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Volvo AB (VOL)


Monday 22 April, 2002

Volvo AB

1st Quarter Results

Volvo  - three months ended March 31, 2002       
                                                            2002    2001
Net sales, SEK M                                           40 385  43 750
Operating income (loss) excluding                   (362)    502
restructuring costs, SEK M
Operating income (loss), SEK M                              (362)   (817)
Income (loss) after financial items, SEK M                  (618) (1 251)
Net income (loss), SEK M                                    (746)   (801)
Sales growth, %                                               (8)      55
Income (loss) per share during most recent 12      (3.40)   6.40
months period, SEK
Return on shareholders' equity, %                          (1.6)     2.9
�     The  first  quarter was characterized by the previously  announced
intense  efforts  to phase in new products and ramp-up production.  This
applied particularly to Volvo Trucks and Construction Equipment with  an
adverse effect on earnings.
�     The  reported operating loss in the first quarter of 2002 was  SEK
362  M,  compared  with a loss of SEK 817 M in the year-earlier  period.
Excluding restructuring costs, operating income in the first quarter  of
2001 was SEK 502 M.
�     More than 20,000 orders have been signed for the new Volvo FH  and
Volvo  FM  trucks. The introduction of the new truck ranges has recently
started in Volvo Trucks' International markets. Mack, Renault and  Volvo
CE also noted positive trends in order bookings.
�     Cash flow was negative in the first quarter of 2002 as a result of
inventory  build-  up  relating  to  product  introductions.  Cash  flow
continues to be a priority area within the Volvo Group.
Comments by the Chief Executive Officer
The general market trend continued to affect the Group in different ways
during the first quarter. Volvo Penta had another quarter of very strong
performance,  with increasing sales compared to the first  quarter  last
year. Volvo Penta is successfully creating added value within our engine
operations,  and  continues to compensate the weaker demand  by  gaining
market shares.
In  North  America, our truck operations were still under pressure.  Our
competitors large inventories of used trucks continued to hamper  prices
and  sales  of  new  trucks. A slight increase  of  order  intake  could
indicate that the market has bottomed out. In Europe, the market  slowed
down,  but  not  as much as the consensual outlook of the  industry  has
The  first three months were also characterized by intensive efforts  to
phase in the new products that were launched in the second half of 2001.
This   particularly  applied  to  Volvo  Trucks,  which   is   currently
implementing  the  most  extensive model replacement  program  ever.  As
previously  announced, this replacement resulted in  extensive  ramp  up
activities in both production and for our suppliers. The most  intensive
part  of  the replacement process is over and production will  start  to
catch  up with orders in the second quarter.  The strong demand for  the
trucks  is  of course a very positive sign, even if it has not  improved
earnings yet. More than 20,000 orders have been received since the Volvo
FH  and  Volvo  FM models were launched in November 2001.  Also  Renault
Trucks'  new model range, with the new Renault Magnum among others,  has
increased  customer  demand  and  increased  market  shares.   This   is
particularly  evident within heavy-duty trucks in France, where  Renault
Trucks reached a record level in February.
Volvo  CE is also going through an important product replacement  phase,
as  the  new  generation  of wheel loaders and  excavators  are  set  in
production.  Volvo  CE  showed for the first time its  extended  product
range  at  the  ConExpo exhibition in Las Vegas in March.  The  extended
range of compact equipment has been very well received. Volvo CE's order
intake increased significantly during the first quarter.
We  still  suffered from weak demand for new trucks, primarily in  North
America. The major changes in production had a further adverse effect on
deliveries  during the quarter. It also affected cash  flow  during  the
first  quarter.  The  North American recession also  affected  Financial
Services  and Volvo CE in a large extent. Volvo CE was also affected  of
the  downturn in Europe where Germany is particularly weak. Volvo Aero's
sales and operating income dropped, mainly depending on the effects from
September  11,  which  started to affect aerospace services  during  the
first  quarter. September 11, has also affected Volvo Buses  with  lower
demand for coaches.
All  in  all,  this  resulted in 8% lower sales volumes  and  a  clearly
unsatisfactory  performance for the Group in the  first  quarter.  Order
bookings  are beginning to improve, however as a result of the extensive
product  renewal that has been carried out throughout the  entire  Volvo
To  sum  up, we are in the middle of a difficult business cycle and  are
going  through an intensive period of ramp up activities.  The  business
environment will continue to be difficult across the Group during  2002.
There  are  few  firm  signs  of immediate  recovery.  Rising  political
tensions in the Middle East, and increasing oil prices add concern about
the  strength  and  timing of the economic recovery  of  North  America.
Consequently, our focus on Business Cycle Management will continue  with
a specific emphasis on inventory and cash flow. The closing of the truck
plant in Winnsboro, US, is proceeding according to plan, as well as  the
integration process within the truck operations. The readiness  to  make
additional production adjustments and structural adaptations remains.
This  is of course also a period of opportunities. We are going to  take
full  advantage of our new products. We are also going to capitalize  on
increased   productivity  and  structural  improvements.  Our   aim   is
definitely to further strengthen our position during this recession.
Leif Johansson
Significant events during the first quarter of 2002
New structure for Volvo's truck operations
Since Volvo's acquisition of Renault V.I. (now named Renault Trucks) and
Mack  Trucks,  a  large  part  of the operations  has  been  focused  on
immediate  integration programs and development of a  strategy  for  the
future  comprising product plans for both vehicles and engines. Most  of
this  work  is  now completed and the years immediately  ahead  will  be
characterized by implementation of approved strategies and product plans
in  order  to  take  advantage  of  the synergies  created  through  the
acquisition. A clear focus on customers, based on distinct and  powerful
brand  names,  will be decisive. A new organization and  management  was
thus  necessary. As of January 7, 2002, Volvo, Mack and  Renault  Trucks
are separate business areas reporting to the Volvo Group Headquarters.
Volvo CE launched new products
Volvo Construction Equipment launched its B-series of excavators; a  new
generation  of machines designed to provide more power and  productivity
and  improved operator comfort. Volvo CE also launched the new Volvo  E-
series   of   wheel  loaders.  The  new  wheel  loaders   combine   high
productivity, low fuel consumption and low environmental impact,  making
them   the   ideal  machines  for  rock,  rehandling  and   log-handling
Newly developed Volvo backhoe loader at the ConExpo
As  announced  in December 2001, Volvo Construction Equipment  showcased
its  newly  developed  backhoe loader at the ConExpo  tradeshow  in  Las
Vegas, US, March 19-23, 2002. The machines represents the company's  new
entry into the competitive, worldwide backhoe loader market, where Volvo
is entering the most popular size class for these machines.
