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Volvo Adapts to Weakened Demand CEO Tells Investors

Volvo Construction Equipment is adapting to weakened demand, president and CEO Leif Johansson told investors at Investor Day in New York last week.

“The Group’s order intake has dropped substantially in several markets,” Johansson said. “Demand in Europe has slowed abruptly and the U.S. market has continued to decline from its already low level. Emerging markets in Eastern Europe and parts of Asia have also deteriorated rapidly, as has South America recently.”

VCE is adapting the capacity of its global production system to weaker demand. The company is implementing personnel cutbacks and shutting down production on certain days and weeks during the fourth quarter, especially in December.

Chief financial officer Mikael Bratt said the Volvo Group has been able to leverage its global presence to secure the Group’s borrowing and has been able to meet the financing requirements of its industrial operations for the remainder of 2008. Bratt added that very few loans will mature in 2009.

Johansson said the company’s product program is strong and the group will continue to invest in products for the future in involving hybrid technology as a key component.

“The Volvo Group’s hybrid solutions for heavy vehicles are entirely different from the solutions available in the market to date,” he said. “On the strength of our volumes and resources, we have been able to develop a more standardized platform solution, which is necessary to ensure that hybrid technology achieves broad-based commercial success.”

In other news, Volvo Construction Equipment is cutting back production at its Shippensburg, Pa., facility in response to slower sales. Intermittent shutdowns are scheduled from Dec. 24 to 31, and in January and February, the company said. Volvo employs about 775 people in Shippensburg.

The facility manufactures road construction equipment. The line was acquired from Ingersoll Rand last year. The Shippensburg plant will also be used for motor grader production that will be moved from its Goderich, Ontario, plant by 2010.

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