Volvo Financial Services Volvo’s Captive Finance Company & Managing Your Career November 28, 2006 Sal Mauro President & CEO : Volvo Financial Services Volvo’s Captive Finance Company & Managing Your Career November 28, 2006 Sal Mauro President & CEO
Volvo Financial Services : Volvo Financial Services Sal Mauro, President & CEO
Bachelor Science Degree Accounting Boston College, USA
Deloitte Haskins & Sells NJ, USA
Certified Public Accountant
Revlon - Professional Products NY, USA
Volvo North America Corp NJ, USA
Volvo Car Finance North America NJ, USA
GE/Volvo JV
Volvo Car Finance Europe Brussels, Belgium
Ford Financial
Volvo Financial Services NJ, USA
Mission : Mission By creating value for our customers we create value for our shareholders.
We use our expertise to create transport related financial services of superior quality, creativeness, and speed for demanding customers in selected segments.
We work with energy, passion, and respect for the individual.
Vision : Vision To be valued as a world class provide
Of financial and related services
For the Group’s external and internal
customers Thereby
Improve Group profitability
Create Group synergies
Improve and protect the Group’s market
Shares in each Business Area
Wanted Position : Wanted Position No. 1 in Image and Customer satisfaction
Sustainable profitability above average After Tax Return on Equity
No. 1 or 2 in size and/or profitability
Customers : Customers
Volvo Financial Services History : Volvo Financial Services History 1959 - 1999
Customer Finance Activities contained within product companies
Treasury Operations developed as a separate entity
Real Estate Operations in Sweden established
Insurance Companies + Partnerships created
2000
Business Unit Finance created containing
Customer Finance
Insurance
Real Estate
Treasury
2001
Volvo Financial Services established as the 6th Business Area
Slide8 : VFS Locations Around the World Q3 2006
Managed Assets
84.8B SEK
After Tax Return on Equity
15.5%
Operating Income
1,777M SEK
Employees
1,123 VFS also does business cross-border in 25 additional countries throughout Eastern Europe and Asia
The VFS Organisation : The VFS Organisation VFS is the Volvo group captive finance company of commercial transportation and equipment, providing financial solutions to the groups Business Area’s, Dealers and Customers. Portfolio size is exceeding
84.8B SEK. Number of employees are 1,123.
VFS is a Business Area of the Volvo group.
The Volvo Group consists of the following Business Areas:
Volvo Trucks, Renault Trucks, Mack Trucks, Volvo Bus, Construction Equipment, Volvo Penta, Volvo Aero, Financial Services
The VFS HQ is located in Montvale, New Jersey, US.
VFS has a regional structure, where each region is responsible for a number of markets and reports to the VFS HQ.
Region North America (US, CA)
Region Northwest Europe (UK,NL,BE,SE,NO,DK,FI)
Region Central Europe (DE,PL,CH,AU,CZ)
Region South Europe (ES,IT)
Region France (FR)
Region International:
Region Latin America (BR,MX)
Region Asia (CN, Indonesia,Thailand, Australia)
Region East Eastern Europe (BG, HR, LT, MK, RU, RO, CS, TR, UA, )
Slide10 : Supporting the Brands Volvo Financial Services Volvo Trucks
Volvo Buses
Volvo Construction Equipment
Volvo Aero
Volvo Penta Renault Trucks Mack Trucks Overview
Slide11 : *Global HQ functions:
President & CEO
CFO
Business Development
Human Resources
Legal & Communication
Credit Risk Officer
Operations VFS Headquarters office maintains full operational control over all finance entities and manages their capitalization irrespective of legal holding structure
Organizational Structure Overview
Key Objectives : Key Objectives 1. Stability in earnings over a business cycle
2. Profitability in all business segments
3. Controlled and profitable asset growth
4. Sound portfolio structure / asset diversification
5. Support Business Areas & maximize customer satisfaction Summary
Financial Targets & Long-term Objectives : Financial Targets & Long-term Objectives Profitability ATROE
Earnings Operating income
Growth % of Volvo unit Sales
Productivity Operating expense ratio improvement
Credit control Write-off and overdue >30 days
Stability Positive and stable development quarter by quarter Long term objectives
12-15% ATROE
Stability of earnings over a business cycle
Slide14 : Financial Summary
Volvo Financial Services Third Quarter : 1) Calculated as a 12 month rolling average New retail financing
(SEK bn) Operating income and return on equity
(SEK M) Volvo Financial Services Third Quarter Highlights
Solid returns
Continued increased market liquidity and competition
China - retail financing commenced In Focus
Business cycle management
Portfolio growth
Operational excellence
Volvo Financial Services Third Quarter - isolated : New financing Penetration on new financing Volvo Financial Services Third Quarter - isolated
Slide17 : The Strategic Value of VFS
Captive Finance Company Benefits : Captive Finance Company Benefits All our major competitors have captive financial services organizations:
Caterpillar Financial Services
Daimler Chrysler Financial Services
Paccar Financial Services
Scania Financial Services
VFS works with the other Volvo Group Business Areas to combat the dynamic services and products offered by these competitors
Marketing support – with a captive this marketing support stays in the Volvo Group and is converted into greater sales and income within financial services
Credit guarantees – giving credit guarantees to external parties would mean that we take the risk without the possibility of receiving the corresponding financial services income.