Volvo delivers 200 city buses to Johannesburg
Volvo  Bus South Africa Pty began delivery of 200 city buses to Metrobus
in  Johannesburg, South Africa. The delivery comprises 150 B7TL  double-
decker  buses and 50 standard B7R buses. The delivery marks an important
modernization  of  the city's fleet of buses and also represents  a  new
element on the urban scene prior to this year's major UN summit meeting,
where world leaders will discuss environmental and economic development.
Volvo Aero Engine Services lands major overhaul order from Aeroflot
Volvo  Aero  signed  an  agreement with the  Russian  airline  Aeroflot,
whereby  Volvo Aero will overhaul Aeroflot's JT9D-59A engines,  powering
its  DC 10-40 aircraft. The initial value of the contract is USD  60  M,
making it the largest overhaul contract signed by Volvo Aero since 1998.
There  is  also  a potential for a total order value of  USD  120  M  if
Aeroflot decides to add more DC 10-40's to its fleet.
Volvo Penta introduced the new Ocean Series propulsion system
During  the  first  quarter of 2002, Volvo Penta  introduced  the  Ocean
Series, a new composite marine propulsion system, intended primarily  to
approach  the  US  saltwater fishing market.  The  Ocean  Series  offers
unparalleled performance in this segment, which traditionally has relied
on  outboard  propulsion. During the Miami International  Boat  show  in
February,   the  new  propulsion  system  was  awarded  the  prestigious
"Innovation Award" for its product excellence.
The Volvo Group - 2002
Net sales
Net  sales of the Volvo Group for the first quarter of 2002 amounted  to
SEK  40,385 M, compared with SEK 43,750 M in 2001, down 11% adjusted for
changes in currency rates and group structure. Ramp-up of production  of
the  newly  introduced products within Trucks and Construction Equipment
adversely affected deliveries during the first three months of 2002  and
were the main reason for the decline in sales. Continued weak volumes in
North America also affected net sales.
Net sales of Trucks' amounted to SEK 26,558 M, a decline of 13% adjusted
for  currency effects compared with the year earlier period.  Deliveries
of  Volvo  trucks within Europe declined by 43%, mainly related  to  the
ramp-up  of  production  of the completely new Volvo  FH  and  Volvo  FM
trucks.  Initial  start-up effects in production, resulting  in  delayed
deliveries,  also  affected  sales  adversely  in  the  first   quarter.
Deliveries of Renault trucks above 16 tons declined by 11% compared with
the  year earlier period. The development in North America continued  to
be  weak  and  the deliveries of Mack trucks declined by 31%  and  Volvo
trucks by 19%.
Net  sales of Buses for the first three months of 2002 amounted  to  SEK
3,165 M, a decline of 1% adjusted for currency effects and the effect of
consolidating Pr�vost/Nova Bus using the proportional method as  of  the
fourth  quarter 2001. Net sales for Volvo CE declined by 12%,  excluding
currency effects, in part due to a negative geographical mix and ramp-up
issues  relating  to the production start of new models.  Volvo  Penta's
sales  remained  strong in the first quarter with  an  increase  of  9%,
excluding  currency effects. As a result of the downturn in the  airline
industry, Volvo Aero's net sales declined by 10%.
During  the  first  quarter of 2002, the Group's net  sales  in  Western
Europe  declined  by 11%, mainly due to the production  start  of  newly
introduced products. Net sales in North America were down 13% and  South
America  declined  12%, while significant growth was  noted  in  Eastern
Europe, Asia and on other markets.
The  distribution  of net sales by market is further  specified  in  the
table below:
Net sales by                         First    Change       
market area                  three months
SEK M                           2002    2001    in %   % of
Western Europe              21 097  23 697     -11     52
Eastern Europe               1 318   1 199     +10      3
North America               11 738  13 441     -13     29
South America                1 211   1 379     -12      3
Asia                         2 650   1 941     +37      7
Other markets                2 371   2 093     +13      6
Total                       40 385  43 750     (8)    100
Operating income/loss
Operating loss for the first three months in 2002, amounted to  SEK  362
M, compared with operating income, excluding restructuring costs, of SEK
502  M  in  the corresponding period a year earlier. The loss is  mainly
attributable  to  lower earnings within Trucks, Buses  and  Construction
Trucks'  operating  loss for the first quarter of 2002  was  SEK  474  M
compared  with  an  operating income of SEK 150 M  in  the  year-earlier
period.  The  operating  loss  was largely  related  to  continued,  but
decreasing, losses in North America and to lower deliveries in Europe as
a  result  of  the production ramp-up of the new Volvo FH and  Volvo  FM
Buses  operating loss of SEK 94 M was basically unchanged compared  with
the year-earlier period, mainly as a result of low volumes. Construction
Equipment earnings declined significantly, to an operating loss  of  SEK
131  M.  The loss is related to production start of new models, negative
geographical  mix  and vendor supply issues. Earnings  for  Volvo  Penta
continued to be favorable; operating margin was 7% in the first  quarter
of 2002. Volvo Aero's operating income was halved compared with the year-
earlier period due to weaker demand. Financial Services operating income
amounted to SEK 115 M, which was in line with 2001.
Selling expenses were higher compared with the year-earlier period as  a
result of dealer consolidation. The increase in other operating expenses
was  mainly due to exchange rate differences. Operating income  for  the
first  three  months  of  2002  included a  less  positive  effect  from
capitalization  of  development costs of SEK 156 M,  compared  with  the
corresponding  period  in  2001.  These  effects  are  related  to   new
accounting  standards, which were applied as of 2001. The  total  effect
for  the first three months 2002 was SEK 334 M, compared with SEK 490  M
in the year-earlier period.
The deficit in Volvo's Swedish pension foundation increased by SEK 181 M
during  the first three months of 2002, mainly due to increased  pension
obligations  combined with a weak development in the stock  market.  The
weaker position had a corresponding negative effect on Volvo's operating
income during the quarter.
