geely
sweden ab
ANnUAL
report
2013
I
CONTENTS
This is Volvo Car Group ................................................................................................................. 1
Financial Reports
Volvo Cars – 2013 at a glance ................................................................................................ 2
Consolidated Income Statements .............................................................................23
CEO Comments.................................................................................................................................... 4
Consolidated Comprehensive Income ...................................................................23
Consolidated Balance Sheets ......................................................................................24
Board of Directors Report ..................................................................................................... 6
Changes in Consolidated Equity ................................................................................25
Financial & Business summary 2013 ....................................................................... 7
Consolidated Statement of Cash Flows ...............................................................26
Strategy .............................................................................................................................................. 8
Notes to the Consolidated Financial Statements ........................................27
Products & Innovation .........................................................................................................10
Income Statements and Comprehensive Income
– Parent Company ..................................................................................................................54
Production & Operations ..................................................................................................12
Sales Development ...............................................................................................................14
Board of Directors ..................................................................................................................16
Executive Management ......................................................................................................18
Governance ..................................................................................................................................20
Risks & Risk Management ..............................................................................................20
Subsequent Events ...............................................................................................................21
Proposed Distribution of Net income .....................................................................21
Balance Sheets – Parent Company .........................................................................55
Changes in Equity – Parent Company ...................................................................56
Statement of Cash Flows – Parent Company ..................................................56
Notes to the Parent Company Financial Statements ................................57
Subsidiaries .................................................................................................................................60
Signatures .....................................................................................................................................61
Auditors Report ........................................................................................................................62
Contact..............................................................................................................................................63
About This Report
The Board of Directors Geely Sweden AB, corporate identity number
556798-9966, hereby submit the Annual Report and consolidated
financial statements for January 1 - December 31, 2013. The Volvo
Car Group’s consolidated financial review comprises all information
through page 6 to 62.
Read more
Visit Volvo Cars at www.volvocars.com and learn more about Volvo Cars’
products and services.
Reports are available online at www.volvocars.com/corporate.
II
geely sweden ab Annual report 2013
This is Volvo Car Group
Volvo Cars’ history dates back to 1927 when the Swedish company
Volvo Car Corporation was founded and the first Volvo car was
launched. Volvo Cars is headquartered in Gothenburg (Sweden). Volvo
cars are produced in factories in Torslanda (Sweden), Ghent (Belgium),
Chengdu (China), Chonqing (China), and Kuala Lumpur (Malaysia).
Since 2010 Volvo Cars is owned by Zhejiang Geely Holding Group Co.
Ltd. (Geely). In 2013 around 2,300 Volvo dealers sold 427,840 cars in
100 countries around the world. As of December 2013, Volvo Car
Group employed about 23,200 people.
The transformation of Volvo Cars
Volvo Cars is going through a major transformation in line with the
corporate and brand strategy “Designed Around You” which is all about
the customer and a human centric focus. Designed Around You is the
foundation of the corporate culture and the strategy sets the objectives
for Volvo Cars to establish itself as a leading brand within the premium
segment. With roots firmly based in its Swedish heritage, China is
becoming the second home market of Volvo Cars with extensive commercial and industrial presence. Additionally, new vehicle and engine
technology will serve the global market and ensure a premium customer
experience based on safety, contemporary Scandinavian design, environmental care and clever functionality.
Corporate Objectives
Strategic CHANGE THEMES
•
•
•
•
• Emphasize profitability and efficiency
• Revitalize the Volvo brand with customer centricity throughout
the value chain
• Reinforce our product strengths based on focused innovation,
smart architecture and win-win collaboration
• Capture global growth and sourcing potential, leveraging the
­presence in China
• Secure profitable growth in core segments in Europe and North
America
• Build a global organization with performance and health, able to
act in a fast, smart and nimble way
Provide cars people want
Be a lean and nimble company
Have a top tier premium auto brand perception
Be the employer of choice
Which will lead to
• Sales of over 800,000 vehicles globally
• Top car industry profitability
The Volvo Car Group
– Corporate structure
Zhejiang Geely
Holding Group Co., Ltd.
Shanghai Geely Zhaoyuan
International
Investment Co., Ltd.
Volvo Car Group includes:
• Geely Sweden AB
• Volvo Car Corporation
• Subsidiaries
• Joint venture companies
Geely Sweden Holdings AB
Volvo Cars, the Operations, includes:
• Volvo Car Corporation
• Subsidiaries
• Joint venture companies
• Affiliated companies
Joint venture companies are associated companies in which Volvo Car
Corporation holds a voting interest of less or equal to 50 percent.
Affiliated companies are companies in close collaboration with Volvo
Car Group but owned by another legal entity, for example the Chengdu
manufacturing plant, Zhongjia Automobile Manufacturing (Chengdu)
Co., Ltd., which is owned by Chinese subsidiaries of the parent
company, Shanghai Geely Zhaoyuan I­nternational Investment Co., Ltd..
geely sweden ab Annual report 2013
Geely Sweden Automotive AB
Volvo Car Group
(Consolidation
level of all financial
communication)
Volvo Cars
(The Operations)
Affiliated
companies
Geely Sweden AB
Volvo Car Corporation
All sales companies,
other subsidiaries
& joint venture companies
1
Volvo cars
–2013 at a glance
In 2013, Volvo Cars continued its transformation journey and launched
the biggest renewal of the product line up in its history and launching
the new Drive-E powertrains. Volvo Car Group reported an operating income of SEK 1,919 (66) million, with a net income of SEK 960 (–542)
million. The result was a step into reaching sustainable profitability
levels, primarily due to the positive second half year.
Volvo Car Group managed to turn a loss over the first half of 2013
into a full-year profit due to a positive sales development and cost
focus. Retail sales for 2013 was mainly driven by an increase in China
and reached about the same volumes as 2012. Wholesale declined
during the first half year following the preparations for the launch of
the renewed models.
In 2013, Volvo Car Group further strengthened its long term
funding structure via loan agreements with financial partners and
institutions.
A major renewal of the models was launched into markets around
the world. The first versions of Volvo Cars’ in-house developed, new
four-cylinder Drive-E powertrain family were launched and new worldfirst safety technologies such as Cyclist Detection with full auto brake
were introduced in Volvo cars during 2013.
At the International Motor Show (IAA), in Frankfurt, the global audience caught a glimpse at what the future holds with the launch of the
Volvo Car Concept Coupé. The concept car was the first of three concept cars showing Volvo Cars’ new design strategy and the possibilities
of Volvo Cars’ in-house developed platform, the new Scalable Product
Architecture (SPA). The second concept car, the Volvo Concept XC
Coupé, was previewed in late December ahead of its reveal at the
Detroit Auto Show in early 2014. Throughout 2013, the development
RETAIL Sales by region 2013
Rest of the World,
18.5%
of the all-new Volvo XC90, the first car to be based on the Scalable
Product Architecture, continued and is scheduled for a global launch
in 2014.
The industrial expansion in China, financed by Geely, is progressing according to plan with the two joint venture companies in Daqing
and Zhangjiakou and the plant in Chengdu which went operational in
November 2013.
Key Figures
2013
2012
Retail sales
427,840
421,951
China
61,146
41,989
USA
EU 20
of which Sweden
China, 14.3%
USA, 14.3%
Europe
excl Nordic
countries and
Belgium,
4.3%
68,079
227,027
52,260
51,832
79,366
84,856
Wholesale
419,728
432,950
Net revenue, MSEK
122,245
124,547
Rest of World
Operating income, MSEK
Net income, MSEK
Operating & investing cash flow, MSEK
1,919
66
960
–542
21
–4,929
EBIT margin
1.6%
0.1%
EBITDA, MSEK
9,826
8,082
Equity ratio
28.1%
28.5%
Average number of employees by region 2013
North and South
America, 1.8%
61,233
226,095
Models by range 2013
Asia, 6.2%
Other, 0.4%
C, 2.7%
S, 17.1%
Belgium,
17.9%
XC, 37.9%
EU20, 52.9%
2
Nordic countries
excl Sweden 1.5%
Sweden, 67.9%
V, 42.3%
geely sweden ab Annual report 2013
• Launch of renewed model range in Geneva
• Launch of the world-first Cyclist Detection
Q1
• Improved funding
• Preview of Chinese manufacturing plant in
Chengdu
• Start of production of renewed models
Q2
• 2013 Global NCAP Innovation Award
• World debut for Volvo Concept Coupé on IAA
• Self-parking car showcase
Q3
• Approved manufacturing license in China
• Start of production of Drive-E Powertrains
• Start of production of S60L in Chengdu
Q4
geely sweden ab Annual report 2013
• Loan agreement with China Development Bank
3
CEO comments
2013 was a year of which we can be proud. We reported an operating income of SEK 1,919 million for the full year of 2013, which
was a significant improvement from the loss of SEK 577 million
in the first half of the year. This is a good performance considering our first half and I would like to thank all our employees who
worked so hard to achieve this.
As I consider 2013, I would like to share some valuable observations I made during the year, as they feed directly into how Volvo Cars
will continue to develop and grow in 2014 and beyond.
The first observation is that our focus on cost in 2013 has been
an essential factor in returning to profitability. We need this work to
continue in order to improve efficiency and productivity. This focus on
costs needs to be a natural and ongoing part of our culture. Stable
profitability is a prerequisite for our future growth and I would like to
emphasise that we will continue to focus on increasing revenues by
manufacturing premium cars. Our strategy is one of growth.
Sales in China increased to 61,146 cars a raise by 45.6 per cent
compared to 2012, driven by new products, increased marketing activities and the expansion of the Chinese dealer network.
It is apparent that China is a crucial market and that our position
with our owner is providing us with a deeper insight into the opportunities to be found in this huge market. This is illustrated by the start of
production at the manufacturing plant in Chengdu, China, in November.
