take away all the account from 1st of January next year.

Next of course looking at the – what we talked about in the decision making. So, what we do now is to do everything in terms of decision making into either weekly, monthly, or quarterly rhythm. And the most important one is on the weekly where we’re going to have the group truck management team added by me on a weekly basis, on a weekly rhythm to make sure at the process decision, make sure that we take the right decisions in-time in order to moving forward.

On a monthly basis, we’re going to look at the cross-functional, which is then process related management teams and then on a quarter basis on a 40 to 50 people, we’re going to come together for two days and we’re going to discuss strategies, strategic issue, brand position issues, portfolio planning issues, and we’re going to do that on a quarterly rhythm as we go forward. And then we have the same on the business areas where we don’t also have everything divided into weekly, monthly, or quarterly decision phase. So, this one is then really to make sure that we increased the phase and decision making.

When it comes to the accountability and this is very important, and I get some questions around that. Who is responsible for what and then we try to make it as schematic as we can. And you have to walk to talk on when you do the functional organization that means that if you say that sales and marketing is responsible for sales and the brand development. Well done, you have to put making sure that they have the mandate, but they also the tools, (means), and resources to deliver on those KPIs and target. And you can see some examples here that is going to be allocated and fully responsible for the different areas. So, we have the sales gross profit selling in admin, all of that are fully in line with and also allocated too. We say some market organization because they have all the resources there, they can actually decide himself and they can put target without actually looking into any other areas.

Customer satisfaction data performance market share is also the responsibility. On the operation side, you understand the cost of goods sold, you have the variances. So, it will be a very, very driven operation because there is no profit and loss in operations. So, it’s mainly how well do we execute on our delivery plans and how well do we feel our factories going forward. Of course investments and in the working progress in inventory as well and technology done will be very much on the financial side and expense function. But then it would be heavily measured on the quality of the projects and the deliveries that we’re going to have on the non-financial order operation in KPIs.

And then of course we add all is together and then the management team, the truck (NYSEARCA:EMT) by self and at the end of the day, myself would then be responsible for getting the whole result together. But it give some pieces are in order still is the matter of putting together and then the profit and loss account also will be in order. So, that is the rationale behind.

On the business area side, it’s slightly different because there we keep the Volvo CE parent and all the others. We keep the business area reporting. So, they will have their own profit and loss and balance sheet as we have it today. So there will be following on the normal both financial and operational KPIs including on VFS as we’ve done it before. So, by this, we can now said that we have a complete picture on where we are in terms of responsibility who has to mean under tools in order to execute and what target we have, it’s a fully aligned sort of strategy and structure according to those as well.

And if I then try to summarize the organization again it’s coming back to increased customer focus and I’ll come back to at over and over again. To me, this reorganization is very much to focusing on executing and improving top-line is about brand assets coordination and it’s about making sure that we have the speed implementation process and moving forward. So, you can see them the clear responsibilities, speed, and execution, improved efficiency, and also which is very important accountability that also goes together with the mandate.

So all in all, we are implementing this now. We have – we are in the process, we are according to schedule this operation. This organization will be operational by far is to generate next year. So, it’s a lot of work ongoing now in terms of details in terms of business models, in terms of accounting, in terms of announcement, in terms of new management team, and all of that. But in the meantime we also need to make sure that we execute on the normal business. And so far the organization has done a tremendous job in doing both. Focus on the business and manage to change, that is sort of slogan that we have right now and so far people has been extraordinary in doing that.

Moving on to the next actions to be done and that is the customer offering. And one thing if you look at it now in terms of actually going forward to the next step, you will have a sort of a three step activity and the first step now that we’re going to start with next year is to really making sure that we globally maximize the brand positions. That means we need to optimize the brand portfolio from a group perspective so this work now with all the brands that we have, we need to take them, look at it by region, by brand but also by market and by brand. To see, do you have the maximal position for the Volvo Group, here is the position that we have one plus one equal three, also one plus one equal 0.75. This is a work that we have to do now.