Net interest expense
Net  interest expense for the first three months declined to SEK  248  M
compared with SEK 273 M in the year-earlier period. The positive effects
of  lower  net financial debt and lower interest rates in  the  US  were
partly offset by lower average SEK exchange rates during the period.
During  the first three months of 2002, a tax expense of SEK 118  M  was
reported, mainly related to current tax expenses in subsidiaries outside
Sweden.  Deferred  tax income related to the change  in  tax-loss  carry
forwards has not been recognized during the period.
Consolidated income                            First three
statements*                                     months
SEK M                                           2002    2001
Net sales                                     40 385  43 750
Cost of sales                                    (33     (36
                                               205)    236)
Gross income                                   7 180   7 514
Research and development                     (1 505) (1 394)
Selling expenses                             (3 797) (3 378)
Administrative expenses                      (1 277)(1 659)
Other operating income and                   (1 094)   (696)
Income from Financial                            115     113
Income from investments in                       16     (2)
associated companies
Income from other                                  0       4
Restructuring costs                                - (1 319)
Operating income (loss)                        (362)   (817)
Interest income and similar                      266     411
Interest expenses and                          (514)   (684)
similar charges
Other financial income and                       (8)   (161)
Income (loss) after                            (618) (1 251)
financial items
Taxes                                          (118)     422
Minority interests in net                       (10)      28
(income) loss
Net income (loss)                              (746)   (801)
Income (loss) per share, SEK                  (1.80)  (1.90)
* Financial Services reported in accordance with the equity
Key operating ratios, Volvo                    First three
Group                                           months
%                                              2002    2001
Gross margin                                   17.8    17.2
Research and development expenses               3.7     3.2
in % of net sales
Selling expenses in % of net                    9.4     7.7
Administrative expenses in %                    3.2     3.8
of net sales
Operating margin*                             (0.9)     1.1
Operating margin                              (0.9)   (1.9)
* excluding restructuring costs
Condensed income statement  -              First three months
Financial Services
SEK M                                           2002     2001
Net sales                                      2 448    2 240
Income after financial                           115      113
Taxes                                           (27)      (6)
Net income                                        88      107
                                               Jan -    Jan 
                                            March      Dec
Key ratios - Financial                          2002     2001
Return on shareholders'                          4.1      4.2
equity, %
Equity ratio at end of                        10.3     10.3
period, %
Asset growth, %                              (3.3)     10.5
Consolidated          Volvo                        Volvo
balance sheets        Group                        Group
                    Financial Financial              total
                     Services Services
                     March 31     Dec 31 March 31  Dec 31 March 31 Dec 31
SEK M                    2002       2001    2002    2001     2002   2001
Intangible assets      17 201     17 366     150     159   17 351 17 525
Property, plant and    29 584     30 370   2 917   2 864   32 501 33 234
Assets under           13 987     15 020  13 669  14 060   25 803 27 101
operating leases
Shares and             34 681     35 145     203     203   27 525 27 798
Long-term customer         51         19  26 139  26 256   25 960 26 075
finance receivables
Long-term interest-     5 433      5 627       8       0    5 400  5 554
bearing receivables
Other long-term         9 113      9 017     123      73    9 048  8 902
Inventories            31 425     30 557     389     518   31 814 31 075
Short-term customer        24         95  22 706  23 732   22 007 22 709
finance receivables
Short-term interest     3 984      6 799      80      82    2 152  2 525
bearing receivables
Other short-term       28 623     29 798   2 688   2 647   30 512 31 044
Marketable             17 113     12 997     448     517   17 561 13 514
Cash and bank           5 537     11 877   1 803   2 417    6 922 13 869
Total assets          196 756    204 687  71 323  73 528  254 556    260
equity and
Shareholders'          83 276     85 185   7 359   7 550   83 276 85 185
Minority interests        377        391       0       0      377    391
Provision for post-    14 345     14 632      15      15   14 360 14 647
employment benefits
Other provisions       13 960     14 085   4 091   4 342   18 050 18 427
Loans                  27 004     29 710  56 371  57 956   80 066 81 568
Other liabilities      57 794     60 684   3 487   3 665   58 427 60 707
Shareholders'         196 756    204 687  71 323  73 528  254 556    260
equity and                                                           925
 1) Financial Services, reported in accordance with the equity method.
The  Volvo Group's total assets at March 31, 2002 amounted to SEK  254.6
billion,  corresponding to a decrease of SEK 6.4 billion  compared  with
year-end 2001. Approximately SEK 6.1 billion of the decrease was related
to currency effects.
Shareholders' equity amounted to SEK 83.3 billion as of March 31,  2002,
corresponding to an equity ratio of 42.5%, excluding Financial Services.
Net  debt  on  the same date amounted to SEK 9.3 billion. Net  financial
debt   corresponded  to  11.1%  of  shareholders'  equity  and  minority
interest. The changes in shareholders' equity and net financial position
since year-end are specified in the tables below.
