Volvo Financial Services North America Investor & Analyst Presentation
Presented by Martin Weissburg, President & CEO
Date: November 19, 2008
Financial Services Overview
This section provides key financial metrics and market penetration data.
Total Managed Assets (SEK bn)
Bar chart description: Data for Q307 and Q308 across Western Europe, North America, and International regions.
| Region | Q307 (SEK bn) | Q308 (SEK bn) |
|---|---|---|
| W Europe | 41 | 49 |
| North America | 29 | 31 |
| International | 19 | 26 |
Penetration on New Financing
Bar chart description: Penetration rates for Q307 and Q308 across Volvo CE, Volvo Trucks, Buses, Renault Trucks, and Mack Trucks.
| Segment | Q307 (%) | Q308 (%) |
|---|---|---|
| Volvo CE | 37% | 37% |
| Volvo Trucks | 31% | 31% |
| Buses | 14% | 13% |
| Renault Trucks | 18% | 21% |
| Mack Trucks | 22% | 20% |
Managed Assets in Volvo Aero & Volvo Penta (SEK M)
Bar chart description: Managed assets for Volvo Aero and Volvo Penta for Q307 and Q308.
| Segment | Q307 (SEK M) | Q308 (SEK M) |
|---|---|---|
| Volvo Aero | 874 | 1167 |
| Volvo Penta | 134 | 105 |
Benefits Provided to The Volvo Group
Description of image: A sailboat with a crew, with the text "A PARTNERSHIP YOU CAN TRUST".
- Sustainable profitability throughout the business cycle
- Increased Business Area sales
- Enhanced customer loyalty & retention
- Strengthen brand recognition
- Ongoing access to customers
- Superior customer & dealer service
- Sole focus on Volvo Group products
- Longevity in the market
Customer Offering
Description of diagram: A structured overview of financial products and services offered, detailing global and North American penetration.
- Insurance/Service & Maintenance Contracts (Non risk based)
- Operational Lease: Global 10.3%, NA 10.2%
- Receivables Management: Global 0.8%, NA 0.7%
- Installment Credit: Global 36.2%, NA 43.1%
- Finance Lease: Global 36.2%, NA 14.9%
- Dealer Financing: Global 16.5%, NA 31.1%
VFSNA Portfolio as of Sept. 30th, 2008
Description of charts: Visual breakdowns of the VFSNA portfolio.
- Managed Assets: Pie chart illustrating the distribution between US and Canada.
- Retail: Pie chart showing the breakdown by product segment: Volvo, Coach, Penta, Aero, Mack, Construction.
- Wholesale: Pie chart showing the breakdown by product segment: Volvo, Coach, Penta, Aero, Mack, Construction.
Volvo Group Customer Relationships
Data on customer numbers, transactions, and relationship strategies.
| Relationship Aspect | 2007 | Sep-2008 YTD |
|---|---|---|
| Customers (end users) | 23,389 | 23,158 |
| Retail transactions - Accounts | 10,817 | 7,984 |
| Retail transactions - Amount funded | $1.5 Billion | $1.0 Billion |
| Dealer customers | 221 | 256 |
| Dealer transactions funded | $2.3 Billion | $1.8 Billion |
- Volvo Group customer retention
- Soft product Volvo brand experience for customer
- High quality service throughout business cycle
- VFS consistent point of contact with customer
Business Conditions
Description of diagram: A two-column layout mapping current business topics to strategic actions.
- Topics: Consumer spending & credit cards, Fuel, Freight movement, Construction. Strategies: Maintain credit standards, Stability & Control, Transaction Structuring.
- Topics: Equipment supply and demand, Equipment remarketing. Strategies: Expanded sales channels & resources, Price optimization.
- Topics: Liquidity and interest rates. Strategies: Market pricing + VFS premium.
Credit and Risk Management
Strategies and practices for managing credit and risk.
- Collateral based lending of readily marketable assets:
- Disciplined transaction structuring
- Supported by well developed remarketing networks
- Consistent underwriting:
- Global credit policies
- Local/region/executive credit committees
- Portfolio performance & trends:
- Daily/weekly reporting
- Monthly review
- Internal control reviews
- Best practices
- Limited risk concentration:
- Diversified asset categories
- Country & regional dispersion
- Risk sharing & syndication of large customer exposures
Business Cycle Management
Description of diagram: A sinusoidal wave illustrating the business cycle, showing phases of downturn and upturn, and VFS's strategic responses.
Downturn Phase
Market Conditions: Competition Enters Increased Liquidity, Fierce Competition, Margin Compression, Irrational Lending, Over Supply of Credit, Competition experiences losses, some exit, Less competition, Tightening of credit standards, Less liquidity for customers and dealers, Price flexibility.
VFS Actions During Downturn: Maintain credit discipline, No irrational pricing, Relationship focus, Preparation for downturn.
Actions Taken 2007 - 2008:
- Process improvements from last downturn
- Hired additional experienced staff in credit and collections
- Reallocated resources to collections and remarketing
- Disposition of equipment through expanded remarketing channels
- Maintained credit standards
- Cost reduction and operational efficiency
Profitable Growth & Upturn Preparation
VFS Actions During Upturn: Consistent credit discipline, Price optimization, Expand relationships, Prepare for upturn.
Key Strategies:
- Build Strong Relationships That Promote Group Sales
- Provide Steady Profitability to Enhance Shareholder Value Throughout the Business Cycle
- Maintain Strict Credit Parameters Throughout All Periods of the Cycle
Opportunities 2009:
- Price premium & leadership
- Retail penetration increase
- Wholesale penetration increase
- Cross marketing for increased hard product sales
- Group Soft Product strategy
- Target market exiting competitors
Conclusion
- VFSNA prepared for current downturn
- Operational improvements continue
- Portfolio performance as anticipated
- Stability, control and profitability throughout cycle
- Reliable and consistent provider to Group, dealers and end-users
- Growth within strict credit parameters
- Price leadership
- Maintain strategy and focus