Then of course we also have to go through and make sure that we have the brand characteristic, the brand promise that goes in line with what we want to do in terms of actual position those brands into the market going forward. And finally it’s then taken to step of defining the brand position in the market for the targeted customer segments and as you can see it goes all the way back to the vision that we say that we want to be active in selective segments and this work is something that of course has already started and has been ongoing but with the new organization we will do it on a total level rather than brand by brand level.

Next step is then to fully inline our product strategy. So then we have the brands, we have the result of the brand positioning, next step is of course is what kind of products structures do we need to have in order to fulfill that brand promise. And this is also work that we need to do when it comes to define this distinction between unique and common and similar. We need to align the features, we need to make sure that we have the cost levels, we need to make sure that we have the strategy in terms of the functionality of the different vehicles that we want to have going into the different brands on different market and in different regions. And then of course, create of the market and service offers telemetric and things.

And then the final step is done to take that. We have the brand positioning, we have the product strategies and that product strategy will then be transformed into revised product brands. And the product span of course you put it over time you put it, they monitor it, you allocate resource and develop the products accordingly to make sure that you meet this going forward.

And here we have a different, number of different tools that we will be working with when it comes to the common architecture and share technology cast for instance. It is something that we have developed over the years, very well and we’re going to continue to do that going forward. You have the platform that we have successfully implemented on the engine side, it’s going to be the basis for doing this going forward as well. But having, the answers from step number one going into step number two to step number three we will of course have to revise some of the thinking and some of the issues that we have had before to make sure that we are following it in a good way.

So basically, if you sum that up you can say that the alignment of the commercial strategy to drive the market share and profit will be done in this process I just described. It is about again to fully utilize each brand and each market. And let me take an example, in CEM you will see that little bit later, we have been very successful running a dual brand strategy in Brazil. The question that I asked to the organization what about the truck side, how we’re going to deal with that. There is no answer and I don’t give you any sort of, but just putting that on the table inside how does that look, how does it look in that market, what about this and so on so forth. Again just by opening up this discussion you get a lot of interesting discussion which then can be transferred into the different areas, efficiency in sales and marketing and another thing.

By having this organization fully focused on and this is a enormous resource that we’re going to have this through regions. And we can imagine, I do not fight over it or with each other they are colleagues in actually trying to do the same thing and that is to sell and gain market shares, be profitable and so on and forth. And having that discussion in how can we share coming back off the systems. Where do we stand in implementation of for instance dealers report systems, products in aftermarket services and so on and so forth, you can envisage a huge potential in actually putting this in front of the new organization and get a lot of attractions going forward into this.

If we don’t look at taking care of the opportunities and Asia is a good example I think, here we can see a little bit what we’re doing right now. If we look at the UD brand we have a, Japanese market is of course a tick, but we have a lot of activities ongoing on the UD brand, with Southeast Asia and export out of Asia. And also of course the development that we do now in the DND joint venture, where we today are looking into together with our partner in a new sort of product line in terms of better supporting the Chinese market for instance.

In the Asia brand, we already sort of competitive, we are the third largest commercial vehicle producer in India. And here again the complete product renewal, with special focus on heavy duty is ongoing. We have taken the decision to expand the capacity from 48,000 to 66,000 by 2012. We have this sort out medium duty in production in India 2012, so there is of course a lot of issues and things that has been started and is ongoing already. But these kinds of actions and activities we need to look into other kinds of market as well to see how we deal with it.

Finally then, if we look at utilizing the full, the full potential and again we have to look at this in different ways, but what I want to look at it is the full sort of the profit and loss. And looking at it again from a revenue growth point of view with the new organization, which did sort of improvements that I talked about before. We have the optimized brand positioning which we have talked a lot about, right product for right market and the right segments. And then of course the Asia opportunity all this done correctly is of course major possibility for revenue growth.