Change in shareholders' equity       First three months
SEK bn                                             2002   2001
Beginning of period                                85.2   88.3
Translation differences                           (1.0)    1.0
Repurchase of own shares                              -  (8.3)
Issue of shares to Renault SA                         -   10.4
Net income (loss) during the period               (0.7)  (0.8)
Other changes                                     (0.2)  (0.1)
Balance at end of period                           83.3   90.5
Change of Net financial position, SEK bn             First three
Beginning of period                                                (7.0)
   Cash flow from operating activities                       (1.3)      
   Investments in fixed assets, net                          (1.4)      
   Customer Finance receivables, net                           0.0      
   Investments in shares, net                                  0.0      
   Acquired and divested operations                            0.2      
Cash-flow after net investments, excluding                   (2.5)
Financial Services
Debt in acquired and divested operations                           (0.2)
Change in provision for post employment                            (0.2)
Currency effect                                                      0.6
Other                                                              (0.0)
Total change                                                       (2.4)
Net financial position at end of period                            (9.3)
Key ratios                                       Jan - Jan 
                                                March   Dec
12 month figures unless                           2002  2001
otherwise stated
Sales growth, %                                  (7.7)  50.0
Income per share, SEK                            (3.40 (3.50
                                                     )     )
Income per share, excluding                       1.00  3.10
restructuring costs, SEK
Return on                                        (1.6) (1.7)
shareholders' equity,
Return on shareholders' equity excluding           0.5   1.5
restructuring costs, %
Net financial position at                        (9.3) (7.0)
end of period, SEK billion
Net financial position at end of period as       (11.1 (8.2)
percentage of shareholders' equity and minority      )
Shareholder' equity and minority                  32.9  32.8
interests as percentage of total assets
Shareholders' equity and minority interests       42.5  41.8
excluding Financial Services, as percentage of
total assets
                                              Mar 31  Dec 31
Number of Volvo shares                          2002    2001
Number of shares outstanding                   419.4   419.4
Average number of shares outstanding           419.4   422.4
during the period
Company shares held by AB Volvo                 22.1    22.1
Cash flow statement                             First
                                         three months
SEK bn                                       2002    2001
Operating activities                                     
Operating income (loss)*                    (0.5)   (0.9)
Add depreciation and                          1.9     1.8
Other non-cash items                          0.1   (0.1)
Change in working capital                   (2.6)     0.5
Financial items and income                  (0.2)   (1.0)
taxes paid
Cash flow from operating                    (1.3)     0.3
Investing activities                                     
Investments in fixed assets                 (1.7)   (1.9)
Investments in leasing                        0.0   (0.2)
Disposals of fixed assets                     0.3     0.2
and leasing vehicles
Customer Finance                              0.0     0.1
receivables, net
Investments in shares, net                    0.0   (0.2)
Acquired and divested                         0.2     3.7
Cash-flow after net investments             (2.5)     2.0
excl Financial Services
Cash-flow after net investments,            (1.1)   (1.4)
Financial Services
Cash-flow after net investments,            (3.6)     0.6
Volvo Group total
Financing activities                                     
Change in other loans, net                    0.6     8.4
Loans to external parties,                    0.3   (0.6)
Repurchase of own shares                        -   (8.3)
Change in liquid funds excl                 (2.7)     0.1
translation differences
Translation difference on                   (0.2)     0.5
liquid funds
Change in liquid funds                      (2.9)     0.6
* excluding Financial                                    
Condensed cash-flow statement,                 First three
Financial Services                        months
SEK M                                        2002    2001
Cash-flow from operating                      0.8     0.7
Net investments in credit                   (1.9)   (2.1)
portfolio etc
Cash-flow after net                         (1.1)   (1.4)
The Volvo Group's cash flow
Cash  flow  after net investments, excluding Financial Services,  was  a
negative SEK 2.5 billion during the first quarter of 2002. Cash flow  in
the  year-earlier period, excluding acquired liquid funds within Renault
Trucks  and Mack Trucks, was a negative SEK 1.7 billion. Apart from  the
fact  that  cash flow during the first quarter normally is weak  due  to
seasonal  variations  in  the  operating  capital,  weak  earnings   and
inventory  build-up  as  a consequence of the production  start  of  new
models also had a negative effect.
Cash flow after net investments within Financial Services was a negative
SEK 1.1 billion (1.4).
Net borrowing in the Group increased by SEK 0.6 billion during the first
three  months of the year. Liquid funds declined SEK 2.9 billion  during
the period, amounting to SEK 24.5 billion at March 31.
Financial review by business area
Net sales                                First    Change     12
                                  three months           month
SEK M                                       2002    2001    in  % rolling
Trucks                                   26 558  29 121      (9) 114 005
Buses                                     3 165   3 715     (15)  16 125
Construction Equipment                    4 476   4 688      (5)  20 923
Volvo Penta                               1 962   1 736       13   7 606
Volvo Aero                                2 485   2 607      (5)  11 662
Other                                     1 739   1 883      (8)   6 929
Net sales                                40 385  43 750      (8) 177 250
Operating income                       First      12-month    Jan 
                                three months                Dec
SEK M                                       2002    2001  rolling    2001
Trucks                                    (474)     150      416   1 040
Buses                                      (94)    (83)    (535)   (524)
Construction Equipment                    (131)      81      679     891
Volvo Penta                                 146     167      637     658
Volvo Aero                                   78     160      571     653
Financial Services                          115     113      327     325
Other                                        (2)    (86)      227     143
Operating income (loss)*    (362)           502   2 322    3 186
Restructuring costs                           - (1 319)  (2 543) (3 862)
Operating income (loss)     (362)         (817)   (221)    (676)
*excluding restructuring                                         
Operating margin                       First      12 month  Jan-Dec
                                 three months
%                                           2002    2001  rolling    2001
Trucks                                     (1.8)     0.5      0.4     0.9
Buses                                      (3.0)   (2.2)    (3.3)   (3.1)
Construction Equipment                     (2.9)     1.7      3.2     4.2
Volvo Penta                                  7.4     9.6      8.4     8.9
Volvo Aero                                   3.1     6.1      4.9     5.5
Operating margin*                          (0.9)     1.1      1.3     1.8
Operating margin                           (0.9)   (1.9)    (0.1)   (0.4)
*excluding restructuring                                        
At  the  beginning  of 2002, the Volvo Group changed the  organizational
structure of its truck operations by making the three truck companies 
Mack Trucks, Renault Trucks and Volvo Trucks - separate businss areas.
The  truck  operations of the Volvo Group reports directly to the  Volvo
Group  Headquarters.  The joint organization for  co-ordinating  Product
Planning,  Purchasing and Product Development, Volvo 3P,  has  formed  a
separate internal business unit.
Net sales by                           First three   Change
market area                          months
SEK M                                2002     2001     in %
Europe                           14 959   17 098     (13)
North America                     7 721    8 562     (10)
South America                       845      873      (3)
Asia                              1 099      754      +46
Other markets                     1 934    1 834       +5
Total                            26 558   29 121      (9)
Total market
The North American market continued on a very low level during the first
quarter.  Pre-buys due to the new, future emission legislation could  be
noticed. Indications of stabilization in the market were seen in March.
The  demand  for heavy trucks in Western Europe remained strong  in  the
first  three  months  of  the year but with increasing  price  pressure.
Indicators  show a favorable trend in the industry at the  beginning  of
this year and order bookings are beginning to rise somewhat.
Many  markets  in  Eastern Europe and Asia continued to  show  a  stable
Trucks'  total deliveries during the first three months of 2002 amounted
to  33,322  vehicles,  a decline of 21% compared with  the  year-earlier
In Europe, deliveries from Trucks amounted to 20,821 vehicles, down 24%.
The  decline is largely related to the production start of the new Volvo
FH/FM trucks.
