Volvo Group - Nine Months Ended Sept 30th 2009

Highlights of comments on the overall truck market by the AB Volvo President and Chief Executive Officer, Leif Johansson…

Stabilisation in the markets
The demand situation in Europe continued to stabilise with a more positive basic tone, except in certain markets, such as Russia and Spain. We see increased activities among our customers and a slight improvement in the use of their trucks, which is positive for our important aftermarket business. The sales trend for spare parts and service was weak during the spring, but is now gradually improving. We also see that demand for used trucks is steadily improving in Europe, which indicates that the market has bottomed out and that our customers’ businesses are moving in the right direction.

We are approaching January 1st 2010 when new emissions regulations will be put in place in North America and when we will introduce trucks with virtually zero emissions of nitrogen oxide and particulates, which is very positive for the environment. The new technology will lead to price increases for the trucks, which to date has not resulted in any notable pre-buy effects. Price increases may, however, have a delaying impact on the recovery of demand in 2010.

We have made strategic acquisitions in Asia in recent years and have worked hard to establish a structure that will help generate favourable profitability in the region. In combination with the recovery in demand that we are witnessing in many markets, not least in China and India, this work is paying off. Signs of improvements in demand for trucks can also be seen in Japan, although from exceptionally low levels.

In addition, demand in South America has remained relatively favourable. Brazil, in particular, has not at all been affected by the financial crisis in the same way as large parts of the rest of the world.

Increased order intake for trucks
The net order intake for trucks rose for the third consecutive quarter, increasing 20% compared with the second quarter. In terms of market outlook, we maintain our assessment that the total European market for heavy trucks will be at least halved in 2009 compared with 2008. Furthermore, we stick to our assessment that the North American heavy-duty truck market will decline by 30-40% in 2009.

Continued hard work
Although we see that the markets have stabilised, we are not relying on our profitability being boosted by a substantial recovery in sales of new products. We remain far below the long-term trend line for sales of new trucks, and will therefore continue to adjust our costs to current demand. We will also continue our work to improve efficiency throughout the Group.

Our liquidity remains favourable and we continue to focus strongly on improving profitability and on creating positive cash flows, for example, by continuing to reduce our inventories.

We are well positioned for the new emission regulations that will come into effect over the next few years, with products and services at the absolute forefront. For this reason, I remain highly confident that with hard and dedicated work we will be able to strengthen our position in the markets globally.

The last year has been very challenging for everyone in the Group. I am therefore very pleased to see that our employee satisfaction index this fall scored the second highest ever. I would like to take the opportunity to thank everyone for the professionalism that they demonstrate in these tough times.