Additionally, the engine plant in the Zhangjiakou joint venture commenced production of Volvo engines. This rapid build-up would not
have been possible without support from our owner, Geely.
Last year, we made the largest renewal of the model range in Volvo
Cars’ history, which was an important factor behind the increase in
sales in Europe during the second half of 2013, despite tough economic conditions.
These developments highlight an important fact - there is a very
healthy appetite for new Volvo cars, which is reassuring considering
the strong pipeline of new models we plan to launch later this year and
thereafter.
This takes me to the United States, where Volvo Cars experienced
a challenging year. Overall sales fell by 10.1 per cent to 61,233
cars compared to 2012, partly due to a narrow customer offer. With
new management in place in the US, new models on the way and a
renewed focus on the Volvo brand by our dealers, it is clear that we are
committed to the market. Within a few years, we should have solidified
our position in the market and sell more than 100,000 cars in the
United States again.
Innovation remained central to our journey in 2013 and provided
some important insights into how we are going to develop in future.
Volvo Cars’ new, highly-efficient, four-cylinder engine family ‘Drive-E’
was launched during the Frankfurt Motor Show in September. Drive-E
engines provide an exciting driving experience while at the same time
reducing fuel consumption and CO2 emissions. They will replace
all other Volvo engine families in the future and all are prepared for
electrification.
Our Drive-E engines are proof of the fact that the number of cylinders no longer matters when the same power as a six or eight cylinder
engine can be derived from a four cylinder engine and at the same
time offer much lower emissions and much better fuel economy.
We are also committed to developing autonomous driving. In early
December, Volvo Cars and the Swedish government announced a
world-first in autonomous driving. From now until 2017 we will work
towards having 100 self-driving Volvo cars use public roads in everyday
driving conditions around the Swedish city of Gothenburg, the world’s
first large-scale autonomous driving pilot project. Autonomous drive
China
Chinasales
sales
sweden market share
61,146
Cars
70,000
41,989
60,000
50,000
0
Q1
2012
4
Q3
17,766
11,284
14,678
14,922
Q2
9,327
10,000
10,881
20,000
13,780
30,000
10,497
40,000
Q4
2013, %
2012, %
Change,
%-points
January–March
20.4
19.3
1.1
April–June
19.5
18.1
1.4
July–September
17.3
17.1
0.2
October–December
22.5
20.6
1.9
Full Year
20.0
18.9
1.1
Total
2013
geely sweden ab Annual report 2013
technologies are a major element in developing safer and more sustainable cars, while these technologies also have many demonstrable
benefits in terms of efficiency and time management.
Several Volvo models were recognized for their top safety levels in
2013, among others by the American Insurance Institute for Highway
Safety (IIHS). We are committed to keep that position as industry
leader and we are moving ever closer to our Safety Vision 2020, which
states that by 2020 no one should be killed or seriously injured in a
new Volvo car. The all-new XC90 that we launch later this year will
feature the first of several next-generation safety and driver support
systems.
Finally, I would like to provide a brief insight into the coming years
at Volvo Cars. The coming year will be a year of growth, with a good five
per cent increase in sales, characterised by a continued strong performance in China and a recovery in the US, our two largest markets.
Volvo Cars will in 2014 and thereafter introduce new technologies,
a series of industry-leading innovations and launch the much-anticipated all-new XC90, the first car to be built on the company’s brand new,
in-house developed SPA platform. It will be the first Volvo production
model to carry the company’s new design language, successfully
showcased in the critically-acclaimed Volvo concept cars. In China,
Volvo Cars will build on the successful sales performance in 2013
and aim to continue its growth momentum. The first full year of local
production of the S60L in the Chengdu manufacturing plant as well as
a further expansion of the dealer network should support Volvo Cars’
continued growth in China.
geely sweden ab Annual report 2013
In the longer term, we will continue the transformation journey that we
embarked on in 2010, by launching more new Volvo cars based on
our in-house developed vehicle architectures, featuring cutting-edge
technologies and powered by our industry-leading family of fourcylinder Drive-E powertrains. By taking full control of our own product
development without the need for compromises, Volvo Cars will flourish
as an independent car manufacturer under solid ownership for many
years to come.
Much of the work that has been undertaken at Volvo Cars since
being acquired by Geely in 2010 has been leading up to today. 2013
was an important step on this path, and it is essential that we do not
rest on our laurels. 2013 was very challenging and required hard work.
2014 will be equally challenging and will require equally hard work. Yet
I am convinced that we have the right strategy and the right people to
take us forward.
Gothenburg, April 24 2014
Håkan Samuelsson
President & CEO
Volvo Car Group
5
Board of Directors
­R eport
The Volvo Car Group
Geely Sweden AB, with its registered office in Stockholm, is a subsidiary of Geely Sweden Automotive AB, a subsidiary of Geely Sweden
Holdings AB, owned by Shanghai Geely Zhaoyuan International Investment Co., Ltd., registered in Shanghai, China with ultimate majority
ownership held by Zhejiang Geely Holding Group Ltd., registered in
Hangzhou, China.
Volvo Car Group consists of Geely Sweden AB, Volvo Personvagnar
AB (Volvo Car Corporation), all subsidiaries in which Volvo Car Corporation holds a voting interest of more than 50 per cent or has the power
to control, and joint venture companies, and are hereinafter referred
to as “Volvo Car Group”. In its capacity as a holding company, Geely
Sweden AB does not conduct any direct business, other than holding
shares in its subsidiary, Volvo Car Corporation. Geely Sweden AB indirectly, through Volvo Car Corporation and its subsidiaries, joint venture
companies and affiliated companies, herinafter referred to as ”Volvo
Cars”, operate in the automotive industry with business relating to the
design, development, manufacturing, marketing and sales of cars. As
the operational business is conducted in Volvo Cars, the annual report
will refer to Volvo Cars when describing the business operation, and
specifically refer to Volvo Car Group where relevant.
Two Chinese joint venture companies for manufacturing plants
- Zhangjiakou Volvo Car Engine Manufacturing Co., Ltd. and Daqing
Volvo Car Manufacturing Co., Ltd. – of which a subsidiary of Volvo Car
Corporation owns 30 per cent with the remainder owned by Shanghai
Geely Zhaoyuan International Investment Co., Ltd. and Zhejiang Geely
Holding Group Co., Ltd., have been established in 2013.
The joint venture companies are accounted for using the equity
method. Volvo Cars governs the operations of the Chinese joint venture
companies and the same processes and quality standards as in the
European facilities are applied.
The manufacturing plant in Chengdu (China), Zhongjia Automobile
Manufacturing (Chengdu) Co., Ltd., owned by Chinese subsidiaries of
the parent company of the Volvo Car Group, Shanghai Geely Zhaoyuan
International Investment Co., Ltd., is an affiliated company to Volvo
Car Group. Volvo Cars operates and governs the operations of the
Chengdu plant to ensure the same processes and quality demands as
in the European facilities.
When communicating the business performance and financial
reports, besides from the annual report, the half year consolidated
financial report of Geely Sweden AB is used to represent the performance of the Volvo Car Group.
6
board of director’s report
Zhejiang Geely
Holding Group Co., Ltd.
Shanghai Geely Zhaoyuan
International
Investment Co., Ltd.
Geely Sweden Holdings AB
Geely Sweden Automotive AB
Volvo Car Group
(Consolidation level
of all financial communication)
Volvo Cars
(The Operations)
Affiliated
companies
Geely Sweden AB
Volvo Car Corporation
All sales companies,
other subsidiaries
& joint venture companies
geely sweden ab Annual report 2013
financial & Business
summary 2013
2013 was characterized by the introduction of the biggest renewal
programme in Volvo Cars’ history. The first half of the year, dealer stock
reduction and phase out of the older models resulted in negative
wholesales in a year on year comparison. After launching the new
models, retail sales increased and reached about the same volumes in
2013 as in 2012, mainly driven by China. Retail sales for Volvo Cars
increased by 1.4 per cent to 427,840 (421,951) units.
Income statement
For Volvo Car Group net revenue decreased by SEK 2,302 million
to SEK 122,245 (124,547) million, primarily due to lower wholesale
volumes and negative exchange rate development. Gross income
increased by SEK 364 million to SEK 20,311 (19,947) million mainly
as a result of a positive market and carline mix as well as efficiencies
on material cost. Expenses in research & development decreased by
SEK 425 million to SEK 5,864 (6,289) million. Expenses in research &
development are the net of investments and capitalised product development costs supporting the product strategy of Volvo Cars. Operating
margin increased to 1.6 per cent (0.1) following a small decrease of
administrative expenses to SEK 5,129 (5,192) million and a decrease
of selling expenses to SEK 7,919 (8,642) million. Operating income
amounted to SEK 1,919 million (66), and net income for the year was
SEK 960 million (–542).
Balance Sheet
Intangible assets increased by SEK 1,605 million to SEK 17,271
(15,666) million linked to investments for SPA and Drive-E. Accounts
receivable increased by SEK 883 million to SEK 5,618 (4,735) million, mainly due to sales growth in China. Trade payables increased by
SEK 1,006 million which is related to higher production at the end of
2013 compared with the same period 2012. Investments in associates
increased by SEK 609 million to SEK 1,159 million, corresponding to
the establishment of the joint venture companies in China.
Total non-current liabilities amounted to SEK 24,108 (21,073)
million. In line with the changed accounting principles under IAS 19 on
Employee Benefits, the Retirement Benefit Obligations have decreased
to SEK 3,641 million and have been restated accordingly for 2012
to SEK 5,492. The provision for post employee benefits was highly
affected by a change in the discount rate. The amendment in accounting principles stipulate that the decreased liabilities is to be offset in
the Group´s equity and have resulted in a positive change in equity to
24,638 million, with 2012 restated equity value at SEK 21,901 million.