But then of course this organization would give even though is not a prime reason cost efficiency I mean we are lining the product specification and brand positioning. We do of course when we find them address overlaps and if we have done double work, we shouldn’t be doing that in the future. If we find way of doing better we should do that, we have production efficiency I talked about purchasing leverage but putting all the three purchasing organizations together, we’re creating a massive purchasing power.

This I am talking about 3P, I am talking about Powertrain purchasing and on automotive purchasing, which is now one organization, function organization so we see that. R&D efficiency we talked about that is of course R&D 30 program we are talking and we see a lot of leverage coming forward. So basically, it is okay, I have to ask that because this one is the number you have been looking for I know that. When I look at all this in terms of the potentials that we have and now I am coming back to saying why we’re looking at potential and how we’re going meet it.

Overtime, I think there is a potential operating margin improvement of at least three percentage again overtime. If you look at it from a margin point of view and then again is a combination of the revenue top growth which we have talked about a lot of and I have talked a lot about and then cost efficiencies. So it is the combination of the two going forward. And of course this is a big change and that we should have all the respect for that is a big change from an organization point of view, it’s a big change also for all our employees that has to start to think in a new way compared to what they were used to for many, many years.

With a business area by business area we’re talking about cultures, we’re talking about belonging, we’re talking about pride, you have all these kind of things that you have to take care of. It is also a lot of uncertainty during the transformation phase, it’s a lot of new things that you have put in place and it’s also sort of a overall new way of looking at things and discussion climate, defining processes, defining the roles and responsibilities. All of that creates uncertainty, but having said that it’s good to see then and that we have an example that we did and have done this before and in order to sort of bring back a little bit of big brushes and you have seen some of this already before when it comes to Volvo CE. It’s about shifting the focus from acquisition to organic growth and I think what we have see now it will lost 2.5, 3 years in Volvo CE that by doing these kind of things.

Broad and competitive product portfolio last what I talked about before. It is an alignment and I’ll come back to that a little bit later. The alignment of the product portfolio by committed on the line of distribution. We have worked a lot on the distribution. The dual brand which was absolutely new in the VC, we’ve implemented than in a broad scale two years ago. Of course technology and fuel efficiency and legislation is given. We need to make that and glad to say that we have done a very good job on that and very well accepted on the market.

We have managed to go now in three years from number, four, five, or whatever up to number one in the Chinese market. And we then have a new orientation in place. All these ingredients is of course there in order to create a basis for good organic and as you can see we have been able to as I showed before on the (indiscernible) to grow in par with competition on an organic basis over the last years.

So the push for organic growth, I think it’s definitely something and message that I want to send out as well in CE, we’re doing this now for instance with the SDLG and the Volvo brand coming together and here you can see sort of a schematic picture on how we divide the market with the Volvo on top and SDLG on the more mass market. And of course you will have a point whether meets. But the trick is to make that point as small as possible and what is very interesting is done this schematics around the vehicles and there you can now start to see what is your brand we can start to see, what is common and if you remember show that on a slide before, what is common, what is similar, and what is unique.

And then you can start to think platform again and without actually touching the brand and the brand promise, we can start to get a very good variance on the thinking and the discussion how to create scale economics at the same time broaden your offer, at the same time making sure that we actually capture bigger part of the market then you had before.

So, in the CE case, we will definitely continue to develop the dual brand strategy, I think we are in a beginning of a journey and we will continue to do that. You have to and that’s the step number two, you can actually start touch on soft offer to do as well. We can have telematics, and we can have that again creating a scale of economics and of course which is very important and we show the example in a minute to deal a development where we actually can create certain markets of better cost base for the dealer the more attractive offer for the dealer, and making sure that he has better possibilities to capitalizing order to drive the growth.

