Volvo Head: Challenging Outlook for U.S. Truck Market

July 21, 2009

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Volvo Group CEO Leif Johansson offered a pessimistic forecast for the U.S. truck market while announcing the company's second-quarter losses.

The second quarter presented the Sweden-based truck manufacturer with some setbacks, due to a lack of expected "pre-buy" ahead of EPA 2010 models, as well as weakened commercial truck markets in Europe and the U.S.

During a press conference in Stockholm, Sweden, to discuss the company's financial results, Johansson told reporters he doesn't see a recovery in sight for the U.S. truck market.

The truck manufacturer reported net losses of $730 million for the second quarter, compared to profits of about $676 million for the same period last year. Sales dropped to $7.08 billion for the quarter, compared with $10.5 billion last year.

The company attributes the losses to $420 million worth in increased provisions for credit losses and residual value commitments, lay-off related costs, write-downs on inventories, and costs associated with healthcare benefits for retirees.

According to a presentation made at the press conference, the heavy-duty truck market in the U.S. is projected to be down 30 to 40 percent by year's end. Meanwhile, the European truck market is also expected to drop by 50 percent.

The company's truck operating income was down $629.9 million during the quarter, according to a report. The delivery of new trucks declined by 57 percent in the quarter, compared with the second quarter of 2008. However, net order bookings have increased by 32 percent compared to the first quarter.

"For the Volvo Group, the second quarter of 2009 remained difficult in terms of earnings in the wake of the exceptionally rapid decline in demand that followed the crisis in the financial system," Johansson said in a statement. "We were, however, successful in reducing our inventories, which contributed to a positive development in working capital."

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