During 2013 Volvo Car Group’s liabilities to financial institutions
increased by SEK 5,486 million. In the first quarter, a loan from Swedish Export Credit of SEK 1,000 million and the second tranche of EUR
107 million of a China Development Bank (CDB) loan was drawn.
During the autumn, CDB and Volvo Car Corporation agreed upon a
second loan of USD 800 million of which USD 466 million was drawn
geely sweden ab Annual report 2013
in the fourth quarter of 2013. A revolving credit facility with maturity in
2016 totalling EUR 360 million was put into place during 2013, and
remained unutilized.
Cash Flow
Cash flow from operating activities was positive with SEK 8,861 (2,749)
million. This was SEK 6,112 million higher than in 2012, mainly due to
the positive operating income and improved working capital development.
Investments, mainly on product development, have increased
compared to 2012. Cash flow from investing activities was SEK –8,840
(–7,678) million. Cash flow from operating and investing activities
amounted to SEK 21 (–4,929) million and with increased financing
activities throughout the year, cash flow for the period increased to
SEK 5,786 (–4,473) million.
Business summary
In China, sales increased by 45.6 per cent compared to 2012 to
61,146 units (41,989). The European markets are still under the impression of the debt crisis and sales for EU20 declined by 0.4 per cent
to 226,095 units (227,027). In the US, Volvo Cars sales decreased
with 10.1 per cent to 61,233 (68,079) units.
In 2013, production of the new powertrains, Drive-E, started in
Skövde and the development of the new platform, Scalable Product
Architecture (SPA), continued. SPA and Drive-E are essential elements
of the transformation of the Volvo brand into a leading premium car
manufacturer with sustainable profitability. Construction work continued
in the manufacturing operations, including the Torslanda plant, to
prepare for the launch of SPA in 2014.
The China expansion continued with the establishment of two joint
venture companies for manufacturing plants in 2013, Zhangjiakou Volvo
Car Engine Manufacturing Co., Ltd. and Daqing Volvo Car Manufacturing Co., Ltd. of which a subsidiary of Volvo Car Corporation owns 30 per
cent with the remainder owned by Shanghai Geely Zhaoyuan International Investment Co., Ltd. and Zhejiang Geely Holding Group Co., Ltd..
In June 2013, production of the Volvo C70 convertible model at
the Uddevalla plant in Sweden ceased, and the property was subsequently sold.
Volvo Car Financial Services is responsible for managing and developing the customer finance and insurance offering provided by Volvo
Car’s on a global basis. During 2013, the new entity secured financing
for the majority of the new Volvo cars sold in the US. In most of the
larger markets, Volvo Cars uses a branded financial and insurance offering through Volvo Cars partner banks and insurance companies.
1)
EU20 includes Sweden, Norway, Denmark, Finland, the Netherlands, Belgium,
Luxemburg, France, Spain, Italy, Greece, Portugal, the UK, Ireland, Germany,
Switzerland, Austria, Poland, Hungary and the Czech Republic.
board of director’s report
7
Strategy
The start of the Journey
Where are we today?
• Division to stand alone
• Become a leading global ­premium auto brand
• Independent development of a modular
­product technology: Scalable Product
­Architecture
• Independent development of powertrains:
Drive-E
• China industrial footprint
• Employee culture change: Aspired Culture
• Launch of model year 2014, the
most extensive renewal of the model
range in Volvo Cars’ history
• Production and launch of a in-house
developed powertrain: Drive-E
• Production start in Chengdu
• Launch of a new design strategy:
Concept Coupé
2020
A leading premium brand
2013
2010
After being acquired by Zhejiang Geely Holding Group Ltd., in 2010,
Volvo Cars embarked on a new chapter in the company’s history. Volvo
Cars started a transformation journey that will establish the company
as a top premium car manufacturer with a strong customer focus, an
independent company under solid and stable ownership and offering
world-class products that people want, based on in-house developed
technology.
Volvo Cars’ corporate strategy, Designed Around You, is based on
the human centric focus that differentiate the brand from other car
companies. The strategy states clear and ambitious objectives and underlines Volvo Cars’ commitment of taking control of its future product
development with an in-house developed scalable platform and a new
modular powertrain family. Volvo Cars has also set out to leverage its
existing fundamental brand pillars: intuitive innovations, safety, environmental performance and Scandinavian design. The long term strategy
which will lead to sales of 800,000 vehicles annually, combined with a
sustainable profitability will be achieved by focusing on the key regions
Europe, China and the US.
Research & development
– technological independence
Volvo Cars is currently in the process of moving towards technology
independence. Since 2010, Volvo Cars has been gradually moving
from Ford legacy technology to technology developed in-house, based
on Volvo Cars’ own prerequisites and without the need for compromise.
8
board of director’s report
This does not just apply to technology completely developed by Volvo
Cars, like the SPA vehicle architecture or the Drive-E engine family,
but also to technology developed through smart collaborations within
Geely. An example is the vehicle architecture for future C-segment
cars currently developed by China Euro Vehicle Technology (CEVT ) in
Gothenburg. While the C-segment architecture will serve both future
Volvo and Geely Automobile cars, the modular nature of the architecture allows for specific solutions that will fulfil the requirements of each
brand, while at the same time, offering economies of scale.
China growth plan
An important element of Volvo Cars’ new corporate strategy is the establishment of China as one of the company’s key markets and setting
up a local headquarter in Shanghai.
In order to support the long-term goal of selling 200,000 cars per
year in China, Volvo Cars has established a manufacturing footprint
in China. The first plant in China was opened in Chengdu in the summer of 2013, with series production starting in the fourth quarter.
Volvo Cars also operates through the newly established joint venture
companies an engine assembly plant in Zhangjiakou, while a second
manufacturing plant is under construction in Daqing.
Volvo Cars has established a solid dealer network in all major cities
in China. Currently the focus is on expanding the network in China’s
smaller cities, many of which represent completely new regional
markets for Volvo Cars. In its marketing activities, Volvo Cars underlines its Scandinavian heritage and its leadership in automotive safety.
geely sweden ab Annual report 2013
Volvo Cars also highlights the premium car experience and intuitive
functionality ingrained in its cars and uses its comparative advantage in
areas like cabin-air quality and safety to appeal to Chinese consumers
concerned about pollution and the well-being of their families.
Financial Strategy
Volvo Cars long-term objective is to deliver sustainable top car industry
profitability. Volvo Cars will continue to invest in new technology and
car models that enable the long term objectives. Investments are not
the sole driver behind sustainable growth as focus on cost control
throughout the whole value chain will continue. Diversified financing
is important to achieve low financing cost and sustainable financial
partnerships, as well as independence. Conservative financial policies
and focused risk management are applied to deliver on the objective of
having a financial risk profile and capital structure that enables investment grade rating.
Sustainability, safety and quality
Volvo Cars’ commitment to the environment covers the entire lifecycle
of the car, from design, engineering and production to useful life, service and recycling. Sustainability is central to all decisions and investments; it is key to successful and ethical business. The sustainability
agenda for Volvo Cars is described in four dimensions: people, societal,
economic and environmental. Together, these four dimensions cover
the work towards a future sustainable mobility.
Volvo Cars has a longstanding commitment to being a responsible
corporation with a clear focus on sustainable development throughout the entire value chain. Volvo Cars publishes annual sustainability
reports in line with the international reporting guidelines of the Global
Reporting Initiative (GRI).
Volvo Cars is committed to developing new technologies that help
create sustainable mobility solutions for the 21st century. Both the
SPA platform and the Drive-E powertrains are prepared for electrification and Volvo Cars is a leading actor in bringing electrification
technologies to market, with the V60 Plug-in Hybrid being a prominent
example. By coupling the four-cylinder Drive-E engines to electrification technology, Volvo Cars delivers a range of smaller, more intelligent
powertrains that provide performance levels comparable to that of a
larger combustion engine, while at the same time reducing fuel consumption and CO2 emissions.
Volvo Cars is the leader in automotive safety and remains at the
vanguard of innovation in safety solutions. The company continues to
introduce world-first technologies in automotive safety and constantly pushes boundaries in the journey towards its Safety Vision
2020, which states that by 2020 no one should be killed or seriously
injured in a new Volvo. A major element in developing safer and more
sustainable mobility solutions is autonomous drive technologies, which
have many noticeable benefits in terms of safety, efficiency and time
management.
The manufacturing strategy is focusing on four areas: Responsive
Manufacturing Structure, Best Practice China Ramp-up, World Class
New Model Introduction and Productivity Step Change & Operational
Excellence. In line with the strategy, the manufacturing department
also simplified the production system, which will be focused around five
principles: Teamwork with involvement, Stability through standardisation,
Right from me, Demand driven flow and Continuous improvements.
geely sweden ab Annual report 2013
Since 1998 Volvo Car Corporation has an environmental product
declaration. All businesses have permits covering their operations and
the environmental impact of noise, emissions to air and water, waste
produced and the consumption of energy and chemicals. Declaration is
made continuously to both local and national environmental authorities.
All manufacturing operations in which Volvo cars are built have to
comply with the Volvo Cars Global Environmental Standard (VCGES).
The VCGES sets standards in a whole range of areas, varying from
waste water treatment over emissions from the paint operations, to
energy consumption and energy efficiency. VCGES is very strict and
puts high demands on Volvo manufacturing sites. Therefore the plants
must perform better than what is legally required. The VCGES is also
an important tool in reaching the desired states in the Volvo Car Group
Environmental Strategy.
Volvo Cars’ global quality standards consist of an extensive series
of requirements processes and demands that ensure that each car
leaving a Volvo plant is of the highest quality. This approach is followed
throughout the whole industrial cycle: from stringent demands on materials and parts delivered by suppliers to strict controls throughout the
manufacturing process, to extensive quality checks after final assembly.