In North America, Trucks delivered a total of 7,442 vehicles, a decrease
of 27% compared with the corresponding period in 2001. In Asia, however,
Trucks' deliveries increased by 52% to 1,718 trucks.
Order situation
The  new Volvo FM and Volvo FH program in Western Europe created  strong
customer  demand  and more than 20,000 orders were signed.  Accordingly,
Volvo  Trucks'  order  intake rose by 2% in the first  quarter.  Eastern
Europe also developed well, with strong order intake in several markets.
The demand for long-haulage trucks in North American was very low in the
beginning  of the year and Volvo Trucks� order intake was 8% lower  than
the  same period last year. The positive sales development continued  in
Asia with a very strong order intake in the Middle East, China and South
Korea.  In the US, Mack posted a 27% increase in its order intake during
the first quarter. The activity is viewed as a move by customers to "pre-
buy"  current models, to avoid new engine technologies being  introduced
to meet new EPA emissions regulations.
The  order  intake  for Renault Trucks increased noticeably  during  the
beginning  of  the year, particularly in France, Spain and Germany.  The
Renault  truck ranges, all of which were renewed in the past six  years,
are  well  appreciated  and order intakes for Renault  Magnum,  Premium,
Midlum and Mascott show steady increases at the end of March, between 4%
and  15%.  The  launch of the new Renault Magnum in September  2001  has
focused the interest of the customers on the new models.
Market share
Volvo's  market  shares for heavy trucks in Western Europe  declined  to
13.8%  (15.7)  in February due to the change over to new  products  (new
Volvo  FM/FH) in the production. The market share in class 8 in the  USA
fell to 7.3% (11.3) as Volvo Trucks chose not to participate in a number
of  very  aggressive  price  biddings to some larger  transport  fleets.
Mack's  US market share through March was 12.3%, down from 12.6% a  year
At  the  end  of  January, the Renault Trucks share in  the  over  6-ton
segment  in Europe had increased by 0.5%, in the medium-duty segment  by
0.7%  and in the heavy-duty segment by 0.4%. Renault Trucks market share
in  France is rising, specifically for the heavy-duty ranges, up 2.7% at
the end of February at a record high 36.6 %.
Financial performance
Net  sales for the first three months amounted to SEK 26,558 M  compared
with  SEK  29,121 M in the year-earlier period. Operating loss  for  the
first three months was SEK 474 M (income, excluding restructuring costs,
150).  The  loss in the first quarter was largely related to  continued,
but  decreasing, losses in the North American operations  and  to  lower
deliveries  of Volvo trucks as a result of the ramp-up of production  of
the new Volvo FH and Volvo FM trucks. Earnings within Mack were affected
by the economic downturn in Venezuela.
New products
The  launch  of the new Volvo FM and FH, which started in November  last
year,  has been very well received by the customers, dealers and  media.
The launch is now under way in Volvo Trucks� International markets.
The   new  Volvo  and  Renault  trucks  were  on  display  at  the   RAI
international trade show in Amsterdam at the beginning of February.  The
new  Renault Magnum attracted interest from visitors with its  new  look
and  new interior concept. The Renault Midlum was presented with its new
18-ton version. At the end of March, Spanish journalists elected Renault
Magnum "Camion del Ano 2002".
Net sales by                           First three   Change
market area                          months
SEK M                                2002     2001     in %
Europe                            1 560    1 326      +18
North America                       857    1 902     (55)
South America                        97      185     (48)
Asia                                444      192     +131
Other markets                       207      110      +88
Total                             3 165    3 715     (15)
Total market
The  demand  both in Europe and North America continues to decline.  The
touring  business is still being hit by the lack of confidence regarding
economical  development which affects the coach market  adversely.  Some
operators  in  Europe  and  the  US are  reducing  their  fleets,  which
increases  the  used  vehicle  trade.  Due  to  the  unstable  financial
situation  in  South America, the market continued on a low  level.  The
markets in Asia Pacific region showed more stable development.
Volvo delivered 1,842 buses and coaches during the first quarter of 2002
compared  with 2,117 in the year-earlier period. The decline  is  mainly
related  to lower deliveries in Mexico, South America and the US,  which
was  offset to some extent, by higher deliveries to China, South  Africa
and  Thailand. 38% was complete buses compared with 50% last  year.  The
lower  percentage  is attributable largely to the North  American  joint
ventures  being consolidated in accordance with the proportional  method
as of October 1, 2001.
Order Situation
As  a  result  of the complete and competitive product range  with  high
customer  value, the order situation in the Nordic area  was  favorable.
Coach order intake in Volvo's main European markets as well as in the US
and Canada was negatively affected by the uncertainty of the development
in  the  touring  business.  Reduced traveling  in  Mexico  resulted  in
operators  postponing their purchases of high-value buses.  Due  to  the
unstable  market  development, low order intake was  reported  in  South
America  in the first quarter of 2002. Overall, the order book  is  good
but the order intake has weakened.
Market shares
The  tough  price  competition in Europe and the US  adversely  affected
Volvo's market share while Asia Pacific had a strong development.  Volvo
is  offering  a  premium  product  and Volvo's  intention  is  to  avoid
unprofitable deals. Volvo persistently increased prices in Brazil during
the  past year, which resulted in lost market share. The competition did
not show any signs of following these hikes until recently.
Financial performance
Net sales amounted to SEK 3,165 M (3,715) during the first three months,
mainly due to the North American joint-ventures being consolidated  with
the  proportional method as from October 1, 2001. Lower sales of coaches
have  also  had  a  negative effect. The operating loss  was  SEK  94  M
compared  with  a loss of SEK 83 M in the year earlier period.  Progress
has  been  accomplished in focused areas to within short reach  a  turn-
around.  Unfortunately, the significant decline  in  South  America  and
Mexico has offset the positive developments in other regions.
In focus
Volvo is continuing to carry out the plans to exit the US transit market
-  the  Nova operations in Roswell - and focus on the Canadian business,
Nova  St  Eustache,  based on a major order from the  city  of  Montreal
received   last   year.  In  Europe  business  focuses   on   increasing
productivity  by  improving the production efficiency, reducing  product
cost  and securing a high level of quality, which is facilitated by  the
new competitive product range.
In  China, Volvo products were awarded "Coach of the Year" and  "Bus  of
the Year" at the bus show in Shanghai in March this year.
