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Volvo Construction Equipment
Road Machinery
Pat Olney
Volvo Road Machinery
• Volvo Road Machinery Business
Line
• Products, market opportunities
and industrial set up
• Integration – updates
• Synergy opportunities
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
2
Land 3
clearing The Road Building
Excavating
crushing
Process
Utilities
Base
construction
Paving
Asphalt
compaction
Road
maintenance
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
3
Comprehensive customer focused product portfolio
Pavers Soil and asphalt compactors
Blaw Knox
ABG
Milling machines
Graders
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
4
Growing market for road machinery
• Building of new road systems in China, India, Eastern Europe and other
emerging markets
• Increasing requirements for infrastructure investments in Europe and US
Russia India China
• Increase public highway • $320B of expected • 2005-2010 planned Road
system by 10% to 670,000 km Infrastructure investment Development spending of
and double 4-lane roads to spending 150B RMB per year
8,000 km by 2010
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
5
Globally balanced and flexible Hameln, Germany
Hameln, Germany
industrial footprint
Goderich, Canada
Goderich, Canada
Shippensburg/Letterkenny, USA
Shippensburg/Letterkenny, USA
Pederneiras, Brazil
Pederneiras, Brazil
Bangalore, India Linyi, China
Bangalore, India Linyi, China
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
6
Integration status
• Acquisition closed 30 April 2007 except India, 4 May 2007
• Synergy potential confirmed and under implementation:
– Wuxi, China, manufacturing relocated to LinYi
– Structural integration of motor grader product line into
Road Machinery business line completed
– Purchasing & Supply Management opportunities identified
• Sales integration well underway
• Engine roadmap drafted
• Re-branding work nearing completion
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
7
Purchasing & Supply Management
7.3% of total RMBL supplier base represent 80% of the total
spend, leaving 92.7% with 20% of the total spend.
RMBL Total Spend
• Significant synergy
opportunity with Volvo
• 20% of spending with
Spend per supplier
Volvo common vendors –
negotiations underway to
harmonize on best terms
• Major commodity cases
under review for non-
common suppliers. Large
opportunities already
identified
Number of suppliers
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
8
Distribution Channels Integration
Level of integration as a % of volume
Placeholder • International
Awaiting figures for Europe, NA and Asia • Integration complete by year
end 2008
Russia, Belarus & Ukraine
• Europe
100%
North America Europe • Transitioned 52%
Turkey & Central Asia • In process 14%
60% 52%
100% • Integration complete by year
Asia end 2008
Middle East
40% • North America
40%
• Integration complete by year
100% end 2008
90%
Africa • Asia
Latin America • Five common dealers and
seven new Volvo dealers in
Oceania Region Asia represent 40%
of road business
• Synergy potential with
Lingong will be reviewed
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
9
Revenue growth opportunities
• Migration to Volvo
European channels
• Compelling commercial offer to dealers
• Volvo CE Market share growth
• Leverage existing Key accounts
• Global
• Strong market fundamentals
• Leverage Volvo Distribution
• Leverage Volvo technology and in Asia
knowledge for product expansion
• Volvo Financial Services
• Latin America expansion
Revenue growth – 2/3 of business case
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
10
Engine roadmap
• Number of ratings to be reduced by up to 50% by Tier IV, while
fulfilling market requirements
• From 6 suppliers to 2
Current Vendors
Current
Ratings
Future
Ratings
Future Vendors
External partner Volvo
Total Power Range
Improved R&D leverage and captive engine business
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
11
Branding plan status
• Facilities external re-branding complete
• First Volvo branded machines off
production line by year-end 2007
• First Volvo branded equipment pre-view
November 14, EXCON - India
• North American “unveiling” of Volvo
branded offering planned for ConExpo
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
12
Volvo Financial Services
• Revised estimates for North America of
VFS synergy potential exceed original
global target.
• Progress on achieving retail finance
penetration ahead of schedule in North
America
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
13
Further areas for synergies
• Industrial optimization
– Core competence leverage with Volvo
– Volvo Production system rollout commencing
– Leverage Volvo Industrial Footprint
• Knowledge and technology transfer
– Powertrain
– Electronics and software
– Noise and vibration
– Cab technology
• Non-Automotive Purchasing
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
14
Summary
• Global market leadership position
• Outstanding market growth opportunities
• Comprehensive customer focused product
portfolio
• Strategic and operational initiatives in place
to continue to drive performance
• The Volvo Way
Volvo Construction Equipment Capital Market Day
New York – 7 November 2007
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