People
Volvo Cars has a clear vision: to be the world’s most progressive and
desired premium car brand. To reach this - it needs talented people.
That is why Volvo Cars has made it a strategic objective to become an
employer of choice that manages to attract the best people available.
When the Corporate Strategy was formulated, the company decided to
build a global organisation based on a balance between performance
and health. Volvo Cars define health as the ability to align, execute
and renew itself faster than its competition. The balance between
performance and health will improve results, credibility and Volvo Cars
attractiveness as an employer. The Volvo Cars culture is the true enabler to reach these objectives, it is expressed by three cultural values
that all employees live by: Passion For Customers And Cars, Move Fast,
Aim High and Challenge & Respect.
Since becoming a stand-alone company in 2010, Volvo Cars has
made good progress towards its objective to become an employer of
choice. Both, in 2012 and 2013, Volvo Cars has been listed on the
Universum list of the world’s most attractive employers, in which students around the globe are asked about their ideal employers. In 2013,
Volvo Cars was ranked 49th on the list of most attractive companies
among engineering students in the world’s twelve largest economies.
Building a global organisation with performance and health and the
ability to act in a smart and nimble way is the essence of Volvo Cars’
people strategy. Another important element of becoming and being
an employer of choice is to ensure sustainable profitability. By being
consistently profitable through steady growth and under solid ownership, Volvo Cars ensures stability and creates new job opportunities in
the regions it operates.
board of director’s report
9
Products & Innovation
– a 2013 review
New Product Launches – 2013
At the Geneva Motor Show in March, Volvo Cars showed no less than
six renewed cars to the world: a major renewal of the S60, V60, XC60,
V70, XC70 and S80 made their world debut in Geneva. The new model
range constituted the most extensive development of existing models
in Volvo Cars’ history.
Part of the launch was a world-first in automotive safety: a technology that detects and automatically brakes for cyclists swerving out
in front of the car. The new functionality was an enhancement of the
existing detection and auto brake technology.
Another feature launched was the innovative permanent high beam
functionality called Active High Beam Control. The system makes driving in the dark safer and more comfortable by enabling drivers to use
the high beam continuously, thanks to an ingenious mechanism that
prevents dazzling of oncoming drivers by shading out only as much of
the beam as necessary.
In 2013, Volvo Cars also launched its new Sensus Connect infotainment and connectivity system. The existing user interface called
Sensus was extended with the option to add intuitive all-new technology that enables connectivity and Internet in the car. Drivers go online
either via a car-mounted 3G/4G dongle or a personal mobile phone.
The system also has a voice-activation system, while it is also possible
to share a WiFi network with everyone in the car.
Drive-E powertrains
The Drive-E powertrains, showcased during the IAA in September are
available in petrol and diesel versions and are currently offered in six
Volvo models, with a further roll-out planned for 2014. Among the first
Drive-E engines on the market was the T6 with 306 horse powers
(hp) and the new 8-speed automatic, which made the S60 T6 the first
car in its segment to deliver over two horsepower per gram CO2 from
a combustion engine only. Another notable Drive-E variant is the D4,
which in an S60 makes it the first car in the premium D-segment with
CO2 emissions under 100 g/km, delivering 181 hp.
New design language and SPA possibilities showcased in Volvo
Concept Coupé
Also making its world debut in Frankfurt was the Volvo Concept Coupé,
the first of three concept cars to showcase Volvo Cars’ new design direction and to demonstrate the capabilities of the company’s in-house
developed Scalable Product Architecture (SPA), on which the first
new model to be launched is the all-new XC90 in 2014. Inspired by
contemporary, progressive Scandinavian lifestyle and design as well as
iconic elements from the past, both the first and the second concept
car - the Volvo XC Concept Coupé, shown in Detroit in January 2014
- generated a lot of positive attention in the media and won several
awards.
10
board of director’s report
The concept car also includes a new approach to Volvo Cars’ humancentric user experience. A large portrait touch-screen in the centre
console interacts with an adaptive digital display and head-up display
in front of the driver. The petrol plug-in hybrid driveline in the Volvo
Concept Coupé reflects Volvo Cars’ strategy to use electrification to
create the most powerful versions in the new four-cylinder Drive-E
engine family.
Innovation and next generation technology – 2013
Next-generation safety and support features
During a media event in July, Volvo Cars demonstrated a number of
user-friendly safety and support technologies that will be introduced in
the all-new Volvo XC90. Among the technologies shown was pedestrian detection in darkness, which makes the detection and braking
for other vehicles, pedestrians and cyclists work effectively also when
driving in dusk or at night.
The all-new XC90 can also be equipped with Adaptive Cruise Control with steering assistance. The feature helps the driver stay in the
lane and follow the rhythm of the traffic by automatically following the
vehicle ahead. Road edge and barrier detection, also with steer assist,
will be introduced in future models produced on the SPA platform.
‘Drive Me’ – Self-driving cars for sustainable mobility
Volvo Cars publicly demonstrated an ingenious autonomous parking
concept during the summer 2013. The smart, driverless car parks by
itself as well as interacts safely with other cars and pedestrians in the
car park. The autonomous parking technology will be part of the ‘Drive
Me’ autonomous driving pilot project that takes place in Gothenburg in
2017, which was announced in early December 2013. ‘Drive Me’ is a
joint initiative between Volvo Cars and Swedish government authorities,
in which 100 self-driving Volvo cars will use public roads in everyday
driving conditions, in what will be the world’s first large-scale autonomous driving pilot project.
The aim with the pilot project is to acquire a deep and broad
understanding of the requirements of autonomous driving in relation to infrastructure, driver interaction and how other drivers react on
autonomous cars. This unique collaboration between authorities and
industry, positions Sweden and Volvo Cars as leaders in the development of future mobility.
New experimental electrification technologies
Throughout 2013, Volvo Cars worked with a number of experiments in
the field of electrification, as part of the company’s constant drive to
further develop its electrification technologies. One example is Volvo
Cars’ participation in an advanced research project studying the possibilities of inductive, cordless charging for electric vehicles. The results,
published in October, showed that this technology for transferring
geely sweden ab Annual report 2013
­ nergy via an electromagnetic field has a promising future. A Volvo
e
C30 Electric test car could be fully charged in around 2.5 hours, by
placing the car on top of an electromagnetic field in a charging base
station.
In another project, Volvo engineers developed a revolutionary concept for lightweight structural energy storage components that could
improve the energy usage of future electrified vehicles. The material, consisting of carbon fibres, nanostructured batteries and super
capacitors, offers lighter energy storage that requires less space in the
car, cost effective structure options and is eco-friendly. The research
project took place over 3.5 years and resulted in energy-storing car
panels on a Volvo S80 experimental car.
In the summer of 2013, Volvo rolled out an upgraded fleet of Volvo
C30 Electric demonstration cars. This fleet, developed in cooperation
with Siemens, allows European leasing customers of Volvo Cars to
drive and evaluate this electric version of the Volvo C30. With acceleration from 0-70 km/h in 5.9 seconds and a full recharge time of only
1.5 hours thanks to a world first on-board fast-charger, the Volvo C30
Electric delivers on Volvo’s commitment to electrification by enhancing
acceleration and customer flexibility.
In April, Volvo Cars also revealed the results of a study into the possibilities offered by kinetic flywheel technology, also known as KERS.
The testing of an experimental system for kinetic energy recovery
was carried out during 2012. The results show that this technology
has the potential to significantly reduce fuel consumption, while also
giving drivers an extra boost in terms of horsepower. Volvo Cars is now
evaluating how the technology can be implemented in upcoming Volvo
models.
Safety achievements and recognition in 2013
In July, Volvo reached a safety milestone as the sales number of Volvo
cars equipped with systems for automatic braking passed the one
million mark.
formance of front crash prevention systems. Both the Volvo S60 and
XC60 received the highest possible rating – ‘Superior’ – and Volvo
Cars’ City Safety was the only standard fitment low-speed crash prevention system in the test, which included 74 vehicles.
IIHS also recognized the lasting quality of the Volvo XC90, which
was launched already back in 2002. More than a decade later, IIHS still
ranked the XC90 as one of the safest cars on the market by awarding
it a 2013 Top Safety Pick+.
Previously, the Volvo S60 and XC60 had already received the prestigious 2013 Top Safety Pick+ ranking since IIHS extended its scope
by integrating the small overlap crash test in 2012. In December, the
Volvo S80 was also recognized with a 2014 Top Safety Pick+ by IIHS.
2013 Global NCAP Innovation Award
Volvo Car Group’s pioneering work on pedestrian protection was
rewarded with the ‘2013 Global NCAP Innovation Award’ in May. The
award recognized a number of ground-breaking pedestrian protection
systems developed by Volvo Cars in recent years, such as Pedestrian
Detection with full auto brake and the world-first Pedestrian Airbag
Technology on the Volvo V40.
Folksam accident research study
Volvo Cars’ leadership in safety was further supported by a safety
report of the Swedish insurance company Folksam in September
2013. The report put four Volvo models – the S60, V60, V70 and
S80 – in lead of the ranking with an extensive margin. The Folksam
study evaluates the safety performance of 238 car models that have
been involved in 158,000 accidents that have been reported to the
Swedish police between 1994 and 2013. The information is combined
with medical reports about 38,000 injured persons in traffic accidents
between 2003 and 2013.
American Insurance Institute for Highway
Several Volvo models were recognized for their top safety levels in
2013. In September, the American Insurance Institute for Highway
­Safety (IIHS) introduced a new test programme that rates the per-
geely sweden ab Annual report 2013
board of director’s report
11
Production & Operations
China: Start of Volvo production in Chengdu
In November, series production of Volvo vehicles started at the Geely
owned manufacturing plant in Chengdu. The first car built in Chengdu
is the Volvo S60L, a long wheel base version of the Volvo S60. The
start of production in the Chengdu plant was an important milestone
in Volvo Cars’ transformation journey and a further cornerstone in the
establishment of an industrial footprint in China.