Construction Equipment
Net sales by                         First three   Change
market area                          months
SEK M                              2002     2001     in %
Europe                            2 245    2 473      (9)
North America                     1 226    1 194       +3
South America                       175      238     (26)
Asia                                667      551      +21
Other markets                       163      232     (30)
Total                             4 476    4 688      (5)
Total market
The  total  combined  world  market for heavy and  compact  construction
equipment declined by 6% during the first quarter of 2002, compared with
the  corresponding period in the preceding year. The downturn  in  North
America was 9%, in Europe 6% and in the other markets 4%.
The market for heavy construction equipment declined by approximately 6%
in  the  first  quarter. Both the North American  and  European  markets
showed a decline of 12%. Other markets showed an increase of about 1%.
For  compact  equipment,  the total market  fell  about  5%  during  the
quarter. The North American market was up 1%, while the European  market
declined 2% and the other markets fell 10%.
Market share
Compared with the year-earlier period, Volvo CE was able to increase its
share of the market in several important geographical and product areas,
mainly due to recently launched products backed by a strong brand name.
Order situation
The  value of the order bookings as of March 31 was 40% higher  than  on
the same date in 2001 and nearly 60% higher compared with year-end 2001.
Financial performance
Volvo  CE's net sales during the first quarter amounted to SEK  4,476  M
(4,688). The operating loss was  SEK 131 M (income: 81).
The  decrease  in  sales  and  earnings is mainly  due  to  the  overall
difficult  market  conditions  and the  subsequent  impact  on  capacity
utilization coupled with a negative geographic mix. In addition, certain
vendor supply and ramp-up issues impacted adversely on production rates.
Other developments
In  March,  Volvo CE announced its acquisition of the manufacturing  and
product  design  rights  to  a range of soil compaction  equipment  from
SuperPac  Inc. This product range will initially be distributed  through
Volvo CE�s recently launched rental initiative and certain dealers under
the SuperPac brand. Volvo will continue to develop the products and at a
later stage brand them Volvo.
Additionally,  Volvo  and Komatsu confirmed their  basic  agreement  for
cooperation  on  production  and development of  construction  equipment
components.  As  a  first step, the companies signed  an  agreement  for
production  of  Komatsu  designed  cabs  at  Volvo  CE's  cab  plant  in
Hallsberg, Sweden. Production is scheduled to start at the beginning  of
2003 and the volume will be set for approximately 1,500 units per year.
The new internally developed backhoe loader was successfully launched at
the  ConExpo  trade  show in Las Vegas in March. The  range  of  backhoe
loaders will be produced in Poland.
Volvo Penta
Net sales by                         First three   Change
market area                          months
SEK M                              2002     2001     in %
Europe                            1 034      967       +7
North America                       578      506      +14
South America                        33       37     (11)
Asia                                281      196      +43
Other markets                        36       30      +20
Total                             1 962    1 736      +13
Total Market
The North American marine and industrial engine market showed signs of a
recovery  during  the first quarter of the year. The  total  market  for
marine  and industrial engines in Europe remained at the same  level  as
the first quarter of 2001, which means that demand continues to be high.
The  market for industrial engines for gensets in China and engines  for
irrigation  plants in Saudi Arabia remained favorable. Demand  was  also
reasonably strong in other world markets.
Market share
During  the  quarter, Volvo Penta strengthened its share of  the  marine
engine  market  in  North  America. The large, independent  builders  of
leisure  craft  in  Europe  continued to be successful,  which  in  turn
boosted   Volvo   Penta's   marine  engine  business.   The   successful
introductions  of the KAD 300 and D2-55 marine diesel  engines  in  2001
have made a strong contribution to Volvo Penta's leading position. Volvo
Penta's  European  sales  of industrial engines for  gensets  increased,
while  sales  of  industrial  engines for mobile  applications  declined
slightly. Taken as a whole, this trend means that the company's share of
the industrial engines market in Europe is virtually unchanged.
Order bookings
During  the first quarter of 2002, an increase was noted in Volvo  Penta
order bookings for mainly gasoline-powered engines in the North American
market.  Order  bookings also continued to increase in Asia.  The  order
situation for diesel engines in Europe continued to be strong,  although
some signs of a decline could be noted toward the end of the period.  In
a  historical perspective, Volvo Penta's total order backlog at the  end
of the quarter was at a very high level.
Financial performance
Volvo Penta's net sales amounted to SEK 1,962 M (1,736), up 13% compared
with the preceding year. Operating income for the first quarter amounted
to SEK 146 M (167).
Changes  in  the allocation of development costs for engines within  the
Volvo  Group had an adverse effect on earnings compared with  the  year-
earlier period. Adjusted for this, Volvo Penta reached a slightly better
result  than  in 2001. Earnings were positively affected by  the  strong
sales  recovery  in  the North American market, continued  stable  sales
increases  in  other  regions  and by an unchanged  level  of  operating
expenses. The Marine Commercial business area showed strong development,
with sales up by more than 20% during the first quarter.
Product news
In  recent  years, Volvo Penta has implemented a number  of  significant
product  launches  within  the  Marine Leisure,  Marine  Commercial  and
Industrial  business  segments.  The  company's  strategy  is  to  renew
substantial parts of Volvo Penta's existing engine program during a five-
year  period.  As  part  of  this strategy,  new  10-liter  engines  for
industrial applications were launched during the first quarter  of  2002
and the engine range for commercial marine traffic was expanded.
Volvo Aero
Net sales by                           First three   Change
market area                          months
SEK M                                2002     2001     in %
Europe                             986    1 217     (19)
North America                     1 260    1 163       +8
South America                        51       40      +28
Asia                                156      141      +11
Other markets                        32       46     (30)
Total                             2 485    2 607      (5)
Total market
Following  the sharp downturn in international air travel  last  autumn,
which  was dramatically compounded by the terrorist attacks on September
11,  airline passenger traffic began to recover, month by month,  during
the first quarter of the year.
However,  total  air traffic around the world is still a minus  compared
with the year-earlier figure. Statistics for passenger traffic indicates
that   air  travel  was  down  10.7%  in  January,  compared  with   the
corresponding month of the preceding year.
According  to  industry analysts, order bookings  for  both  Boeing  and
Airbus  are expected to decline this year by 30-40%, compared with  2001
and  bottom out during 2003. Key factors for a reversal of the  negative
trend  for the industry are the general economic situation, improvements
in the finances of the airlines, and how many of the approximately 2,000
aircraft that are currently parked in the desert will be scrapped.