So, what we did in terms of the organic growth part of you, you can see here we did a very good work together with our partners in SDLG and basically schematic a very easy we can say that we brought to the table, western technology, and a lot of experience for many, many years in different areas of the world where the SDLG and the Lingong brought in the thinking about low cost solutions both in terms of engineering, but also in terms of production in terms of technical implementations. And what we did I was actually to line the product now, completely between the Volvo and SDLG over the next years that then resulted in this product plan, I’ve talked to many of you about, which is now containing a 55 major upgrades on new products coming out from an organic growth point of view.

Capturing both existing segments and growing in existing segment that also capturing new segments that we haven’t been active in before. And this is a very good example on the dealer side. We definitely see that you have then in Brazil where we now have the SDLG launched and basically moved from (indiscernible) Chinese content because we didn’t have a Chinese content. And is today number one in Brazil on the Chinese import side in Brazil. Whether profit the business from day one and we have show some of the concept of having the same dealer ownership structure and then we have different foundations vis-a-vie the customers. What you see here is an example of a dealership owned by the same, people or company, but you have done completely two different sides of the customer interface with one SDLG and one Volvo. Again, you get the benefit of increased volumes and then of course now it’s a matter of looking at how can we develop this even further.

So this is an example of the push-through organic growth from a branding point of view. You can also look at it from a production point of view and organization point of view and we have had for many, many years to Shanghai and the (indiscernible) Korea manufacturing in the sea and what we lately have done is that saying that by pushing organic growth you need to be closer to the market and we are taking about final assembly, final assembly on building up the local supplier network in a good way.

So, just in a couple of years now, we have decided to actually move as you can see here now to have local manufacturing in many places. It’s relatively cheap in terms of capital investment, because it’s final assembly but gives a huge leverage of actually growing the business in Russia, in Brazil, and in the future also in U.S. (indiscernible). It gives you also the advantage which we have talked about many times, you get rid of the currency flow issue that we have in sea by shipping vehicles around the world producing only one currency selling on another and exposing ourselves in different ways.

So, again, it’s only the branding and the branding position. You go also to make sure that you fill up with and having a very efficient production coming with it. And again the same as I talked about for the truck side and the reorganization we are doing, we have the same kind of thinking here where we are again primarily looking at what growth potential can we have, never ever lease – leave track of the growth potential. That is what’s going to sort of give us the future business going forward, installed base, revenue service and spare parts revenue and so on and so forth. But then of course we need to keep an eye on the cost efficiency in the organization. Whenever we find efficiency we need to of course to address them, but again it is a story about top line growth rather that combined with cost efficiency that would then bring us to them.

So, by that, I then conclude with this picture. So, what I try to tell you today is a little bit reasoning why we did it, how we build up the case, how we created the platform on which we then built new organization and capturing the full potentials. The answers to it, new organization and clear responsibility easier to working and of course lot of changes, but in more efficient and agile organization is we think it lot of focus on the brands, lot of the focus on the enormous brand assets that we have acquired over the years make sure that will take full advantage of that, making sure that we then come back to the financial targets and live up to them as being the number one or number two in the market in terms of profitability amongst our peers. And then of course also looking into a little bit that we have managed into VC to actually buy working with a brand being very successful of having a good story on (indiscernible), so capture the full potential of the strong business portfolio. This is the end picture and I thank you very much for listening and this gives us exactly 22 minutes for answering questions.

Thank you very much for listening.

Question-and-Answer Session

Olof Persson

Exactly. We need to speak into a microphone, because we are also broadcasting this live, so can we have?

Unidentified Company Speaker

You are going to stick on to that microphone?

Olof Persson


Unidentified Company Speaker


Nico Dil – JPMorgan

Good afternoon. Nico Dil, JPMorgan. Two questions please. First of all, 300 basis point margin improvement over the cycle what do we need to think about in terms of normal through the cycle margin. Do we take it to 12%, you are currently sitting at about 9% or do we need to think about 11% as you were sitting at 2006/2007 levels at around 8%. How do we think about the new through the cycle margins when you are sort of around mid-cycle sales? Second question is flexibility in the downturn you highlighted that mainly in the downturn, you are undershooting your peers next to increasing the number of temporary employees what are the other measures we are taking?