Benefits
The Benefits Provided to the Volvo Group by VFS : The Benefits Provided to the Volvo Group by VFS Profitability:-
VFS provides excellent income streams and margin contribution to the Volvo Group
VFS provides sustainable profitability throughout the business cycle for the Volvo Group
VFS gives returns in the range of 12% - 15% to the Volvo Group over the business cycle
Marketing Tool
Customer Loyalty and Brand Management
Benefits
Slide20 : Organization Letter of Understanding Global Risk Management Reserve
Methodology Competitive Analysis Proforma Pricing Customer
Satisfaction Operational
Efficiency Employer
of Choice Emerging Markets
Financing Develop Product Offering
& Customer Retention Strategic Principles Integration
with BA’s
Key customer
Financing Strategic Partners @-commerce/
Data warehousing
Internet Portals Product & Service
Bundling BEST IN CLASS:
Products, Diversification Customer Support & Profitability Business Strategy
Slide21 : VFS Expert Originator & Servicer Providers of Volvo Branded
Products and Services Financial
calculator Customer-
Dealer-
Supplier-
Portals Data warehouse CRM E-commerce
Financing key customers
Covering viable customer segments
Providing services in major markets
where Volvo is present Product suite of customer demanded
financial services required to offer the
total transport solution
One Stop Shopping Systems & Tools Volvo Group Customers Products & Services Strategic Partners Market Leader for
Financing of Volvo Group Customers and Dealers Strong Value Proposition
2006 Big 5 : 2006 Big 5 Commercial Focus
Successful completion of the first 6 projects
Measurable activities from joint BA planning sessions
Launch of BA metrics (penetration, managed assets, operating income)
Launch of internal CF communications campaign
Completion of brand management project
Pilot BA recognition reward program
Operational Excellence
Measurable improvement in operational efficiency
Short-term and long-term organizational/IT strategy (all regions)
Measurable improvement in CSI, BSI and DSI
Stabilize and improve the operations in France
Develop the European regional organizations
Business Cycle Management
Demonstrate preparedness for downturn (volume and risk)
Maintain Treasury risk mandate and deliver best in class funding
Profitable Growth
Grow global Mack and Renault penetration by 50%
Address volume and return issues in Spain, Italy and France
Expansion in Asia and former Eastern Europe
Danafjord Expansion
People Development
Achieve improvement in diversity
Develop program for high potentials and potentials
Institute formal training programs
Increase VGAS ESI by 2% and no groups with ESI <45%
Managing Your Career : Managing Your Career Always properly introduce and validate yourself
Find a mentor
Integrity and accountability
Do the right thing
Treat the company you work for like you own it
Managing Your Career (Con’t.) : Managing Your Career (Con’t.) Be the best floor sweeper
When one door shuts, another will open
Never give up “the Milton Hershey Principle”
Be ready to sacrifice
Family comes first
Life is a package deal
Managing Your Career (Con’t.) : Managing Your Career (Con’t.)
Human Resources are your most important assets
Hire the best and give them some room
Hire yourself out of a job
Keep your “A” and “B” players and transition out your “C’s”
Shadow of the Leader
Managing Your Career (Con’t.) : Managing Your Career (Con’t.) Diversity drives innovation
Never lose focus on your customers and shareholders
Make lists, they work
The BIG 5 – Get organized
Have fun, enjoy what you do, life goes by pretty fast