In 2013, Volvo Cars also started operations at the engine plant in
Zhangjiakou, while work on the establishment of the vehicle manufacturing plant in Daqing continued.
Sweden: SPA investments, start of production
of Drive-E powertrains
At the Swedish operations in Torslanda and Olofström, work continued
to make the plants ready for the production of cars built on the SPA
architecture. As part of the significant investments in the new SPA and
Drive-E projects that were announced late 2012, construction of a new
body shop in the Torslanda vehicle plant in Gothenburg, Sweden was
completed during the second half of 2013. In May, Volvo Cars’ engine
plant in Skövde, Sweden started the production of the company’s new,
in-house developed Drive-E powertrain family. The new petrol and
diesel engines were introduced in a number of car lines in 2013 and
will be fully rolled out through 2015.
Global standards for sustainable,
high-quality car production
All plants are following the global environmental standards set out in
the Volvo Cars Global Environmental Standard (VCGES). The waste
water treatment plant in Chengdu is designed with both chemical and
biological treatment steps before the water is released to a municipal
waste water treatment facility. The VCGES also aims to reduce water
consumption and to implement a global water protection standard in
all plants. In terms of emissions to air, which are mostly caused by paint
operations, the Chengdu plant is designed to perform better than the
average car factory in Europe. The paint operations in the Chengdu
plant are based on the use of mainly water-based paints and the stateof-the-art paint application equipment used in Torslanda and Ghent.
Volvo Cars strives to find a climate-neutral energy supply for all
its global operations and to continuously reduce the total energy
consumption. All the electricity used in the company’s European
operations is certified hydro- and wind-powered electricity. Volvo
Cars has decades of experience of energy efficiency, such as energy
management, energy monitoring and lean energy principles which are
implemented in all plants.
In China, the supply of renewable energy is still under development,
but it is expected to grow strongly in the years to come. Volvo Cars follows this development closely and aims to contribute to the shift from
traditional means of energy to renewable sources of energy.
Belgium: Strong year for Ghent plant
In January, Volvo Cars’ manufacturing plant in Ghent, Belgium celebrated a milestone as the plant’s fifth-millionth car rolled off the assembly
line. The Ghent plant started operations in 1965 and currently employs
around 4,500 people. The fifth-millionth car was a diesel variant of the
successful Volvo V40. In total, Volvo Car Gent produced over 253,000
cars in 2013, with the majority being XC60 and V40 models.
Production numbers per manufacturing/assembly site
Gothenburg
Ghent
Chengdu1)
20,874
35,124
1,856
Uddevalla2)
Chongqing3)
Malaysia
Total 2013
–
6,507
418
58,272
65,634
225
7,790
11,549
S40
S60/S60L
S80
7,565
S80L
3,752
Total 2012
3,752
5,529
32,526
V40
80,961
455
81,416
V40CC
24,138
167
24,305
2,579
–
22,625
V50
V60
56,568
V70
25,166
XC60
415
113,056
XC70
23,974
XC90
23,491
569
180
C30
C70
Total
1)
2)
3)
12
4,059
157,638
253,279
1,856
4,059
3,752
2,429
56,983
55,161
25,166
32,030
113,625
113,252
23,974
26,274
23,671
29,841
–
18,079
4,059
7,811
423,013
429,397
The manufacturing plant in Chengdu (China) is owned by Chinese subsidiaries of the parent company of the Volvo Car Group,
Shanghai Geely Zhaoyuan International Investment Co., Ltd.
The Uddevalla plant was closed in June 2013.
Manufacturing performed in a factory owned by Changah Automotive Co Ltd, Ford Motor Company and Mazda Automotive Co., Ltd.
board of director’s report
geely sweden ab Annual report 2013
geely sweden ab Annual report 2013
board of director’s report
13
Sales Development
Car industry development
Global car industry development
Overall, global gross domestic product (GDP) growth stabilized at 2.5%
in 2013. Growth in the US improved from 1.1% in the first quarter to
3.6% in the third – followed by a relapse in the fourth quarter because
of the temporary US government shutdown in October. Overall, car
sales rebounded as the economy, job creation and housing markets
improved.
The positive global development was partly offset by another
weak year in Europe. Most northern European markets saw feeble but
positive growth in 2013, whilst growth in all the Southern European
economies was negative. One quarter of European pre-crisis car sales
volumes was lost between 2007 and 2013, with car sales during this
period virtually collapsing in the southern part of the continent. Precrisis volumes will not be reached for several years still. At the same
time, structural changes within the industry increase complexity further.
The overcapacity in Europe is still unsolved with plant utilisation for
more than half of the top 100 plants below break-even; emerging market demand now outstrips developed market demand and a changing
regulatory environment is placing additional cost on manufacturers.
In the BRIC countries, with the exception of Russia, economic
growth either stabilized or increased. China’s economic growth hit a
low point of 6.1% in the first quarter and then accelerated to 9.1% in
the third quarter. Chinese car sales continued to increase with sedan
models accounting for the main volumes but with sport utility vehicles
(SUV) models showing the strongest growth..
Global trends
Demand for new cars in large developed markets such as the US
remains quite healthy, but the shift away from larger cars to smaller,
more fuel efficient models continues. This indicates that consumers
remain financially constrained and that fuel efficiency is becoming a
key factor when it comes to deciding which car to buy. At the same
time, consumers in larger emerging markets such as Brazil, Russia,
India and China are seeking bigger and more luxurious cars, especially
SUVs. Crucially, however, they are also demanding fuel efficiency and
environmental friendliness. Hybrid and electric cars are unlikely to
satisfy this demand in the short term and this has raised interest in
optimising and downsizing the internal combustion engine, possibly in
line with electrification.
sales by model
SALES BY ten biggest markets
2013
Outlook
In China, growth will continue to develop strongly as increasing disposable income makes cars affordable. In the long term, car sales in the
US are expected to be back at pre-crisis level by 2016, while Europe
faces a new normal with car sales staying below pre-crisis levels for
the foreseeable future. The automotive industry has shown itself to
be resilient and open to change during economic uncertainty. But the
way in which it handles the twin pressure of economic and structural
change will define its longer term future.
2012
2013
2012
S40
181
12,354
US
61,233
68,079
S60
61,579
64,746
China
61,146
41,989
Sweden
52,260
51,832
UK
32,678
31,743
Germany
26,680
32,070
Netherlands
23,006
16,338
S60L
S80
67
–
7,951
11,698
S80L
3,531
5,545
V40
78,307
22,202
V40CC
21,604
244
Japan
16,897
13,848
223
30,246
Belgium
16,670
16,338
V50
V60
54,666
53,037
Russia
15,017
20,364
V70
26,133
31,522
Italy
13,708
14,855
114,010
106,203
XC60
XC70
24,418
25,579
XC90
23,784
31,290
C30
5,628
19,256
C70
5,758
8,029
427,840
421,951
Total
14
board of director’s report
geely sweden ab Annual report 2013
Retail sales in 2013
In 2013 the market development in the automotive sector was strong
in China as well as in the US. China grew by 14.5 per cent compared
to 2012, from 14.972 million units to 17.145 million units. The US
market, characterised by high levels of discounts and competitive offers, increased by 8.4 per cent to 15.520 (14.313) million units.
The economies in Southern Europe contracted, whilst almost all of
Central and Northern Europe saw weak, but positive growth. In Europe
(EU20), the total car market declined by 2.1 per cent to 12.004
(12.265) million units in 2013. A positive exception was the UK, where
the total car market grew by 10.8 per cent to 2.264 (2.045) million
units.
Volvo Cars retail sales
Volvo Cars reported retail sales for 2013 of 427,840 (421,951) units,
an increase of 1.4 per cent following significant growth in China and
flat sales in the mature European markets, partly offset by decreasing sales in the US. The Volvo XC60 was the best-selling model with
114,010 (106,203) sold units, followed by the V40 and the S60. Sales
for the V40 model reached sales volumes of 78,307 units, while the
V40 Cross Country model recorded additional sales of 21,604 units.
The launch of the renewed models supported the sales development in Europe, which also built on the ongoing success of the Volvo
V40 and V60 Plug-in Hybrid. Helped by strong demand for these two
models, overall sales in the Netherlands increased by 40.8 per cent.
The Netherlands is now Volvo Cars sixth largest market.
In Sweden, Volvo Cars defended its position as market leader in
Sweden with a small year-on-year increase of 0.8 per cent to 52,260
(51,832) cars. The market share was strengthened to 20 per cent and
four models were on the top-ten list of best-selling car models. The
Volvo V70 once again ended the year as Sweden’s most-sold car, while
the Volvo V60, XC60 and V40 were other top sellers in the country.
China sales increased by 45.6 per cent compared to 2012, selling 61,146 cars. The increase was driven by new product launches,
increased marketing and the expansion of the dealer network. Demand
for Volvo Cars safety offer and premium cabin air quality were major
drivers behind the success of the Volvo S60 and XC60, while the first
full year of Volvo V60 sales also underlined the popularity of the estate
model with sales of 6,554 cars. The Volvo V40 was launched in China
in the first quarter of 2013 and was the third best-selling Volvo model
in China, behind the XC60 and S60.
Volvo Cars experienced a challenging year in the US, but the
market remains important. Sales fell by 10.1 per cent to 61,233 cars
compared to 2012, partly due to the phase-out of the C30 and C70
models and a later introduction of the renewed model programme,
while demand for the Volvo XC60 and S60 was strong and both
models sold better than in 2012. Just before the end of the year, Volvo
Cars introduced the V60 to the American market, which together with
the refreshed model range and new Drive-E powertrains is expected to
stabilize Volvo Cars sales in the American market in 2014.