Olof Persson

If I start with the first question, I think what we say now is 3% on the operating margin over time, okay so this is what we over time and that’s what we are looking at. Some of the improvements will come faster than others. If you look at what I said, the revenue growth we’re looking at defines of course how we are positioning our brands what kind of adjustments we need to do to our product and that is more of a long-term part of it, part of it when we find other work and we find issues that we are doing of course we can do that quicker. But I will not give you any, first of all, it is not I’d over time, not over cycle, I say over time that is one. And secondly of course we will keep the eye on our financial target. So, I will not give you a dead line when we are done with it, but it will be over time.

On the flexibility side, I think there are two ways of doing the flexibility one is of course to make sure that we have the flexibility on the workforce side to make sure that we can meet ups and downs and we’re doing that and I think we will have that situation going forward as well. But it is also to me flexibility to make sure that you have the costs structure in place today, well driving more buffered when things are rolling up and down to make sure that we don’t fall off the way we have done compared to our competitors before, so, it’s two sides of it. Thank you.

Fredric Stahl – UBS

Hi Fredric Stahl from UBS. Could you, on the 300, that’s sort of 3% margins that could you give us an idea what proportion of that is costs and what you think is the benefits of greater revenue growth when you implement your sales and marketing strategy?

Olof Persson

I would rather not go into that split right now because as you’ve seen we have a lot of work ahead of us on two sides, one is of course to do the work on the brand positioning, making sure that is rolled out and making sure we get the benefits out of it. And the second one, we also need on the cost efficiency side now what we have done is to announce the high level. I want to make sure that the guys that come into charge, and are in charge now take full responsibility on the cost efficiency. That means that I will not second guess, they will get targets, we will have to look at it but at the end of the day they need to commit to deliver it and that we cannot do until we have seen the whole picture of the organization. So therefore I will not go into that but if I take broad overview of everything, I see those at least the 300 basis point as you called it 3% of sizing.

Fredric Stahl – UBS

Okay. And next, if I could ask you two questions please. First question regarding the new target to grow organically at least as much as your competitors. You told us about the sort of focus of the organizational change being to capture more growth. Another fact that you have a target to grow at least in line with your competitors, does that means that you just sort of being conservative at the initial stage and be more upside for later or doesn’t mean that you expect competitors to do exactly the same. Because logically, you should be able to see even more topline expansion if that’s the key driver for improvement. Second question, if I give you that straight away Volvo has about $27 billion worth of book value of real estate is that an area looking at the organizational changes you presented you would consider not necessarily having to own everything?

Olof Persson

Okay. I’ll start with the first question. I think, it says equal or higher okay, and says the target and to me is stand equal the low end and higher, it has no roof it. And I think it is very important to make sure to me it’s the top line growth, it’s extremely important to make sure that we get all the benefits and synergies that we need to have both from a production system point of view but also from leverage on the investments we have done previously in new brands and making sure we get full investments of that. But being if we are successful with this of course you can call it conservative whatever, but at least we should be on par with the growth and this will again coming into this expression that we’re using then over time, because as I said we had a on the sea side we had a very quick response because we have the SDLG, we had a very good platform we did an extremely quick work on expanding that your brand starting with escalators and internationally. That was a specific case you could do that quickly. Otherwise take much longer time and then we’ll work itself over time.

On the real estate, I don’t know Michael if you would like to but I can give you a very, very short answer there is no plans to do any changes of that. We have a footprint of real estate that we have today and I don’t know if I want to give a little bit more flavor to that.

