Volvo CE President Lindgren: “We are here to stay, and we are here to grow!”

Transcript – Webcast Göran Lindgren, President Volvo Construction Equipment North America 12 February 2010

The time has come for us to give you an official and conclusive perspective on today’s market, where Volvo Construction Equipment North America – the company you helped build – is going; and how we will continue to build the future of this company.

We are in the middle of the greatest recession since the thirties and our industry has been hit hard. Today’s economic climate has badly affected every single heavy equipment manufacturer in the industry. We are in the company of thousands of organizations in the US and Canada that had to resize their businesses to match reduced market volumes.

There are signs of recovery, but we believe it will be slower than we had initially anticipated. But we have no doubt that Volvo Construction Equipment North America will remain a major force in its market, serving customers as it has for decades. Reports to the contrary are absolutely not true!

While dramatic and personally very sad, our recent actions in response to the market decline have been necessary for our future. The loss of friends and colleagues through staff reduction has been difficult for all of us, but just as other companies did, we too had to adjust our organization in response to market forecasts that indicated that we were oversized.

At the same time, we consolidated our industrial footprint: manufacturing of motor graders was moved to our newly acquired Shippensburg facility in Pennsylvania after the closure of the Goderich plant in Canada. The production of motor grader cabs currently manufactured in Asheville will also move to Shippensburg.

While large investments had taken place in the Asheville production facility when the market was booming, the economics of today’s market simply could not sustain the production capacity at the Asheville plant. We have taken difficult decisions, and the objective now is to ensure that Volvo Construction Equipment in North America is a lean and industrially efficient organization. The consolidation of our manufacturing operations was a major factor in our new strategy and will help us achieve synergy, consistency and commonality in our products, leading to improved competitiveness.

23 acres were purchased to expand the Shippensburg campus. The more than 200,000 square-foot, 30 MUSD factory expansion is on track. The existing factory is being redesigned and manufacturing processes are being improved.

The Volvo Production System is actively being deployed to support and meet the high standards of Volvo’s manufacturing operations, using LEAN, Six Sigma and other tools and processes. Shippensburg employees are being trained in Operational Development, so we can further improve quality and reduce waste.

All these investments in Volvo Construction Equipment’s Shippensburg plant will enable us to respond quicker to customer demands.

We are at a great advantage, also, as a major member of Volvo Group North America, sharing markets and customers, and building the value of all of our companies.

The more than 10,000-strong workforce contributed to Volvo Group sales in 2009 of $29.5 billion. Together, these companies (Volvo Trucks, Mack Trucks, Volvo Financial Services, Renault Trucks, Volvo Aero, Volvo Penta, Volvo Bus and Volvo Construction Equipment) are a tremendous business force in North America.

A very distinct benefit of the Volvo Group – in addition to ownership of one of the strongest quality brand names in the world – is the participation in, and sharing of, fuel- efficient engine technology from an in-house development base, resulting in major synergies (Volvo is the world’s largest manufacturer of Tier 3 compliant heavy duty diesel engines).

And Volvo Group’s investments and work on Tier 4 compliant engines are an example of our dedication to success in the North American market. Also, the global nature of our construction equipment business gives us a singular strength as we share state-of- the-art technology, product development and manufacturing capabilities with customers around the globe. Everything we do has the power of the Volvo Group behind it.

We have many opportunities that will help us grow our business. You can be sure that Volvo will overcome the adversities the whole industry faces today and that our objectives will be accomplished.

Together with the more than 15,000 employees who work in our distribution network, we will be an important part of the market’s upturn. And we will improve our position in the marketplace.

We are here to stay, and we are here to grow!

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