Volvo Business Partnership Program
Lennart S. Larsson
Commodity Director PurchaseAgenda
•
Volvo
•
Volvo Powertrain
•
New Emission Challenges
•
Heavy Duty Platforms: Engines, Gearboxes, Rear
Axles
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Volvo Powertrain Partnership Program
Welcome to Volvo Group
The Volvo Group is one of the world's leading suppliers of transport solutions for commercial
use. We also provide complete solutions for financing and service.
Volvo Group Corporate Values
Environment
Safety
Strong positions in all areas
Volvo Bus Mercedes + Setra IRIS Bus Neoman Scania > 12 ton FAW DCX Volvo Group Dongfeng Motors Paccar > 16 ton Volvo CE Caterpillar KomatsuCase & New Holland
Deere
Volvo Aero
yWorld leading in development and production of selected engine components.
yEngine components from Volvo Aero is included in 80% of all larger civil aircrafts.
9-18 l Volvo Powertrain DC Powersystems Caterpillar Cummins Scania Volvo Penta Brunswick Yanmar Cummins Caterpillar
Highlights
In Focus Going Forward
z Manage and capitalize on product introductions
z S&A costs
z Cash Flow
Third Quarter
zBusiness environment
- Continued strong demand in North America - Europe flattening out on a high level
zContinued strong sales growth: +14%
zImproved profitability in all Business Areas - Group operating margin 7.6% (6.3%) - ROE at 19.0%
zImportant truck launches
- Mack Granite and Mack Pinnacle - Renault Premium
- Volvo FH and Volvo FM
Volvo Group
Summary
z
Continued good sales development +14%
z
Improved profitability in all Business Areas
Net sales
(SEK bn)
Operating income*
(SEK M)
Earnings per share
(SEK) North America 32% (29%) South America 6%(4%) Europe 48% (53%) Asia 9% Rest of the world 5% 2,75 8,45 7,93 9,67 7,24 8,25 23,6 25,78 28,78 33,29 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05
Quarter 12 months rolling
46,0 57,0 52,3 61,1 52,5 193,9 202,2 208,6 216,4 222,9 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05
Quarter 12 months rolling
Quarter Margin 12 months rolling
2 900 4 697 4 536 5 350 4 004
6,3% 8,2% 8,7% 8,8% 7,6%
10404 13764 15944 17483 18587 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05
188 122 116 171 170 246 214 256 0 50 100 150 200 250 300 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05E Western Europe Europe Forecast
Heavy Duty Truck Market
Europe
(EU members + Switzerland and Norway)
Forecast 2005 0 to +5% Units, Thousands (heavy trucks)
Units, Thousands (heavy trucks)
Heavy Duty Truck Market
North America
179 255 170 309 199 236 122 174 134 0 50 100 150 200 250 300 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05E Forecast Forecast 2005 ~ 20%Heavy Duty Truck Market
Heavy Duty Truck Market
--
dominated by three regions
dominated by three regions
147 261 266 '01 '02 '03 239 215 214 '01 '02 '03 170 179 179 '01 '02 '03 35 36 45 '01 '02 '03 32 29 32 '01 '02 '03
North America Europe
South America Japan China • USA 142 • Canada 23 • Mexico 14 • Brazil 36 • Other 9 R.O.W. 1) 153 • E.Europe 35 • Middle East 20 • Korea 16 • Taiwan 13 • S-E Asia 30 • India 16 • Australia 7 • Misc. 16 1)2002 figures
28 34 43 46 77 84 98 125 155 0 20 40 60 80 100 120 140 160 DCX Volvo FAW DongFeng Paccar Scania MAN Iveco Intern'l
Global Market Position
Heavy Duty Vehicles – 2003
1,000 units 17% 10% 9% 11% 14% Volvo Group • Volvo 73 • Renault 33 • Mack 19 DCX • Mercedes 77 • Freightliner 63 • Sterling 11 • Western Star 4 PACCAR • DAF 32 • Kenworth 24 • Peterbilt 20 • Foden 1 Other • Kamaz 24 • CNHTC 21 • BIAC 16 • Chongqing 16 • Isuzu 21 • Hino 18 • MMC 16 • Nissan D 15 • Shaanxi Auto 12 5% 5% 4% 3% ?
