VOLVOFINANCIAL SERVICES

VOLVO FINANCIAL SERVICES
company presentation
FINANCIAL SERVICES FOR TOMORROW’S
TRANSPORT MARKET
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In 2001, Volvo joined several of its existing business units and created Volvo Financial
Services (VFS), a new Business Area within the Volvo group. The operations of VFS include
customer finance, insurance, real estate and treasury activities. Our vision is to be valued as
a world-class provider of financial and related services for the Group’s external and internal
customers.
We are here to support Volvo over the long haul. Unlike other finance companies or
banks, our focus is exclusively on the brands which make up the Volvo Group. So we form a
vital link with our sister companies in marketing their products, both new and used. We participate in new product launches as well as sales campaigns. We know what our customers’
businesses are really like, and we have in-depth knowledge of the products they use daily.
Our customers rely on us for favorable financing as well as insurance and maintenance
contracts. We strive to find creative and integrated solutions, such as contract hire agreements in England, Consorcios (pooled financing) in Brazil, or fuel tax and mileage reporting
in the U.S. We have the ability to stay in constant touch with Volvo’s customers, long after
they have purchased a Volvo product.
One of our main challenges is to strike a proper balance between risk management on
the one hand, and profitability on the other hand. Simply put, the deals we support must be
prudently underwritten, and they must be competitively priced. We believe that our intimate
knowledge of the Volvo Group’s products help us to achieve the right balance and add value
to the whole enterprise.
In addition, VFS companies purchase insurance for the Group, and yet others manage
Volvo’s Gothenburg-based manufacturing and office facilities. Volvo Treasury deserves special mention as a well-established Volvo enterprise. It works closely with the financial world
and, combined with our own financial strength, enables us to develop competitive financial
solutions.
In short, VFS is becoming a full service provider, expanding its financing to all of the
Volvo brands and business areas. As a diversified financial services company, VFS is dedicated to enhancing the competitiveness of Volvo and its dealers, thereby increasing shareholder value.
Sal Mauro
President & CEO
VOLVO FINANCIAL SERVICES IN BRIEF
Volvo Financial Services was formed as a separate
Business Area in 2001. The units that make up
the company were earlier separate centers of
expertise within the Volvo Group. By bringing
them together in a single Business Area, Volvo
formed a strong and focused supplier of transport-related financial services.
Volvo Financial Services provides services in five
main areas:
• Customer financing
• Insurance
• Treasury (in-house bank)
• Real estate management
• Other services
Customer financing, insurance and other services
are connected closely with Volvo products and are
directed primarily toward “external” customers.
The real estate and treasury functions are of
greater importance for customers within the
Volvo Group.
Insurance, treasury and real estate management services are provided by separate, dedicated
organizations. Customer financing is divided into
three large geographical areas, each comprising
of companies that focus on a particular country
or market. (See below.)
Volvo Financial Services
Customer Finance
The Americas
Customer Finance
Europe
Customer Finance
International
Treasury
Insurance
Real Estate
(Danafjord)
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GROWING DEMAND FOR OUR SERVICES
Demand for financial services is increasing steadily
among Volvo’s customers.
Today our customers operate in markets characterized by rapid change. Decisions on investments often have to be made quickly. In addition,
customers demand financial solutions that are
adapted to their business.
Customers today want to use a full-service
supplier to gain access to all the services related
to their products. Everything that can be associated
with a product – insurance, service and financing,
for example – should be available from a single
supplier in order to satisfy customers’ requirements.
Simplicity and “customer-adaptability” are key
concepts in this connection.
In short, the portfolio of services offered by
Volvo Financial Services can significantly influence
the customers’ purchasing decision.
Our customers’ desire to have close control over
costs is another important driving force. More and
more vehicle owners want to know the exact perkilometer or mile costs of each vehicle. Volvo
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Financial Services adds value and creates profitability by bundling a customer’s lease agreement,
maintenance contract and insurance coverage,
for example. If the total costs can be included in
a single package from the same supplier, it is
easier for the customer to control costs.
Transport industries are generally highly cyclical, with strong fluctuations in demand. Solid
financing underlying a company’s fixed assets –
with solutions that benefit all parties – thus become
an extra source of security.
Customers will turn to a financial partner in
whom they have confidence. It is therefore absolutely necessary that Volvo offers well-developed
financial services with the same high quality as
its products.
FIVE BUILDING BLOCKS IN OUR OPERATIONS
Financial services are a significant part of Volvo’s
strategy for becoming the world’s leading provider
of commercial transport solutions. Volvo has been
active in the field of financial services since 1959.
When Volvo Financial Services (VFS) was formed as
a separate Business Area in 2001, a new, unified
structure for these services was created. VFS represents Volvo’s response to the market’ growing
need for customer-focused, integrated financial
solutions. As a diversified financial services company, VFS is dedicated to enhancing the competitiveness of Volvo and its dealers, thereby increasing shareholder value. The company is active
in the following five areas:
Customer financing
VFS offers Volvo’s customers a variety of services
in this area. This applies to buyers of trucks, construction equipment, buses and engines for marine
and industrial applications, as well as aircraft engines and spare parts. VFS is active in markets
where over 80% of Volvo’s products are sold.