Unidentified Company Speaker

Yeah, I mean of course we have a real estate policy exercised at, if it is strategic real estate that we are going to be in for considerable point of time, that is something we own. Then we are renting if it’s more of a temperature nature for couple of years or if it’s more pure office sales reps office. And I mean, that’s something we’re going through over time, but I mean the number you mentioned, absolute my (indiscernible) there is of course our factories, and the sites here in Sweden for it’s own, foundries and so on. So, if not real estate normally that is worth more than or what it means that we are sitting in, so it’s not like an ordinary real estate company of course. But I mean it’s something evaluating all the time here.

Fredric Stahl – UBS

Thank you.

Unidentified Analyst

(indiscernible) I just have one question, you didn’t mention that much details about arrowing your financial targets. And I also hinted, you’d touch upon this at the capital marketing. I was wondering if you could share some light on how we should look at on arrow, bench market and profitability and growth going forward. Thanks.

Unidentified Company Speaker

I think, as I said on the quarter three result, I mean there just because it’s the new CEO, there has been a lot of change, but then in that respect this hasn’t been any change. We are now and I think it’s important we have sold of the service businesses, we closed on, we sold off the US part.

Now I think Volvo is participating very well in different programs and focusing now on their core activities. What they need to focus now is to make sure, we get productivity up in running to make sure that all the investments that we have done in programs are paying off and also doing whatever they can to mitigate the extreme headwinds that they have on the dollar rates. So, this work is ongoing as we speak now. And they are together with Penta buses then placed in the business area, we all can call some as the head and they are going to continue to focus on that and making sure we’re driving those issues going forward.

Unidentified Company Speaker

Okay. We have one more question.

Unidentified Analyst

Hi good morning, (indiscernible) William Blair, you discussed SDLG in major markets. Have you avoided cannibalizing your legacy Volvo sales, and the profitability vis-à-vis to business units. And also you made bold acquisitions is the past outside of construction, but you can see in CV’s and mining or anything else for example?

Unidentified Company Speaker

On the, how we avoid cannibalization, was that your question? Well, that is exactly what brand positioning is all about and we did an extensive work on that in order to make sure that we get the features, the costs and the solution correct in order to make sure that we didn’t cannibalize. And as you see on the page, you will always have a little bit of cannibalization, as long as that is rather limited, I don’t mind, I think that can sort of give a little bit of the trigger, but the big showing must be outside.

And I must say, the interesting things in Brazil for instance we did this and we were spot on. We had above 90% of the customers buying SDLG has never bought a Volvo. I don’t know if they have ever been to a Volvo dealer, we don’t truck that but at least they have never bought a Volvo before. So, there I think we did the right spot and this kind of exercises we need to continue doing as we go.

When it comes to acquisition, I think the whole sort of message about the presentation that I did was very much of the organic growth run, and showing the potentials that you actually can buy doing the things that we have done and the things that we’re going to do, actually push a lot of organic growth. We decise that we have, if you are number three as we are in CE you can do a lot of things.

Having said that of course I am paid for and Pat Olney is paid for, and everyone in Volvo Group is paid for to always keep an eye on what’s going on in the industry. We have done that before we are doing today and we will do that tomorrow as well. But the main point and the main focus is exactly this pushing everything we can to make sure that we get as much out of organic growth, utilizing the full potential of a strong business portfolio.

Unidentified Analyst

And the profitability of SDLG is comparable with your legacy Volvo?

Unidentified Company Speaker

We don’t specify that, but we usually say that if you look at the profitability of CE and you look at the size of the Chinese markets, and then you look at profitability of CE you have to conclude that there is no way that we’re going to have an anchor. We cannot show those numbers by having an anchor dragging. So, of course SDLG is profit, we don’t specified those numbers or exactly how much this.

Unidentified Analyst

And a question on financial services, we have a situation now in Europe where in parts of Europe banks are going be the leveraging and pulling back from I guess truck financing as well. What’s your view on how financial services should take? What’s your view on financial services, actions and with regards to that market share opportunity when the banks pull back?

