Pat Olney once said he gets nervous if he's in one country longer than a week. The Canadian-born Olney, for those who don't recognize the name, is the president of Volvo Construction Equipment, and if you take look at what Volvo CE is doing around the world, you'll understand why the man doesn't sit still for long.
To start, Volvo has implemented or will be implementing more than SEK 2 billion (more than U.S. $315 million) of investment in the “BRIC” markets. More than half of that investment is in China. Since opening a plant in Shanghai in 2003, Volvo CE has invested more than SEK 260 million (more than $40 million) in the development of that facility, and is currently investing even more to build a Volvo technical center for product development in China. The company has invested comparable quantities to build excavators for the Chinese market and and to build a components facility.
In Brazil, the company has a factory in Pederneiras, and last year announced it would spend SEK 65 million to produce excavators in Brazil, which went into production in the first quarter. Volvo CE is investing SEK 140 million to start production of excavators for the Indian market. Volvo is investing SEK 700 million into the Russian market, especially the expanding of the distribution network in that country.
The component facility in Eskilstuna, Sweden, recently underwent a SEK 1 billion facelift to extend the factory, install modern equipment and new production and assembly methods. The factory manufactures power trains – axles and transmissions – for Volvo CE, and now covers 65,000 square meters. The entire layout of the factory has been adapted to flow-oriented production methods similar to those found in the automobile industry, with a changeover from station assembly to paced line assembly. The company has made considerable investments in training.
The company is investing $100 million into its new U.S. headquarters in Shippensburg, Pa., where it is going to start rolling out product of wheel loaders, excavators and articulated haulers to complement the existing range of road machinery products already being produced there. Volvo will also add a customer demonstration center and training center there.
Olney has fulfilled several roles for Volvo CE, including his most previous role, where he was in charge of global industrial operations, so he got to experience firsthand the topic of our July cover story about the global supply chain (check it out at http://rermag.com/business_technology/business_info_analysis/equipment-straining-global-supply/)
Olney pointed out that within a span of 24 months, Volvo had to deal with a curve that came down 70 percent in demand and is now rising back up and a pretty substantial clip, with a 57-percent year-over-year increase in European revenue in the first quarter, 59 percent in North America and 54 percent in Asia, (70 percent in China). Volvo then posted a 32-percent year-over-year sales jump in the second quarter.
Regarding Volvo Rents, the company's recent expansion moves, buying independent rental companies as well as some of its own franchises, are an indication of the importance of the rental market. It will be worth watching to see if Volvo Rents will invest enough into its rental program to join the top tier of national rental companies in North America.
In August RER, you'll have a chance to read my report about my visit to Sweden for Volvo days, when for 24 days Volvo entertained thousands of dealers and customers from around the world and showed off hundreds of products, including a number of world premieres. I was only there a couple of days, but saw dozens of new products as well as Volvo's impressive components factory and customer center.
The company is certainly not standing still, not that anybody ever suggested it was. As for Olney, I wonder what country he's in right now? I could ask but by the time I find out, he'll probably be somewhere else.