Customer financing involves installment contracts in which the product serves as collateral,
as well as financial leasing and operational leasing. Service and maintenance contracts are also
offered – separately or combined with financing
services – in most markets. It also includes
inventory and real estate financing for Volvo’s
dealers.
The greater part of the customer financing is
provided in the Group’s Truck Business Areas,
which contain the Volvo, Renault and Mack makes.
These three Business Areas account for approximately 80 percent of Volvo Financial Services’
financing. However, products from Volvo Construction Equipment, Volvo Buses, Volvo Aero and
Volvo Penta are increasingly being financed by
VFS. The major markets of North America and
Western Europe account for nearly 90 percent of
all customer financing.
Insurance
In this area, VFS Insurance offers a full complement
of products including liability, physical damage
insurance, GAP and life coverage for Volvo customers and their vehicles.
Here, too, truck volume accounts for the greater part of sales. In the U.S., VFS Insurance has a
successful cooperation with Volvo Action Service
(VAS), which is Volvo’s global highway-assistance
service for truck drivers. When an unscheduled
stop occurs due to a claim, the driver calls VAS
to promptly schedule repairs at the nearest
action service workshop. The combination of VAS
and insurance service is highly successful, and the
concept is currently being introduced in several
markets in Europe.
In addition to insuring the risks inherent in the
transportation industry, VFS Insurance also insures certain risks of the Volvo Group. Utilizing
reinsurance companies located in Luxembourg,
Sweden and Ireland, VFS Insurance minimizes
the liability, commercial property and business
interruption risks associated with the operations
of a multinational manufacturing concern. VFS Insurance strives to offer Group companies consistent, specialized and efficient access to alternative risk markets.
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Treasury (in-house bank)
Other services
Volvo Treasury serves as Volvo’s in-house bank.
As an integrated business partner, it coordinates
the Group’s internal and external largescale
financial transactions. These include management of the interest bearing assets and liabilities,
global funding and foreign exchange operations,
as well as cash management and pooling activities. The unit has well-developed relations with
banks and other financial institutions. The business concept is that Volvo Treasury – by providing transaction services, optimizing interest
rates, securing funding and managing financial
risks – should contribute to the development of
the Group in the financial markets and thereby
enhance profitability.
Road Manager Financial Services specializes in
compliance services for the North American truck
industry. It offers of services such as fuel tax and
mileage reporting, permitting and licensing. The
goal is to assist truck companies in complying
with government regulations, thereby helping
them to be successful in an ever-changing
industry.
Volvo Commercial Credit Corp. also offers a
versatile, new purchasing card for small businesses
and fleet companies. The card, which is offered in
conjunction with MasterCard® International
Incorporated, has been specially designed to
serve the purchasing, management and reporting
needs of this important business segment. The
card makes it possible to track and manage costs
incurred by a customer – for fuel, spare parts,
lodging and meals, for example – in a single statement. The card also provides a host of features
comparable to the best corporate card programs.
Fortos Financial Consulting serves customers
both internal and external to the Volvo Group.
Fortos’ effective methods, tools and training support the client’s goals for long term improvement
of net income and cash flow through increased
awareness and competence.
Real estate
Danafjord AB is responsible for real estate management within Volvo Financial Services. The company
provides leases and adapts premises for companies in the Volvo Group, or for operations of
interest to Volvo. The greater part of the properties
operated and owned are commercial and are
located in the Göteborg region. Included is an
agreement with Ford to administer the real estate
of Volvo Car Corporation in Göteborg. Danafjord’s
key real estate management activities include
property maintenance, construction and infrastructure, with a commitment to quality, safety
and care for the environment.
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FINANCE COMPANIES
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The Americas Region
The Europe Region
The International Region
Treasury Centers
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■ Australia
■ Thailand
■ Volvo Finance International
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Brazil
Canada
Mexico
Peru
United States
VFS Headquarters
Austria
Belgium
Denmark
Finland
France
Germany
Italy
Netherlands
Norway
Poland
Spain
Sweden
Switzerland
United Kingdom
Brazil
Singapore
Sweden
United States
A COMPANY WITH A GLOBAL PRESENCE
The head office of Volvo Financial Services is
located in Montvale, New Jersey, in the United
States. VFS Insurance is also headquarted in
Montvale. In addition, there are 22 customer
finance companies, four Treasury Centers and
the head offices of the treasury and real estate
(Danafjord) operations in Göteborg, Sweden.
Total assets
SEK Bn
Net income
Dec. 2000
66.5
2000
Dec. 2001
73.5
2001
The finance companies generally operate in single
markets, except for Volvo Finance International,
which is active in Eastern Europe, Asia and other
markets. The finance companies are organized by
regions: The Americas Region, Europe Region
and International Region.