Olof Persson

As a captive finance company, I think VFS has done a great job in actually mitigating what is the most important thing and that is making sure that the market shares you’re taking or not taking is dependent on the risk structure that you have. So you make sure that you have and I must say that, the more I understand about VFS and the more work them. We have in VFS some extremely good risk mentality, but on the same time also good view ongoing that’s all. It all depends and you can also give casual number on that.

I think what is important for a captive finance company is to be there when our customer needs it to making sure it supports the business, but supporting the right business in order to make sure we don’t get increase our risk level on the balance sheet which can easily be done and there we have all the process in place. But it’s also a matter and that’s developing new ways so actually developing products for the VFS market and looking at different aspects of getting financing not only everything from our own balance sheet, but also utilizing dual brand sourcing also there in terms of the VFS making sure that we get the financing ready for our customer but not necessarily always looking at a traditional way which then means that in different countries you need to develop the business in different way. So there are different aspects to the VFS, but again the balancing will be to grow, but making sure that you do that with all the risks under control. That trigger some questions obviously. Sorry, sorry my fault. Please.

Unidentified Analyst

(indiscernible) a question on this new organization often its important when you make a big change that you have some success in the beginning, so everyone feel just comfortable and they follow suit. Do you see the biggest risk to this big change that next year is going to be perhaps worse than your market outlook for Europe for example and that you need to go into more of a cost cutting mode and that change over sort of loose pace or what’s the greatest threats you see to this, you’re thinking?

Olof Persson

I think to be quite honest the ups and downs in the market, I don’t see is the major threat, because I have been doing a lot of reorganizations in the past sometimes we’re in good time, sometimes we’re in bad times when we do see worse of all times. And the issue is not that, the issue is that you manage to get the communication out to people everyone understand why we’re doing it. And that you have to do very rapidly, you have to make sure that is no discussion out there, that say’s why are we are doing, we don’t understand why. Then it’s a different thing if would read or not, but at least everyone is understand why and there I must say, we have got a great acceptance in understanding the way and get a understanding on that yes, this is the next logical step in order to do what I just described here. So that phase we’re going through right now, and doing a lot of communication and traveling around because so far this is very much sort of coming back to me with all the presentations I’m doing. And we are using all kinds of modern tools in social media, so I did a chat yesterday for instance we haven’t got into tweet yet, but you know all these are getting out, getting answering the questions. That’s much more than ups and downs into business actually. So far so good.

Unidentified Analyst

Thank you.

Olof Persson

I think that was a couple before…

Unidentified Analyst

And then move from (indiscernible) question please first, please to follow up to the previous question. I guess that is simplified structure that also means increased responsibility for the key people. Do you see this as a risk? And secondly, as you said previously, you had a certain number of acquisition in the past, now that you’re focused on all getting goals, what are the implication in terms of CapEx and if this does not change the big picture what could this mean in terms of dividend policy.

Olof Persson

I think the first one in terms of responsibility for the persons because of the size of their responsibility. I don’t think that’s an issue it’s all a matter of, to me it’s very important that someone whose is in charge of something needs to be fully responsible and also be able to actually correct things and making sure that we can drives the whole is to say having the six strings on the guitar when you play a guitar, that’s very important and this organization gives every manage of that. So, I don’t think that’s a risk as more I’d say an opportunity. What we have to do in the truck (EMT) that the management team will truck is of course to be extremely coherent and talking the same language. And making sure that we get all the issues on the table and take decisions clearly communicate and then making sure we implement, that I’m really looking forward for and the team that I have put the place is a team definitely second to none when it comes to experience, when it comes to knowledge and also team spirit. So, we somewhat say we’re little bit like raising horses. we’re starting to wait for the 1st of January as all can get going now. But we have to focus on the business for the fourth quarter.

in terms of the CapEx, I don’t really you mean by focus on the growth that you would have an increase in CapEx, now I don’t think necessary pair definition, I mean, if you look what we’re looking at the investments that we have done is enormous in the brands, we have done a lot of investments in our refractory footprints especially running up to the 2009 prices and what we have done is and we have continue to do lot of investments in R&D and technology. So, we have the bit some pieces and I don’t think necessarily this has to do anything to do with higher or lower CapEx, that’s more of the decision we need to take on business basis, but has nothing to do with the reorganization pursue. We do have and we have that a lot of investments in the past as well. Okay, anyone here?