During 2002, Boeing and Airbus are expected to deliver 650-700 aircraft,
compared with 852 in 2001. Forecasts for 2003 refer to 575-600 aircraft.
Deliveries of components for new aircraft engines are still  on  a  high
level,  but are expected to decrease this autumn affected by  the  lower
demand  for aircraft. The high utilization of the aircraft fleet in  use
will  in time positively affect production of new spare parts. This will
also have a positive impact on recovery within engine overhaul and spare
parts   sales   within  Volvo  Aero  Services,  which  were  immediately
influenced by the terror attack September 11.
Order situation
As  a  consequence of the crisis affecting the aviation industry, orders
for components for new aircraft engines have declined, compared with the
corresponding period of 2001.
The decline in air travel has also had a major effect on the spare parts
market and engine-maintenance requirements.
Financial performance
Net  sales  declined by 4.7% during the period to SEK 2,485  M  (2,607).
Operating  income  fell to SEK 78 M (160), despite  a  continued  strong
trend of earnings from newly manufactured components and spare parts for
commercial  aircraft engines. The operating margin was 3.1%  (6.1).  The
areas  with  the  greatest profitability problems are  those  that  were
affected  earliest by the downturn following September 11, namely  spare
parts and engine overhaul operations.
Current  focus  is  on adapting operations to meet  the  new  conditions
prevailing  in  the aviation industry. Volvo Aero Services  in  the  US,
which  sells  spare  parts  to airlines, reduced  its  workforce  by  70
employees last autumn. In total about 370 employees will have  to  leave
Volvo Aero, of which 70 have already left.
On  the  overhaul  side,  the company is working intensively  to  secure
orders  in  a  declining market. Volvo Aero Services is  continuing  its
efforts  to sign long-term agreements with both airlines and  the  large
manufacturers in the sector.
Work  to generate export sales of Sweden's Gripen combat aircraft,  with
the Volvo RM12 engine, are continuing. Slovakia is the latest country to
have shown an interest in this aircraft.
New orders
The  need  for  engine overhauls has declined in pace with  air  traffic
having  contracted throughout the world since autumn 2001. Despite  this
trend,  in  February Volvo Aero Engine Services successfully  secured  a
contract with Russia's Aeroflot for the maintenance of the JT9D  engine,
an order worth approximately USD 60 M during a five-year period. This is
the largest single overhaul contract signed by Volvo Aero since 1998 and
is,  at  the  same  time, an important breakthrough into  the  expanding
Russian market.
Ryan  air,  the  Irish low-price airline, has placed an  order  for  100
Boeing 737-800 aircraft, with an option for an additional 50 aircraft of
the  same  type.  For Volvo Aero's part, this contract in  its  entirety
corresponds to orders for engine components totaling slightly more  than
SEK 200 M.
The  negotiations  with  the Czech Republic's government  regarding  the
purchase of 24 Gripen combat aircraft are proceeding according  to  plan
and are expected to be concluded before the summer.
Financial Services
Retail volume during the first quarter was SEK 5.8 billion, which is SEK
1.1  billion  higher than in the corresponding period in  the  preceding
year.  Renault  and  Mack Truck financing added  approximately  SEK  1.3
billion, Construction, Bus and Aero related financing increased SEK  0.2
billion  while Volvo Trucks related financing decreased SEK 0.4 billion.
Penetration in markets where Financial Services is offering financing on
sales of new Volvo trucks amounted to 33%, compared with 25% in the year-
earlier period.
Total  assets as of March 31, 2002, amounted to SEK 71 billion, of which
SEK 62 billion was in the credit portfolio. Adjusted for the effects  of
foreign exchange movements, the credit portfolio increased by 1%  during
the  first  quarter.  Volvo truck financing accounted  for  62%  of  the
portfolio,  bus  financing for 16% and construction equipment  14%.  The
remaining 8% is related to financing of Renault Truck and Mack  and  the
other  business  areas. Geographically, about 20% of Financial  Services
credit portfolio is related to the US truck market.
Operating  income  for the first quarter amounted to  SEK  115  M  (113)
compared with fourth quarter earnings in 2001 of SEK 80 M (151). At  the
end  of  March,  total credit reserves amounted to 2.9%  of  the  credit
portfolio compared with 2.2% the same period last year. Total write-offs
during the first quarter amounted to SEK 212 M compared with SEK  163  M
for the same period last year.
During  the  first  quarter,  the  increased  volume  and  strengthening
relationship  with  Mack  Trucks  and  Renault  Trucks  was  a  positive
development.  The  benefit  is  both  a  development  towards   a   more
diversified  portfolio  and potential synergies  that  can  be  achieved
through the utilization of a common back-office.
Number of employees
As  of  March  31, 2002, the Volvo Group had 70,460 employees,  compared
with 70,921 at the end of 2001.
G�teborg, April 22, 2002
AB Volvo (publ)
Leif Johansson
This report has not been reviewed by AB Volvo's auditors.
Volvo's report on the first six months of 2002 is to be published on
July 23, 2002 and will be available at The report can
also be ordered from Celero Support AB, DDC, Dep 64620 ARUN, SE-405 08
G�teborg, Sweden. Telephone: +46 31-66 10 47. Fax: +46 31-66 20 20. E-
mail: [email protected]
Quarterly figures,                                         
Volvo Group                                                
SEK M unless           1/2001  2/2001 3/2001  4/2001 1/2002
otherwise specified
Net sales              43 750  47 098 41 134  48 633 40 385
Cost of sales             (36     (38    (34     (40    (33
                         236)    887)   033)    321)   205)
Gross income            7 514   8 211  7 101   8 312  7 180
Research and           (1 394) (1 357) (1 279) (1 361) (1 505)
development expenses
Selling expenses       (3 378) (3 599) (3 444) (4 242) (3 797)
Administrative         (1 659) (1 776) (1 525) (1 514) (1 277)
Other operating         (696)   (815) (1 063)   (497) (1 094)
income and expenses
Income from Financial     113      63     69      80    115
Income from               (2)   1 396   (43)       9     16
investments in
associated companies
Income from other           4       0   (28)    (14)      0
Restructuring costs    (1 319)       - (1 406) (1 137)     
Operating income        (817)   2 123 (1 618)   (364)  (362)
Interest income and       411     388    466     388    266
similar credits
Interest expenses and   (684)   (650)  (690)   (629)  (514)
similar charges
Other financial         (161)    (49)   (38)      58    (8)
income and expenses
Income (loss) after    (1 251)   1 812 (1 880)   (547)  (618)
financial items
Taxes                     422   (465)    316      53  (118)
Minority interests         28       9     29       7   (10)
Net income (loss)       (801)   1 356 (1 535)   (487)  (746)
Depreciation and amortization                              
included above
Volvo Group excl        1 818   2 106  1 907   1 216  1 950
Financial Services
Financial Services        698     691    834     691    783
Total                   2 516   2 797  2 741   1 907  2 733
Income (loss) per      (1.90)    3.20 (3.60)  (1.20) (1.80)
share, SEK
Average number of       431.4   419.4  419.4   419.4  419.4
shares, million
* Financial Services reported in accordance                
with the equity method.
