Mikael Bratt AB Volvo AB Volvo

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1 Mikael Bratt SVP and CFO Volvo Group 1 Upturn management Cash flow Volvo Group funding Conclusions 2 1

2 Focus Profitable Growth Required scale in all business areas achieved Product Portfolio Management Capitalize on scale to optimize R&D based on shared technology and common architecture Good progress Operational Excellence Reduce operating cost to improve profitability Good progress DOWNTURN MANAGEMENT SUMMARY Targets achieved S&A R&D Inventory PPE Overdues Headcount reduction SEK 21 bn cost reduction in place - Competitive future product portfolio - Working capital reduced - Reduction of 18,000 employees 4 Make improvements sustainable! 2

3 UPTURN MANAGEMENT Hold on to implemented cost reductions Increased focus on efficiency Build flexibility in cost structure Increase working capital turn-over Price management 5 Focus in INCREASED EFFICIENCY Reducing Selling & Admin costs further Strict control of capital expenditures Maintain inventory levels Improve R&D efficiency 6 3

4 Volvo IT Sourcing over the business cycle FTE s sourced to India and corresponding savings Recession Management Reducing IT cost base for Volvo Group by SEK 1.8 bn run-rate in only 6 months -still safeguarding strategic initiative and keeping quality in deliveries and services Upturn Management To meet future demands without letting IT spend back to levels of R&D efficiency A competitive edge in our Industry Global environmental demands Competitive global products Shorter time to market Project RnD 30 - Improve R&D efficiency by 30% R&D Spend ~ SEK 13.0 bn Increased project output (efficiency) R&D spending, new theoretical level

5 Upturn management Cash flow Volvo Group funding Conclusions 9 CASH FLOW Operating cash flow Cash conversion cycle 5

6 Volvo Group Operating cash flow Industrial Operations, SEK bn sh Flow 1,3-1,4 3,4 5,1 7,6 11,4 6,8 12,6 15,2-2,7-11,4 11 Volvo Group cash flow Industrial Operations SEK bn Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 12 6

7 Volvo Group working capital management Inbound Manufacturing Outbound Aftermarket WCM strategic objectives and targets, policies, directives and instructions WCM reporting WCM Checklist WCM Assessment One central WCM agenda Group Executive Commitment Activities run by GIB X Activities run by Council X Need for new Group initiatives WCM survey Need for new BA/BU initiatives Cash conversion cycle Net of days in account receivables, inventory and account payables 02Q4 03Q Q2 03Q3 03Q4 04Q1 04Q2 04Q3 04Q4 05Q1 05Q2 05Q3 05Q4 06Q1 06Q2 06Q3 06Q4 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 Target: 20 Q1 7

8 Upturn management Cash flow Volvo Group funding Conclusions 15 VOLVO GROUP FUNDING Net financial debt Funding update 20 Credit rating 16 8

9 Volvo Group Net financial debt Industrial operations Net debt, SEK bn Liquidity position SEK 66 bn - Limited maturities in % 66.0% Q1 09 Q2 09 Q3 09 Q4 09 Q1 Pensions 9,8,1 9,5 6,0 6,1 Financial Debt 35,6 41,0 41,0 35,5 39,0 17 Funding update 20 Completed key transactions Club loan of EUR 775 M prolonged 2 year. 12 banks participating JPY bridge of JPY 50 bn prolonged 1 year with Mizuho Committed transactions EIB loan of EUR 400 M in 5-7 yr duration Transactions to be discussed Agency (EKN) backed funding 18 9

10 Credit rating Short-term Long-term Moody s (global) P-2 Baa2 stable S&P (global) A-3 BBB- neg DBRS (Canada) R-2 (high) R&I (Japan) a-1 A-, stable 19 Upturn management Cash flow Volvo Group funding Conclusions 20

11 GOING FORWARD Cost control in upturn Tight working capital management 21 11