Unidentified Analyst

(indiscernible). Moving from a metrics organization to functional organization looking at the cost side and same dish on the revenue side, the three percentage points of increasing profitability, I read efficiency, execution, speed sourcing in the cost side is through an element of reducing employees here or is it just this more efficiency things we should look at.

Olof Persson

I think that the prime reason is in the prime result we’ll not be that than if as I said if we find overlap or if we find process is that at time exactly do same thing, we can merge into one that we have to look at it. But that is something that we will now start to review and in order to do that in a proper way and in an analytic and plan way, we need to get a whole sort of orientation in place and that we go through that. But to me doing if we have that kind of dual work that is cost efficiency that is not where you should be and then we need to address it and that we will do overtime.

Unidentified Analyst

Second question, should we be expecting any cost program for this side. What you should be expecting starting for implementing business organization as we’ll be this on a quarterly basis?

Olof Persson

Again, that’s too early to say, it’s – that is part of that what we’ll done can going forward because that is depending on also where is business is going. We have our business plan right now and we see that unfolding the way we discussed two weeks ago. But then we need to get everything in present, a little bit again coming back to I will do the signal – my methodology is little bit the same as I build the platform of actually coming up with the organization, the systematic making sure that we have the sounds foundation. Going into the implementation I will continue doing the same thing and now rush things true unless I really see that we can move very quickly. Yes, please

Nico Dil – JPMorgan

Nico Dil, JPMorgan, two follow-up questions please, first of all, about a year ago you announced that you like to convert 85,000 engines to your own platform in India. So, both looking at miss some details sort of UD trucks as well as some of the construction engines wondering where that stands and when you intend to complete that new platform, number two, if I look at the number of employees for just a sales basis, you about 25% of your employees, but 23% of your assets being based here in Sweden versus only 5% of your sales being based here in Sweden. How do you intent to look at that going forward at the same five years time? How do we expect to see the distribution of those assets and sales assets (indiscernible)?

Olof Persson

I think on your first question it was what I point out on the slide that would in the engine factory, I think it has 2012 right, 2013 – 13 sorry, 2013 so, that’s – that what we talked about that. When it comes to distribution of employees and the proportion of, we have to look at it in two ways if you go back to five years you will see a completely different picture what would even be to more have your sort of versus the western European compared to Asia. So if you look at where your growth has been is of course in South America and Asia, will the growth continue there? Well that looks like we have growth markets and low markets and therefore of course we need to look at that. What that mean, that necessarily then have a negative impact on the Swedish or the Western European side. It’s impossible to say because that’s too many variables to call that question right off. But I also think it’s important to notice that in Sweden and in Western Europe we have a huge asset in our research and development both on the engine platform side and on technology on the vehicle side which is something we have build up over decades and is of course a very important part of the cluster where we’re now looking forward in terms of technology.

Mikael Bratt – Chief Financial Officer

Very good. Then I think its 21 pass, so I miss with a minute there. I apologize for that. Can I do a clarification nothing I think on the slides you will receive it will say 2012 that we’ll start engine production in India for the medium duty and actually it’s true. We’ll have some long book production at the end of the year. But it’s really 2013 you will see any volumes coming into the products and with that if we don’t’ have anymore questions then I think we say thank you for today.

Olof Persson – Chief Executive Officer

Thank you very much, very nice of you to come. See you next time.

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