Japanese sales grew by 22 per cent to 16,897 cars, a level last
achieved in the late 1990s. Other well-performing markets in Asia
were Taiwan with an increase of 4.6 per cent to 4,364 cars and South
Korea with an increase of 11.5 per cent to 1,965 cars.
Industry development (total passenger vehicles registered)1)
‘000
2013
2012
Change, %
14.5
China2)
17,145
14,972
USA2)
15,520
14,313
8.4
EU 20
12,004
12,265
–2.1
of which Sweden
Rest of the World
270
280
–3.7
17,489
17,676
–1.1
2013
2012
Change, %
Retail Sales
Number of cars sold
China
61,146
41,989
45.6
USA
61,233
68,079
–10.1
226,095
227,027
–0.4
52,260
51,832
0.8
79,366
84,856
–6.5
427,840
421,951
1.4
2013
2012
Change, %–points
China2)
0.36
0.33
0.03
USA2)
0.40
0.47
–0.07
0.03
EU 20
of which Sweden
Rest of the World
TOTAL
Market share1)
%
EU 20
of which Sweden
Rest of the World
1)
2)
1.90
1.87
20.01
18.86
1.15
0.33
0.35
–0.02
Source: Polk
Preliminary data for China and US.
geely sweden ab Annual report 2013
board of director’s report
15
Board of directors
Board of Directors in Geely Sweden AB
This is the Annual Report of Geely Sweden AB. Geely
Sweden AB has a Board of Directors consisting of four
members. In its capacity as a holding company, Geely
Li Shufu
Chairman of the Board of
Directors, Since August, 2010.
Born 1963. MSc in
mechanical engineering
and BSc in Management
Engineering.
Other assignments: Founder
and Chairman, Zhejiang Geely
Holding Group.
Hans-Olov Olsson
Vice-Chairman of the Board of
Directors, since August 2010.
Born 1941. Master of Political
Sciences.
Sweden AB does not conduct any business, other
than holding assets in its subsidiaries and joint venture
companies.
Li Donghui
Member of the Board of
Directors, since April, 2011.
Born 1970. MBA and Master
of Management Engineering.
Other assignments: CFO &
Vice President, Zhejiang Geely
Holding Group, Executive
Director, Geely Automobile
Holdings, Chairman of London
Taxi Corporation.
Zhang Ran
Member of the Board of
Directors, since August, 2010.
Born 1966. Ph.D. in
Economics.
Other assignments: Executive
director of Geely Automobile
Holdings Limited, CFO of
Geely Auto Group.
Board of Directors in Volvo Car Corporation
Volvo Car Corporation is a subsidiary of Geely Sweden AB. The operational business is conducted in Volvo Car Corporation and its subsidiaries. The Board of Directors of Volvo Car Corporation consists of 13
members, with two deputy members from the trade union side.
Li Shufu
Chairman of the Board of
Directors, since August 2010.
Born1963. MSc in mechanical
engineering and BSc in
Management Engineering.
Other assignments: Founder
and Chairman, Zhejiang Geely
Holding Group.
16
Hans-Olov Olsson
Vice-Chairman of the Board of
Directors, since August 2010.
Born 1941. Master of Political
Sciences.
board of director’s report
Volvo Car Corporation welcomed two new members to the Board of
Directors in 2013. Carl-Peter Forster (formerly BMW, Opel, Tata) joined
the Board in January and former IKEA CEO Mikael Ohlsson took up a
Board position in October.
Carl-Peter Forster
Member of the Board of
Directors, since January 2013.
Born 1954. Economics,
Aeronautical Engineering.
Other assignments: Chairman
of the Board, ZMDi AG
and Friedola Tech GmbH.
Member of the Board, Geely
Automobile Holdings, Gordon
Murray Design Ltd., The
Mobility House AG, Cosworth
Group Holdings Ltd.
Mikael Ohlsson
Member of the Board of
Directors, since October 2013.
Born 1957.
Industrial economy.
Dr. Herbert H. Demel
Member of the Board of
Directors, since August 2010.
Born 1953. PhD in technical
sciences.
Other assignments: Special
Advisor to the CEO and
Executive Management of
Magna, Chief Operating
Officer, M+W Group GmbH.
geely sweden ab Annual report 2013
Board of Directors in Volvo Car Corporation cont.
Lone Fønss Schrøder
Member of the Board of
Directors, since August 2010.
Born 1960. MSc in Law and
an MSc in Economics.
Other assignments:
Vice Chairman and Audit
Committee, SAXO Bank.
Member of the Board and
Audit Committee, Aker
Solution ASA, Member of the
Board and Chairman of the
Audit Committee NKT A/S
and Valmet Oy amo.
Dr. Peter Zhang
Member of the Board of
Directors, since December
2010.
Born 1966. PhD in Economics.
Other assignments:
Regional Managing Director,
North Asia, G4S Plc.
Winnie Kin Wah Fok
Member of the Board of
Directors, since August 2010.
Born 1956. Bachelor Degree
in Commerce.
Other assignments: Senior
Advisor of FAM, Member of
the Board of Directors: G4S
plc., Kemira Oyj, Skandinaviska
Enskilda Banken AB, HOPU
Investments Co. Ltd.
Li Donghui
Member of the Board of
Directors, since April 2011.
Born 1970. MBA and Master
of Management Engineering.
Other assignments: CFO &
Vice President, Zhejiang Geely
Holding Group, Executive
Director, Geely Automobile
Holdings, Chairman of London
Taxi Corporation.
Håkan Samuelsson
CEO and Member of the
Board of Directors, since
August 2010. Born 1951.
MSc in Mechanical
Engineering.
Other assignments: Chairman
of Scandlines GmbH, Board
member Kihlstedt & Dueholm.
Sören Carlsson
Union representative in The
Board of Directors, appointed
by Unionen, Since 2010.
Employed by Volvo Cars: 1985
Birth year: 1964
Björn Ohlsson
Deputy union representative
appointed, by Akademikerna
Volvo Cars, since 2009.
Employed by Volvo Cars: 1981
Birth year: 1963
Magnus Sundemo
Deputy union representative,
appointed by IF Metall, since
2008.
Employed by Volvo Cars: 1979
Birth year: 1954
Union representatives
Glenn Bergström
Union representative in The
Board of Directors appointed
by IF Metall, since 2009.
Employed by Volvo Cars: 1974
Birth year: 1955
Marko Peltonen
Union representative in The
Board of Directors, appointed
by IF Metall, Since 2006.
Employed by Volvo Cars: 1989
Birth year: 1965
geely sweden ab Annual report 2013
board of director’s report
17
executive management
Executive Management Team in Volvo Car Corporation
Volvo Car Corporation is managed by the Executive Management Team,
(EMT) with twelve members, led by the CEO and overseen by the Board
of Directors of Volvo Car Corporation. Besides from managing Volvo Car
Corporation the Executive Management Team also set out the directions for the operations in the rest of the businesses in Volvo Cars.
In February 2013, Lars Danielson was appointed Senior Vice
President Volvo Car China Operations in May, Volvo Cars announced the
formation of a new global Purchasing and Manufacturing function. Lars
Wrebo, until then Senior Vice President Manufacturing, was appointed
head of the new unit. Alain Visser, from Opel, took up the position as
Senior Vice President, Marketing, Sales & Customer Service in July.
Hans Oscarsson, who had a key role during Zhejiang Geely Holding
Group Ltd.’s acquisition of Volvo Car Group and has been with the company since 1990, was appointed as Chief Financial Officer in August.
Håkan Samuelsson
President & CEO, since
October, 2012.
Born 1951. MSc in
Mechanical Engineering.
Previous positions: Chairman
& CEO, MAN AG, Executive
Board Member Development/
Production, Scania Group.
Hans Oscarsson
Chief Financial officer,
since August 2013.
Born 1965. Master Degree of
Finance.
Previous positions: Various
positions within Finance, Volvo
Cars.
Lex Kerssemakers
Senior Vice President, Product
Strategy & Vehicle Line
Management,
since January, 2011.
Born 1960. Automotive
­Business Management.
Previous Positions: President,
Volvo Car Overseas Corp.
Senior Vice President,
Brand, Business & Product
Strategy, Vice President
Global Marketing, Volvo Cars,
Gothenborg.
Peter Mertens
Senior Vice President,
Research & Development,
since April, 2011.
Born 1961. PhD in Production
and Industrial Engineering.
Previous positions: Jaguar
Cars Plc/Tata Motors India,
Head of Corporate Quality
Member of the management
board of Tata Automotive and
Jaguar/Landrover Cars
Global Vehicle Line Executive,
Compact Cars, General Motors.
Alain Visser
Senior Vice President
Marketing, Sales and
Customer Service,
since July, 2013.
Born 1963.
Master of Business
Administration.
Previous positions: Board
member at Opel/Vauxhall.
Chief Marketing Officer at GM
Europe.
­ ars Danielson
L
Senior Vice President, Volvo
Cars China Operations, since
March, 2013.
Born 1949.
B.A. in Mathematics and
Computer Science.
Previous positions: Vice
president, Volvo Cars
Manufacturing Asia, Shanghai.
General Manager, Volvo Cars
Torslanda (VCT), Gothenburg.
Vice President Manufacturing,
Saab Automobile, Trollhättan.
18
board of director’s report
geely sweden ab Annual report 2013
Executive Management Team in Volvo Car Corporation cont.
Lars Wrebo
Senior Vice President,
Purchasing & Manufacturing,
since April, 2012.
Born 1961. Master of Science.
Previous positions: Executive
Vice President, Production
& Logistics. Member of the
Executive Board MAN Trucks
& Bus, Munich Germany,
Senior Vice President, Chassis
and Cab Production, Scania,
Södertälje, Sweden. Managing
Director, Scania Production
Angers S.A.S., Angers, France.
