Despite strong performance elsewhere, the depressed North American truck and bus markets put Volvo in the red for first quarter 2001.

The Sweden-based truck and bus maker reported first quarter sales of 43.7 billion kroner ($4.2 billion), up 55% from first quarter 2000, and a loss of 801 million kroner ($77 million) compared to a 1.27 billion kroner profit the same period last year.
Volvo Global Trucks’ total deliveries during the quarter were 42,139 vehicles, down 11% from a year ago, including Mack and Renault trucks. North American deliveries were down 38% while European deliveries rose 1%. The biggest increase came in Eastern Europe, where unit sales were up 10.5%. Worldwide order bookings declined 15%. Bookings dropped 26% in North America and 10% in Europe.
Sales revenue almost doubled, including a 55% increase attributed to the addition of Volvo and Renault trucks, but first quarter earnings were "clearly unsatisfactory," said CEO Leif Johansson. Volvo Global Truck’s operating margin was 0.5%, compared with 4.3% a year ago. North American operations were blamed for the deteriorating margins.
"The adaptation to a weakening business climate now has top priority," he said. "We do not foresee any immediate recovery in North America, while the decline in order bookings in Europe necessitates preparations for new measures."
Last year, Volvo’s truck operations laid off some 1,800 workers worldwide and, in first quarter, it announced plans to reduce its North American workforce by another 1,400 -- 700 each for Volvo Trucks North America and Mack. Johansson said further actions will be implemented if necessary.
In addition to production cutbacks, Volvo said its North American truck operations are aggressively implementing profit-improvement programs. The Mack and Volvo units are separately implementing programs to reduce inventories and develop processes to keep inventories closely aligned with market demand.
Volvo Global Trucks was organized on January 2, and the company said its primary emphasis in first quarter involved "corporate culture aspects" of integrating its three truck brands, Volvo, Renault and Mack. Another vital issue, however, was to capture cost savings possible through the increased volume. In some cases, coordinated purchasing has reduced costs more than 6%.
In other markets, the worldwide bus market is shrinking, due to uncertain prospects and higher fuel and wage costs for operators, Volvo said. Worldwide, the company delivered 2,117 buses and bus chassis in first quarter, down 19% from a year ago. Deliveries of city buses in the U.S. declined "substantially," while deliveries in Mexico continue to increase.
Financial Services, a relatively new business for Volvo, also felt the sting of a soft North American truck market. Some 72% of the New Jersey-based unit’s 4.7 billion kroner ($459 million) first quarter revenue was related to the financing of trucks. This was about the same as first quarter last year. But operating income was down about 50%, due mainly to increasing credit losses. The company blamed lower transport volumes and high diesel prices which, in combination with the depressed used truck market, caused high levels of credit losses. "Given the present development, no short term improvement is expected," the company said.

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