Employees at year-end
Market penetration, trucks
Retail volume
SEK Bn
1,028
Dec. 2000
1,223
2000
29%
2000
20.6
335
Dec. 2001
1,077
2001
30%
2001
22.6
SEK M
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TOGETHER WE ARE STRONG
Volvo is one of the world’s leading suppliers of commercial
transport solutions. The Group manufactures trucks, buses,
construction equipment, power systems for marine and
industrial use, as well as engines and engine components
for aircraft. Our product range also includes customeradapted total solutions for financing, leasing, insurance and
service, as well as traffic systems for major urban areas.
The shared strategic and financial strength of the Volvo
Group provides opportunities for aggressive initiatives, which
through acquisitions and cooperation open the door to both
a wider range of products and new markets for all product
areas. Coordination in research and development between
the companies provide other extensive opportunities. One
example is the Volvo Powertrain, the unit that develops and
produces diesel engines and transmissions for trucks,
buses and construction equipment, an integration that also
benefits Volvo Penta. Through coordination and joint development projects, the scope for what Volvo companies are
able to accomplish is constantly broadened. Allow us to
present the other business areas of the Volvo Group:
Mack Trucks is one of the largest manufacturers of
heavy-duty trucks in North America, with a market share of
14.6% (2001) in the US "Class 8" segment. In the vocational segment, Mack is the indisputable leader, with nearly
30% (2001) of the US conventional straight truck market,
and 70% (2001) of the US low cab-over-engine straight
truck market. Mack reinforced its leadership position in
the construction segment with the launch of its new
Granite™ series in 2001. The Mack CH model is a leader
in regional heavy distribution applications, and the Vision
by Mack™ tractor is designed for demanding long-haul
assignments. Mack vehicles are sold and serviced in more
than 45 countries worldwide.
Renault Trucks is one of Europe’s largest truck manufacturers. Its product range comprises everything from light
trucks for urban distribution, to heavy trucks for long-haul
operations and military vehicles. In 2001, Renault held
12.3% of the European market for heavy trucks (>16 tons)
and 11.9% for trucks of 6 to 16 tons. The heavy segment
includes the new Renault Magnum for long-haul transports,
which was introduced in 2001. Renault also offers a modern
selection of light and medium-weight trucks that correspond
to more than 40% of the company’s manufacturing.
Volvo Trucks is the world’s second largest manufacturer
of heavy trucks. Vehicles weighing more than 16 tons
account for about 90% of production. Volvo Trucks’ market
share for heavy trucks in 2001 was 14.5% in Western
Europe (>16 tons) and 10% in the US (>15 tons). During
2001 and 2002, the product program is being renewed
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extensively through the introduction of new Volvo FH
models for heavy long-haul transports and the new Volvo
FM models for regional transports and construction applications. Volvo Trucks’ products are marketed in more than
120 countries, with most sales in Europe, North and South
America, and Asia.
Volvo Buses is the world’s second largest manufacturer
of large buses and bus chassis. The product range consists
primarily of diesel-powered vehicles for city, intercity and
tourist operation. Volvo Buses is also Europe’s leading
manufacturer of natural-gas-powered buses. Operations
also comprise transit systems for major urban areas.
During the past year, the product range was substantially
renewed with the introduction of a new product platform
for intercity buses and tourist coaches.
Volvo Construction Equipment is one of the world’s
largest manufacturers of equipment for the construction
industry, with production on four continents and sales in
more than 100 countries. Volvo Construction Equipment’s
products are used for a number of different purposes, such
as civil engineering projects, extraction and recycling operations, and in the mining and forestry sectors. The product
range includes wheel loaders, excavators, motor graders
and articulated haulers, small wheel loaders and excavators
as well as compact wheel loaders, excavators and backhoe
loaders. In addition, the company will expand its customer
offer with a range of telehandlers and skidsteer loaders.
Volvo Penta is a world leading, global manufacturer of
engines and complete drive systems for marine and
industrial use. Development and manufacture is concentrated in Sweden and the US, while sales and service are
conducted worldwide through a strong network consisting
of more than 5,000 agents. Volvo Penta maintains operations within three different business segments, Marine
Leisure, Marine Commercial and Industrial.
Volvo Aero has broad operations within the aerospace
industry and is a world-leader in the development and
manufacture of certain strategically selected advanced
engine components. These components from Volvo Aero
are to be found in more than 80% of all larger commercial
aircraft. Volvo Aero Services (previously the AGES Group)
operates worldwide, selling aircraft engines and spare
parts for aircraft and aircraft engines. Maintenance, repairs,
spare parts and financial services form more than half of
Aero’s sales. Operations are characterized by innovative
business solutions in far-reaching cooperation with customers and partners.
25 Philips Parkway
Montvale, New Jersey 07645
USA
636-8002, 04.02. Engelska. Printed in Sweden.
Volvo Financial Services LLC