Björn Sällström
Senior Vice President, Human
Resources, since 1 March
2007.
Born 1954. Pedagogical and
Behavioural Science.
Previous positions: Senior
Vice President Luvata
International, England, Senior
Vice President HR Cardo AB,
Sweden, Senior Vice President
HR Mölnlycke Health Care
AB, Sweden.
Paul Welander
Senior Vice President, Quality
and Customer Satisfaction,
since April 1, 2011.
Born 1958. Master of Science
in Mechanical Engineering.
Previous positions: Acting
as Senior Vice President,
Product Development, Senior
Vice President, Quality and
Customer Satisfaction, Volvo
Cars, Executive Vice President,
Aftersales Business Unit,
Volvo Cars of North America.
Maria Hemberg
Senior Vice President Group
Legal and General Counsel,
Since March 2012.
Born 1964. Master of Law.
Previous positions: Legal
Counsel, AB SKF, Lawyer,
Senior Associate Mannheimer
Swartling, Legal Counsel, SCA
Hygine Products AB.
Thomas Ingenlath
Senior Vice President Design,
since July, 2012.
Born 1964.
Master of Arts.
Previous positions: Design
Director of the Volkswagen
Group Design Studio
Potsdam, Design Director of
Skoda Design.
Anders Kärrberg
Acting Senior Vice President
Corporate Communications,
since january 2014.
Born 1959.
Master of Science, Mechanical
Engineering.
geely sweden ab Annual report 2013
Previous positions:
Vice President, Government
Affairs, Volvo Cars Group,
Director, Environment - Vehicle
Engineering R&D, Volvo Cars
Group, Director, Environment
Affairs, AB Volvo.
board of director’s report
19
Governance
Volvo Cars promotes the value of sound corporate governance, characterized by high standards when it comes to transparency, reliability and
ethical values.
Volvo Cars is managed by the Executive Management Team, (EMT)
with twelve members, led by the CEO and overseen by the Board of
Directors of Volvo Car Corporation. The Board of Directors of Volvo Car
Corporation consists of 13 members, with two deputy members from
the trade union side. The Directors of the Board are proposed by the
shareholders nomination committee, including a proposed remuneration to the Directors. At the annual shareholders meeting, the Board
of Directors and the external auditors, are elected or re-elected on an
annual basis. The majority of the board members are independent of
Volvo Cars and of the independent board members at least two shall
further be independent of the shareholders.
The Board of Directors of Volvo Car Corporation has assigned an Audit
Committee to oversee the corporate governance, financial reporting, risks
and the compliance with external and internal regulations. The Board of
Directors has also assigned a Compensation Committee to determine the
remunerations to the CEO and the EMT members. In 2013, the Board of
Directors of Volvo Car Corporation held six ordinary meetings.
Internal control over financial reporting
Volvo Cars primarily builds its internal control principles around the
recommendations of the Committee of Sponsoring Organisations of
the Treadway Commission (COSO). Group Internal Control, including a local network with Internal Control Coordinators, aims to ensure
compliance with directives, policies and legal requirements. The Audit
Committee is informed about the result of the work performed by the
internal control function.
In addition there is an Internal Audit department with the assignment to perform an independent audit of the governance process,
monitor the management of risks and ensure that systems of internal
control are adequate and effective. Internal Audit reports to the Audit
Committee. The internal audit plan is approved by the Board of Volvo
Car Corporation, and results from the audits are communicated to the
Audit Committee and management.
Risks & risk management
Risks are a natural element in all business activities. In order to achieve
its short and long-term objectives, risk management is part of the daily
business at Volvo Cars. The risks of Volvo Cars are broadly categorised
into strategic, operational, financial and compliance risks.
Strategic Risks
Volvo Cars has established an Enterprise Risk Management (ERM)
system following ISO 31000 standard. Amongst others this includes a
formal risk assessment process. On a regular basis all functions within
Volvo Cars report strategic short term and medium term risks and
mitigation activities. The ERM system is governed by the Enterprise
risk committee. The complete risk list is updated continuously by the
organization. At each Board of Directors meeting and Audit Committee meeting the current status is presented. In addition to these
updates the Executive Management Team receives quarterly information. Strategic risks include, but are not limited to: political decisions,
conflicts, changed customer patterns, and the economy’s effect on
demand. Other examples of strategic risks result from sustainability
megaforces like population growth, urbanization, resource scarcity
and climate change. Volvo Cars is continuously working on mitigating
identified risks. Besides risk mitigation, two of the focus areas for ERM
in 2014 are to further improve the dialogue about strategic risks within
the organization and to increase the effectiveness of the current risk
management processes.
Operational Risks
Operational risks include for example production disruptions, IT risks,
supplier dependence, and price fluctuations of raw material or compo-
20
board of director’s report
nents. Operational risks are managed by operations. Certain crossfunctional risks, such as corporate responsibility, business continuity,
security, IT security and insurable risks are centrally coordinated. Risk
management is embedded in various process controls of the operations such as decision tollgates and approval levels.
The Group Insurance Policy stipulates how the management of the
insurable risks shall be handled and how insurance programmes shall
be procured in order to protect Volvo Cars from unforeseen losses.
Financial risks
In the operations, Volvo Cars is exposed to various types of financial
risks, such as currency risk, interest rate risk, liquidity risk, credit risk
and commodity price risk. The Board of Directors has approved a
Group Treasury policy for Volvo Cars describing how the financial risks
shall be managed and controlled. The management of the financial
risks is centralised to Volvo Car Group’s Group Treasury function.
Further information on financial risk management is available in Note
21 - Financial risks and financial instruments.
Compliance risks
Compliance risks are corporate legal and business ethical risks, including corruptive business practices, anti-competitive behaviour as well as
data privacy and export control matters. The Corporate Compliance &
Ethics Office has the overall responsibility for the development, implementation and maintenance of the Corporate Compliance Programs
within Volvo Cars including the Volvo Cars Code of Conduct, corporate
policies and directives.
geely sweden ab Annual report 2013
subsequent events
Subsequent events
In Detroit and Geneva, the Volvo Concept XC Coupé and the Volvo Concept Estate demonstrated more of what to expect from the all-new
XC90, which will be launched later in 2014 .
During 2013, Volvo Cars took a decision to insource the assembly
business for headliner and tunnel consoles of Johnson Controls Inc. in
Torslanda and Gent respectively, in order to strengthen the value chain
and provide efficiency benefits. The agreements in relation to the
insourcing were signed in March 2014, but are conditional upon the
approval from the relevant competition authorities.
The Shanghai Volvo Car Research and Development Co., Ltd. is a
joint venture company that has been established in China in January
2014. The purpose of the new joint venture is to engage in services supporting the production and sales of Volvo cars in China.
In February 2014 Volvo Cars made the decision to investigate the interest from external parties to acquire the business performed in the Floby
manufacturing plant.
During the Chinese State Visit in Belgium in April 2014 the Chinese
President Xi Jinping and Mme Peng Liyuan, and King Philippe and
Queen Mathilde of Belgium visited the Volvo Cars’ production plant in
Ghent.
Proposed distribution
of net income
The parent company
The following funds are at the disposal of the Annual General Meeting
(AGM):
Share premium reserve
SEK
Shareholders’ contribution
SEK
5,509,350,000
293,083,620
Net profit brought forward
SEK
2,091,642,513
Net loss for the year
SEK
–57,610,024
At the disposal of the AGM
SEK
7,836,466,109
The Board proposes the following allocation of funds:
Carried forward
SEK
7,836,466,109
For the results and financial position in general of the parent company,
Geely Sweden AB and Volvo Car Group, reference should be made to
the following financial statements.
