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Volvo boosted from all quarters

5th February 1983
Page 76
Page 76, 5th February 1983 — Volvo boosted from all quarters
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Which of the following most accurately describes the problem?

VOLVO EXECUTIVES must have been rubbing their hands with glee at remarks made by Leyland Group managing director, Ron Hancock, at Leyland Trucks' distributor convention in London last month.

Quite justifiably, he drew attention to Leyland's role as an exporter and contributor to Britain's balance of payments. In 1982, he told the dealers, Leyland Vehicles imports were just £4m but exports were nearly £170m. He was properly proud of this.

Then he knocked Volvo for its claim to be a British company. He produced figures to show that 2,900 Volvos were in fact imported while 900 were assembled in Scotland.

Whether his figures were correct or not isn't relevant. Knocking Volvo isn't the answer to Leyland's problems. Who gains? — Volvo! To people outside the Leyland Group it smacks of sour grapes and doesn't help Leyland one bit. The efforts of the present management to make Leyland viable have to be admired; the product is better than it has been in years and the morale at Leyland is obviously much improved. The Group is going in the right direction. So knocking other niakers is a reversion to the Leyland of the 1970s.

I look forward to the day when Leyland gets the sort of findings as those given recently by a London firm of stockbrokers, W. Greenwell & Co in a report on, dare it be said, Volvo.

Whether by accident or design, the report appeared at the same time that Volvo announced record sales of heavy trucks for 1982; vehicles delivered totalled 35,000 of which 4,300 were US-built White models. This compared with 29,800 trucks delivered in 1981, of which 1,300 were Whites.

In its announcement, Volvo revealed that in the first nine months of 1982, Volvo's truck business showed a turnover of 7,381 million kroner (£738m), 37 per cent more than in the corresponding period of 1981 and more importantly, "profitability is still good," said the company.

Volvo also reported that it had improved its market share in Europe in the heavy tractive unit class to about 15.5 per cent during the first ten months of 1982, an increase of one per cent. The medium heavy class improved to 5.5 per cent during the same period. Sales were particularly successful in France, Great Britain and Sweden.

The Greenwell report covered the activities of the whole of the Volvo Group up to the middle of 1982, and it indicated that although the most significant move of Volvo in the last few years had been to turn the car operation from a loss to a profit, the Volvo Trucks' subsidiary was making reasonably satisfactory profits despite world recession and could be expected to achieve good growth in the future based on continuing product/marketing developments.

Greenwell commented that the expansion policy for heavy trucks in the 1970s had been successful — witness, it said, the increase in output from 21,000 in 1974 to around 30,000 in 1980/81 and the rising market shares expecially in Europe and the Middle East.

Apart from its tractive unit expansion, Volvo as a group has been pursuing a policy of diversification. The big move here was the acquisition of Beijerinvest, which Greenwell says seems to have been motivated largely by Volvo's wish to become increasingly involved in the energy sector — hence the attractiveness of the Beijer subsidiary, Scandinavia Trading Company.

"STC's prospects in the oil trading sector look very good and significant returns should soon begin to accrue from its oil/gas prospecting activities," said Greenwell.

But it then sounded a note of caution by saying that the STC contribution to Volvo Group profits was unlikely ever to assume major proportions especially with the Volvo stake now reduced to 61 per cent.

Consequently, while STC was expected to provide useful support to Volvo's international operations through its experience and know-how of commodity trading, the main impetus to Volvo's future energy developments would almost certainly come from the association between Volvo Energy and the Hamilton Group of Companies.

The final comment of Greenwell is worth quoting because it reveals that diversification does not perhaps always give the desired result — at least in the view of the commentator.

It reads: "Volvo's earlier objective of making a full acquisition of 'an operating company with good reserves of oil and gas' has not been achieved. Consequently, a large cash flow from the energy sector will not materialise as quickly as had been hoped. The partnership with Hamilton is nevertheless a decisive move that may well satisfy Volvo's objectives over a somewhat extended time span."

• by George Malcolm

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Locations: London

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