Income per share is calculated as net income divided by the
weighted average number of shares outstanding during the
Key operating ratios                                       
%                      1/2001  2/2001 3/2001  4/2001 1/2002
Gross margin             17.2    17.4   17.3    17.1   17.8
Research and              3.2     2.9    3.1     2.8    3.7
development expenses
in % of net sales
Selling expenses in %     7.7     7.6    8.4     8.7    9.4
of net sales
Administrative            3.8     3.8    3.7     3.1    3.2
expenses in % of net
Operating margin        (1.9)     4.5  (3.9)   (0.7)  (0.9)
Operating margin excl     1.1     4.5  (0.5)     1.6  (0.9)
restructuring costs
Net sales                                               
SEK M                  1/2001  2/2001 3/2001  4/2001 1/2002
Trucks                 29 121  29 256 25 611  32 580 26 558
Buses                   3 715   4 915  4 001   4 044  3 165
Construction            4 688   6 067  5 388   4 992  4 476
Volvo Penta             1 736   1 976  1 774   1 894  1 962
Volvo Aero              2 607   3 060  2 994   3 123  2 485
Other                   1 883   1 824  1 366   2 000  1 739
Net sales              43 750  47 098 41 134  48 633 40 385
Operating income                                        
SEK M                  1/2001  2/2001 3/2001  4/2001 1/2002
Trucks                    150     639  (340)     591  (474)
Buses                    (83)    (25)  (185)   (231)   (94)
Construction               81     408    266     136  (131)
Volvo Penta               167     222    141     128    146
Volvo Aero                160     286    118      89     78
Financial Services        113      63     69      80    115
Other                    (86)     530  (281)    (20)    (2)
Operating income          502   2 123  (212)     773  (362)
Restructuring costs    (1 319)       - (1 406) (1 137)     
Operating income        (817)   2 123 (1 618)   (364)  (362)
* excluding                                                
restructuring costs
Operating margins                                       
%                      1/2001  2/2001 3/2001  4/2001 1/2002
Trucks                    0.5     2.2  (1.3)     1.8  (1.8)
Buses                   (2.2)   (0.5)  (4.6)   (5.7)  (3.0)
Construction              1.7     6.7    4.9     2.7  (2.9)
Volvo Penta               9.6    11.2    7.9     6.8    7.4
Volvo Aero                6.1     9.3    3.9     2.8    3.1
Operating margin*         1.1     4.5  (0.5)     1.6  (0.9)
Operating margin        (1.9)     4.5  (3.9)   (0.7)  (0.9)
* excluding restructuring costs
Accounting principles
In  preparing  this report, Volvo has applied the accounting  principles
presented in Note 1, page 57, of the Volvo 2001 Annual Report.
This   report   contains   forward-looking   statements   that   reflect
management's  current views with respect to certain  future  events  and
potential financial performance.  Although the Company believes that the
expectations   reflected   in  such  forward  looking   statements   are
reasonable, no assurance can be given that such expectations will  prove
to have been correct.  Accordingly, results could differ materially from
those  set  out in the forward looking statements as a result of,  among
other   factors,  (i)  changes  in  economic,  market  and   competitive
conditions,  (ii)  success of business and operating initiatives,  (iii)
changes in the regulatory environment and other government actions, (iv)
fluctuations in exchange rates and (v) business risk management.
This  report  does not imply that the company has undertaken  to  revise
these  forward-looking  statements, beyond what is  required  under  the
company's  registration contract with the OM Stockholm Exchange  if  and
when  circumstances arise that will lead to changes compared to the date
when these statements were provided.
Units invoiced                      First three  First three Change in %
 Trucks                             months 2002  months 2001
Europe                                   20.821       27.517        (24)
   Western Europe                        19.341       25.883        (25)
   Eastern Europe                Eastern Europe           1.480        1.634         (9)
North America                             7.442       10.150        (27)
South America                             1.163        1.283         (9)
Asia                                      1.718        1.132          52
Other markets                             2.178        2.057           6
Total, Trucks                            33.322       42.139        (21)
Mack Trucks                         First three  First three Change in %
                                    months 2002  months 2001
North America                             4.555        6.564        (31)
South America                               181          189         (4)
Asia                                          2            -         n.a
Other markets                               256          180          42
Total                                     4.994        6.933        (28)
Renault Trucks                      First three  First three Change in %
                                    months 2002  months 2001
Europe                                   14.029       15.574        (10)
   Western Europe                        13.274       14.889        (11)
   Eastern Europe                           755          685          10
Asia                                         82          138        (41)
Other markets                             1.214        1.373        (12)
Total                                    15.325       17.085        (10)
Volvo Trucks                        First three  First three Change in %
                                    months 2002  months 2001
Europe                                    6.792       11.943        (43)
   Western Europe                         6.07       10.994        (45)
   Eastern Europe                           725          949        (24)
North America                             2.887        3.586        (19)
South America                               982        1.094        (10)
Asia                                      1.634          994          64
Other markets                               708          504          40
Total                                    13.003       18.121        (28)
Units invoiced, buses/bus           First three  First three Change in %
chassis                             months 2002  months 2001
Europe                                      714          632          13
   Western Europe                           639          596           7
   Eastern Europe                            75           36         108
North America                               445          943        (53)
South America                                84          262        (68)
Asia                                        437          207         111
Other markets                               162           73         122
Total, buses/bus chassis                  1.842        2.117        (13)
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