Volvo Cars is doubling its investment in its plant in the USA. According to reports in South Carolina, Volvo is increasing its investment from USD 500 million to USD 1 billion. It will also more than double its workforce, from 2,000 to 4,500.
According to the original plans, the plant is to manufacture the S60. The capacity is said to be 100,000 although to begin with 60,000 cars will be built per year, of which 60% will be exported worldwide, except China.
AB Volvo’s shares gained over 7% on Friday after the vehicle giant presented a new aggressive target for its operating margin. The operating margins are to be ten per cent over an economic cycle.
When asked whether this is a realistic goal, head of investor relations, Christer Johansson, said, “This is a long-term goal and not a vision. At our capital market day earlier this year we presented a number of priority areas for gradually improving profitability.”
At a first glance, the Volvo group’s interim report looked set to ignite a stock market rally; the group posted a 22% per cent increase in orders and an operating profit of SKr 8,540 million in the second quarter and raised its forecast for the North American truck market and the all-important Chinese construction equipment market.
But, when the Stockholm stock exchange opened the group’s share price fell and at close was down 3.4%. The main reason for this was that the Trucks division, which is Volvo’s largest business area, reported an operating margin of 9.6% for the quarter, which was 1.1 percentage points lower than expected. The margin was weighed down by delivery disturbances, mainly in Europe, and problems in the supplier chain.
Volvo hopes to resolve the problem over the summer and expects the impact of the disturbances to be lower in the third quarter.
Volvo and Scania may be competitors but in order to develop the manufacture of heavy powertrains they are to collaborate in a new research lab.
The new research centre at the Royal Institute of Technology (KTH) in Stockholm goes under the name of Powertrain Manufacturing for Heavy Vehicles Application Lab and is to be inaugurated on Tuesday. Scania and Volvo are industrial partners investing around SKr 10 million each plus a large number of engineering hours.
Volvo-owned Mack Defense has received two major orders for 1,500 trucks from the Canadian Armed Forces. The deal is worth SKr 5 billion.
Communication director for Volvo Group Governmental Sales Grégoire Verdon, says, “One of the pillars in our strategy is to develop business in other parts of the world… Canada is an example that our strategy is giving results.”
This is first time Volvo has succeeded in selling a European truck to a defence customer in North America. “This is a good opportunity to show our group’s abilities,” says Grégoire Verdon.
AB Volvo’s Q1 report carried a number of millstones: turnover fell by 4 percent, currency effects cost almost SKr 400 million in turnover, and truck production in North America was cut by a third.
Nevertheless operating turnover amounted to SKr 4.5 billion and the operating margin was 6.2% adjusted for capital gains and last year’s restructuring costs. Within sales, buses and Penta shone with 14% and 5% respective increases in organic turnover.
For the first time former Scania boss Martin Lundstedt revealed that service and reserve parts contributed 23% to the company’s turnover.
Volvo Cars has tripled profits to SKr 6.6 billion, readying the company to go out onto the bond market. For the second year in a row Volvo broke its sales record with over 503,000 cars sold, bringing earnings to over SKr 163 billion, 19% compared to the previous year.
The majority of operating profits came in during the first half of the year, around SKr 5 billion, due to volumes and also to Volvo selling many of the XC90 and XC60 models with high margins.