Volvo Group organisation
Mack Trucks Renault Trucks Volvo Trucks Volvo Aero Financial Services AB Volvo Volvo 3P Volvo Powertrain Volvo PartsVolvo Information Technology & Others
Buses Construction Equipment Volvo Penta Volvo Logistics BUSI NE SS ARE A S BUSI NE SS UNITS
Volvo 3P, Volvo Powertrain and Trucks Working
Interface
Competitive Truck Brands
• Quality • Product Planning • Product Development • Purchasing • Manufacturing • Sales • Distribution • Assembly
Focus on Product, Customer satisfaction, Cost, Capital, Economy of
scale, Synergies and Profitability
• Marketing • After Market • Customer offer
Focus on Customer satisfaction, Brand Image, Synergies and Profitability
Pre Customer Interface
Global Business
Mack Trucks Renault Trucks Volvo Trucks Volvo Buses
Volvo Construction Equipment Volvo Penta
Volvo Aero
Volvo Powertrain scope & customers
- Powertrain Systems- Installation Support
- Components; engines, transmissions, driven axles
Volvo Powertrain Organisation
Business Office
Anders Hellman HR &
Communications Kerstin Renard CFO Jörgen Scribe North America Sten-Åke Aronsson France Philippe Divry Sweden Bertil Thorén Volvo Powertrain President and CEO
Lars-Göran Moberg Purchasing Bruno Linsolas Product Development Pierre Lecoq Manufacturing Katarina Lindström Göteborg Brazil Göteborg Brazil Göteborg, Brazil, Köping, Skövde Lyon Lyon Lyon Hagerstown Hagerstown Hagerstown
Skövde - Engines - Foundry Skövde - Engines - Foundry Köping - Transmissions Köping - Transmissions
Vénissieux / St Priest / Limoge
- Renault V.I. PTD HQ - Engines
- Foundry - R&D
- Purchasing
Vénissieux / St Priest / Limoge
- Renault V.I. PTD HQ - Engines - Foundry - R&D - Purchasing Hagerstown - Mack PTD HQ - Engines - Transmissions - R&D - Purchasing Hagerstown - Mack PTD HQ - Engines - Transmissions - R&D - Purchasing Curitiba - Engines Curitiba - Engines Göteborg - Volvo Powertrain HQ - Volvo Division HQ - R&D - Purchasing
Volvo Powertrain Structure
Göteborg
- Volvo Powertrain HQ - Volvo Division HQ - R&D
VPT Heavy Duty Manufacturing
Towards one industrial system
Skövde, Köping, Curitiba
(Volvo system)
Lyon (Renault system)
One system 2007 Three systems 2001
Hagerstown (Mack system)
Hagerstown Skövde Köping Curitiba Lyon • Global processes and systems • Casting and main machining concentrated • Assembly on regional scale • Bigger volume • Business cycle management
New Engine Assembly Plant in Lyon
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Investment of 42 million Euro
•
Supplier of 9 -11 liter diesel engines for all Volvo Group BA:s
Ground Breaking in Hagerstown
– The Hagerstown Transformation Project– Cost: $147.5
– D12 assembly starts in early 2005
– New engine family members introduced into the assembly operation 2005-2006
– Crankshafts and Camshafts for new engine family from January 2006
– Material Handling project to support production
Volvo Powertrain scope & customers
- Powertrain Systems- Installation Support
- Components; engines, transmissions, driven axles
Volvo Powertrain – Strong Relative Position
Heavy Duty Diesel Engines 2003*
40000 43000 51000 54000 70000 106000 117000 127000 0 20000 40000 60000 80000 100000 120000 140000 Volvo DCX CAT Cummins Scania MAN Hyundai Yaroslavl
* Engine Production 2003, 9-18 liter displacement
Environment - l
egislative demands
Emission Levels 0 1 2 3 4 0 0,05 0,1 0,15 0,2 NOx g/kWh PM g/kWh 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015USA US’02/´04 US’07 US’10
Euro4
Europe Euro5 Euro6
Off Road >130 kW Tier3/Stage3A Tier4A/Stage3B Tier4B/Stage4
Proposal
Japan NST NLT PNLT
Legal level
MD/HD Engine Consolidation
18 PLATFORMS 2 PLATFORMS 10 4 6 8 16 14 12 E9 ETech dCi11 F3-10 F2 -6L F2 -4L S50 ISX ISM S60 S60 ISL ISC ISB 6 ISB 4 N14 1004 Displ. Litre D16 D12 TD120 D10 D7 D6 TD70 2012-4 2012-6 1013-4 1013-6 MD9 MD11 MD13 MD16 Heavy Duty Platform MD4 MD6 MD5 MD7 Medium Duty PlatformNew Engine Range Volvo Powertrain Current RVI/ Mack Current Volvo Current Vendor
Commonality
Heavy Duty Platform Engines
Definition of commonality
• Shared Technology• Common Architecture
• Same manufacturing technology • Same supplier
Common
M D 16 MD13 MD9 /1194%
Volvo Trucks
New Volvo FH and Volvo FM
• New Powertrain
- All new 13 L engine
- Improved 9 L engine
- I-shift gearbox up to 60t
- Axles
• Euro 4/5 emission std
• Up to 5% reduced
fuel consumption
• Improved interior
Launched at Renault Trucks retailers during February 2005
Renault Magnum with DXI 12 and Optidriver II
DXI 12
Optidriver II
04/02/2005 : Renault Magnum 2005
With its new chassis, new engine,
new powertrain, a cab offering
exceptional levels of comfort and
safety, the Magnum 2005 is the
top-of-the-line road transport vehicle for
the 21st Century.
Renault Trucks
New Renault Premium Route
• New chassis
• New cab offering comfort
and driving pleasure
• New Powertrain
- 11 L engine
- Optidriver II
• Up to 5% less
Mack Trucks
New trucks and engines
Launched October 23
rd2005
• Redesigned Mack Granite
series for
construction/vocational
• New Mack Pinnacle series
for highway
• MackPower (MP) engine
family
MP7 - 11 liter, available 2006
MP8 - 13 liter, available 2007
Mack Granite Mack Pinnacle MP7Launched in Phoenix Arizona, February 3rd
VT 880 with D16 for the North American Market
Volvo unveils "most powerful engine" ever built
GREENSBORO, N.C. (Feb. 7, 2005) -- Volvo Trucks North America says "the most powerful diesel engine on North American highways" will be available this summer. It was introduced in conjunction with Volvo’s new flagship truck, the Volvo VT 880, and is available in North America exclusively in the VT 880.
The 16-litre, inline six-cylinder diesel Volvo D16 engine with 625 hp and an unmatched 2,250 lbs.-ft. of torque, has the power to handle the biggest loads and the steepest roads.
VTNA’s New Engine Family for 2007
Presented at News Conference, October 17, 2005, Boston, Massachusetts
D11
D11
D13
D13
D16
D16
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Product Launch in 1
stQuarter 2006
Volvo Buses
New complete product range
• Widest range ever
• New powertrain
- Improved 12L, 9L
- New MG9 and 7L
- New I-shift
• Euro 4/5 emission
- Euro 5 incentive
• 3-7% reduction of fuel consumption
• Many new features
Volvo Penta
Marine Commercial Product News
IPS
D16
Volvo Powertrain Partnership Program
Volvo Powertrain Partnership Program definition
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The Partnership Program encompasses all actions which contributes to creating value in the business relationship between VPT and a very limited number of suppliers•
This requires alignment of9 Strategies
9 Processes
9 Behaviour
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This approach should involve all people interfacing between VPT and its supply baseA new set up and a new supplier interface to support
worldwide volume to the level of the car industry
New products
Legacy
3 suppliers bases: - 1000 suppliers - 14 000 part numbers Supplier 2 Supplier 1 Supplier 3 Lyon Hagers-town SkövdeVCE VTC Penta Bus
1 supplier base: - VPT Extended Enterprise - 100 suppliers - 5 000 part numbers Common Supplier Hagers-town
VCE VTC Penta Bus
Skövde
VCE VTC Penta Bus
Lyon VCE VTC Penta Bus # suppliers # parts # teams # processes Same suppliers Same parts Same team Same processes
A very pragmatic collaborative approach
To create value
To deliver a competitive advantage
To become our suppliers preferred customers Focused on 3 building blocks
3 shared implementation plans
Deliver on Heavy Duty Platforms: High level commitment and shared targets
Deliver Quality breakthrough Secure cost
Avoid diversity, redundancies (validation) and waste Innovation partnership on key area
Regroup our strength / Prepare the future Take value out of supply chain
A Powerful network of 40 partners
A new relationship based on teamwork
And between suppliers
From commercial/engineering focused relationship
To broad collaboration at all management levels CEO Sales Engineering Quality Purchasing Manufacturing Aftermarket Logistics Finance Supplier A
Volvo Supplier Volvo
Supplier B
Joint relationship management
• Organize and manage the business relationship between Volvo and key supplier as well as between suppliers
• This is one of the areas where purchasing is expected to exercise its leadership. • However, Supplier Relationships are not the monopoly of Purchasing.
• These strategic relationships are lived and developed cross functionally
throughout the organization at all level of management within the Volvo group and within our supply base.
Volvo Powertrain Partnership Program
Supplier integration
“Develop seamless relationship with our supplier base through
efficient collaboration to build a joint competitive advantage for
Early supplier integration in advance engineering activities
for Euro5–US10
Collaboration
for future
Emission
target
Supply Base OEM Base HDEP Supplier VPT Benchmark Driven by supplier Benchmark Driven by VolvoJoint Benchmarking needs to be organized between VPT and HDEP suppliers as a target setting tool
Strategic Alliance with Arvin Meritor
Stefano Chmielewski Renault Trucks,
Brad Arnold ARM, Lars-Göran Moberg Volvo Powertrain
North America, Agreement signed on May 9, 2002.
• Consolidation of current range
• Manufacturing of Mack’s proprietary axles
Europe, Agreement signed on October 4th, 2004
• Outsourcing of single reduction axles
• Outsourcing of hub reduction and non-driven axles • Keep product development and IPRs
• Divestiture of Lyon Foundry and Axle Plant into two Joint Ventures • Divestiture of Köping Axle Assets
Optimise interfaces with all functional areas
Quality Create attention And Focus Warranty Aftermarket Supply chain optimisation Engineering Finance and Shared servicesHuman resources Manufacturing
Logistics
Purchasing
Volvo and Uddeholm has signed an
agreement regarding Tool Steel Support
and Optimization of Specifications.
Mould Makers and – if required – Component Producers, shall be visited together
with Uddeholm Tooling in order to:
1.
Present the tool steel collaboration project
2.
Review scope of improvements leading to enhanced competitiveness
3.
Sort out issues of concerns and how to function
HEAT TREATMENT
HEAT TREATMENT
HIGH PRESSURE ALUMINUM DIE CASTING
HIGH PRESSURE ALUMINUM DIE CASTING
• cleaning • shot peening • stress tempering • Welding • cleaning • shot peening • stress tempering • Welding • machine characteristics • hydraulic pressure • process settings • machine characteristics • hydraulic pressure • process settings DESIGN
DESIGN MATERIALMATERIAL
• Preheating • Austenitizing temperature/time • Tempering temperature/time • quenching media • Surface treatment/coating • Preheating • Austenitizing temperature/time • Tempering temperature/time • quenching media • Surface treatment/coating • Hardness • temper resistance
• hot yield strength
• creep strength • ductility, toughness, thermal conductivity, thermal expansion • Hardness • temper resistance
• hot yield strength
• creep strength • ductility, toughness, thermal conductivity, thermal expansion TOOL MAKING TOOL MAKING PRODUCTION PRODUCTION • Process control • Preheating tool temperature • cast metal
•Holding time at peak temperature • Cooling • Lubrification • Mechanical loads • Process control • Preheating tool temperature • cast metal
•Holding time at peak temperature • Cooling • Lubrification • Mechanical loads DIE CASTING DIE CASTING MACHINE MACHINE TOOL TOOL MAINTENANCE MAINTENANCE • Size • die / inserts • Fillets/holes/corners • Cooling channel • runners/gates/overflows • Size • die / inserts • Fillets/holes/corners • Cooling channel • runners/gates/overflows • Spec. Nadca, Cnomo, GM, Ford • Machining • EDM’ing • Grinding • Polishing • Welding • stress relieving • Spec. Nadca, Cnomo, GM, Ford • Machining • EDM’ing • Grinding • Polishing • Welding • stress relieving