geely sweden ab Annual report 2013
board of director’s report
21
Contents Financial Report
Consolidated Financial statements
Note 22 – Marketable securities and cash and cash equivalents .....48
Consolidated Income statements ...............................................................................23
Note 23 – Equity ......................................................................................................................48
Consolidated Comprehensive income ....................................................................23
Note 24 – Post Employment Benefits ....................................................................49
Consolidated Balance Sheets .......................................................................................24
Note 25 – Current and other non-current Provisions ..................................52
Changes in Consolidated Equity ..................................................................................25
Note 26 – Other non - current Liabilities ..............................................................52
Consolidated Statement of Cash Flows..................................................................26
Note 27 – Other Current Liabilities ...........................................................................52
Note 28 – Pledged Assets ...............................................................................................52
Notes to the Consolidated Financial statements
Note 29 – Contingent Liabilities ..................................................................................53
Note 1 – Accounting Principles ...................................................................................27
Note 30 – Cash Flow statements................................................................................53
Note 2 – Critical Accounting Estimates and judgements ........................33
Note 31 – Changes in Accounting Principles ...................................................53
Note 3 – Net Revenue .........................................................................................................35
Note 4 – Operating Expenses .......................................................................................35
Note 5 – Related Parties ....................................................................................................35
Note 6 – Audit Fees ...............................................................................................................36
Note 7 – Other Operating Income and Expenses ..........................................36
Note 8 – Leasing ......................................................................................................................36
Note 9 – Employees and Remuneration ................................................................37
Parent Company Financial statements
Income Statements and Comprehensive Income
– Parent Company ...................................................................................................................54
Balance Sheets – Parent Company ..........................................................................55
Changes in Equity – Parent Company .....................................................................56
Statement of Cash Flows – Parent Company ....................................................56
Note 10 – Depreciation and Amortisation ...........................................................38
Note 11 – Government Grants ......................................................................................38
Note 12 – Financial Income ............................................................................................38
Note 13 – Financial Expenses ......................................................................................38
Note 14 – Investments in Associates ......................................................................38
Note 15 – Taxes ........................................................................................................................40
Note 16 – Intangible Assets ...........................................................................................41
Note 17 – Tangible Assets ...............................................................................................42
Note 18 – Other Non-Current Assets .....................................................................42
Note 19 – Inventories ...........................................................................................................42
Note 20 – Accounts Receivable and Other Current Assets ...................42
Notes to the Parent Company Financial statements
Note 1 – Accounting Principles ...................................................................................57
Note 2 – Related Parties ....................................................................................................57
Note 3 – Audit Fees ...............................................................................................................58
Note 4 – Remuneration to the Board of Directors .........................................58
Note 5 – Financial Income and Expenses ............................................................58
Note 6 – Taxes ...........................................................................................................................58
Note 7 – Participation in Subsidiary ..........................................................................59
Note 8 – Pledged Assets ..................................................................................................59
Note 9 – Cash Flow Statement......................................................................................53
Note 21 – Financial Risks and Financial Instruments .................................43
Subsidiaries ..........................................................................................................................................60
22
geely sweden ab ANNUAL REPORT 2013
CONSOLIDATED INCOME STATEMENTS
SEK million
Note
2013
2012
Net revenue
3
122,245
124,547
Cost of sales
4
–101,934
–104,600
20,311
19,947
4, 16
–5,864
–6,289
4
–7,919
–8,642
Administrative expenses
4, 6
–5,129
–5,192
Other operating income
7
1,509
1,032
Other operating expenses
7
–1,168
–814
14
179
24
5, 8, 9, 10, 11
1,919
66
Gross income
Research and development expenses
Selling expenses
Share of income in associates
Operating income
Financial income
12
87
120
Financial expenses
13
–874
–1,180
1,132
–994
Income before tax
Income tax
15
Net income
–172
452
960
–542
960
–592
Net income attributable to
Owners of the parent company
Non-controlling interests
–
50
960
–542
CONSOLIDATED COMPREHENSIVE INCOME
SEK million
Note
2013
2012
960
–542
1,735
–98
Translation difference on foreign operations
–160
–324
Translation difference of hedge instruments of net investments in foreign operations
–100
48
9
138
Net income for the year
Other comprehensive income, net of income tax
Items that will not be reclassified susequently to income statement:
Remeasurements of provisions for post-employment benefits
Items that may be reclassified susequently to income statement:
Change in cash flow hedge reserve
Total comprehensive income for the year
23
1,484
–236
2,444
–778
2,444
–828
Total comprehensive income attributable to
Owners of the parent company
Non–controlling interests
geely sweden ab ANNUAL REPORT 2013
–
50
2,444
–778
23
CONSOLIDATED BALANCE SHEETS
SEK million
Note
Dec 31, 2013
Dec 31, 2012
ASSETS
Non-current assets
Intangible assets
16
17,271
15,666
Property, plant and equipment
8, 17
25,653
25,654
Assets held under operating leases
8, 17
4,145
3,542
14
1,159
550
Investments in associates
Other long-term securities holdings
Deferred tax assets
15
Other non-current assets
18
10
10
2,165
1,820
1,077
734
51,480
47,976
19
12,161
11,812
5, 20
5,618
4,735
Total non-current assets
Current assets
Inventories
Accounts receivable
Current tax assets
97
87
2,781
2,587
Other current assets
20
Marketable securities
22
88
–
Cash and cash equivalents
22
15,372
9,607
Total current assets
36, 117
28,828
TOTAL ASSETS
87,597
76,804
EQUITY & LIABILITIES
Equity
23
Equity attributable to owners of the parent company
24,638
21,901
Total equity
24,638
21,901
Non-current liabilities
Provisions for post-employment benefits
24
3,641
5,492
Deferred tax liabilities
15
1,759
1,556
Other non-current provisions
25
5,463
5,911
Liabilities to credit institutions
26
12,033
7,057
Other non-current liabilities
26
1,212
1,057
24,108
21,073
Total non-current liabilities
Current liabilities
Current provisions
8,169
7,182
Liabilities to credit institutions
25
820
310
Advance payments from customers
317
187
13,632
12,626
Trade payables
Current tax liabilities
658
365
15,255
13,160
Total current liabilities
38,851
33,830
TOTAL EQUITY & LIABILITIES
87,597
76,804
Other current liabilities
24
27
geely sweden ab ANNUAL REPORT 2013
CHANGES IN CONSOLIDATED EQUITY
SEK million
Balance at January 1, 2012
(as previously reported)
Share
­Capital
1,000
Other
Share ­contributed
­ remium
p
capital
Translation
differences
Other
reserves
Attributable
to owners
Retained
of the
earnings
­parent
Non-­
controlling
interest
Total
22,648
5,509
1,127
–302
–
15,026
22,360
288
–
–
–
–
–1,483
–1,483
–
–1,483
1,000
5,509
1,127
–302
13,543
20,877
288
21,165
–
–
–
–
–
–592
–592
50
–542
Remeasurements of provision
for post-employment benefits
–
–
–
–
–
–126
–126
–
–126
Translation difference on
foreign operations
–
–
–
–324
–
–
–324
–
–324
Translation difference of hedge
instruments for net investments
in foreign operations
–
–
–
61
–
–
61
–
61
Change in cash flow hedge reserve
recognised in other comprehensive income
–
–
–
–
177
–
177
–
177
Effect of changes in accounting policies
Balance at January 1, 2012 (restated)
Net income for the year
Other comprehensive income
Tax attributable to items recognised in
other comprehensive income
–
–
–
–13
–39
28
–24
–
–24
Other comprehensive income
–
–
–
–276
138
–98
–236
–
–236
–
–276
138
–690
–828
50
–778
1,779
–
–
–
1,779
–
1,779
–258
Total comprehensive income
Transactions with owners
Unconditional shareholder’s contribution
–
–
Acquisition of remaining shares
in non-controlling interest 1)
–
–
–
–
–
75
75
–333
Other changes
–
–
–
–
–
–2
–2
–5
–7
Transactions with owners
–
–
1,779
–
–
73
1,852
–338
1,514
1,000
5,509
2,906
–578
138
12,926
21,901
–
21,901
–
–
–
–
–
960
960
–
960
Remeasurements of provision
for post-employment benefits
–
–
–
–
–
2,190
2,190
–
2,190
Translation difference on
foreign operations
–
–
–
–160
–
–
–160
–
–160
Translation difference of hedge
instruments of net investments
in foreign operations
–
–
–
–128
–
–
–128
–
–128
Change in cash flow hedge reserve
recognised in other comprehensive income
–
–
–
–
12
–
12
–
12
Balance at December 31, 2012
Net income for the year
Other comprehensive income
Tax attributable to items recognised
in other comprehensive income
–
–
–
28
–3
–455
–430
–
–430
Other comprehensive income
–
–
–
–260
9
1,735
1,484
–
1,484
Total comprehensive income
–
–
–
–260
9
2,695
2,444
–
2,444
Transactions with owners
Unconditional shareholder’s contribution
–
–
293
–
–
–
293
–
293
Transactions with owners
–
–
293
–
–
–
293
–
293
1,000
5,509
3,199
–838
147
15,621
24,638
–
24,638
Balance at December 31, 2013
1 )
Acquisition of remaining shares in Pininfarina Sverige AB (Volvo Car Uddevalla AB).
geely sweden ab ANNUAL REPORT 2013
25
CONSOLIDATED STATEMENT OF CASH FLOWS
SEK million
Note
2013
2012
OPERATING ACTIVITIES
Operating income
Depreciation and amortisation of non-current assets
10
Interest and similar items received
Interest and similar items paid
Other financial items
Income tax paid
Adjustments for items not affecting cash flow
30
1,919
66
7,907
8,016
87
120
–433
–423
–80
–85
–573
–928
–281
–410
8,546
6,356
Change in inventories
–349
1,407
Change in accounts receivable
–883
–928
Change in accounts payable
1,006
–2,838
Change in items relating to repurchase commitments
Movements in working capital
–816
–1,132
Change in provisions
767
–858
Change in other working capital assets/liabilities
590
742
Cash flow from movements in working capital
315
–3,607
8,861
2,749
Cash flow from operating activities
INVESTING ACTIVITIES
Investments in shares and participations
Investments in intangible assets
Disposal of intangible assets
30
Investments in property, plant and equipment
Disposal of property, plant and equipment
Investments in marketable securities
22
Other
Cash flow from investing activities
Cash flow from operating and investing activities
–520
–258
–4,188
–3,061
500
–
–4,714
–4,466
66
93
–88
–
104
14
–8,840
–7,678
21
–4,929
FINANCING ACTIVITIES
Proceeds from credit institutions
26
5,336
8,063
Repayment of liabilities to credit institutions
26
–45
–7,251
Received shareholders contribution
293
–
Other
181
–356
Cash flow from financing activities
5,765
456
Cash flow for the year
5,786
–4,473
9,607
14,634
Cash and cash equivalents at beginning of year
Exchange difference on cash and cash equivalents
Cash and cash equivalents at end of year
26
22
–21
–554
15,372
9,607
geely sweden ab ANNUAL REPORT 2013
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts are in MSEK unless otherwise stated.
Amounts in brackets refer to the preceding year.
NOTE 1 – ACCOUNTING PRINCIPLES
Basis of preparation
These are the second financial statements for Geely Sweden AB and its
subsidiaries (Volvo Car Group) that have been prepared in compliance
with the International Financial Reporting Standards (IFRS) issued by
the International Accounting Standards Board (IASB), as adopted by the
European Union. This Annual Report is prepared in accordance with IAS
1 Presentation of Financial Statements and the Swedish Companies
Act. In addition, RFR 1 Supplementary Rules for Groups has been
applied, which is issued by the Swedish Financial Reporting Board. RFR
1 specifies mandatory additions to the IFRS disclosure requirements in
accordance with the Swedish Annual Accounts Act. As from 2012 with
a restatement of comparison year 2011, Volvo Car Group has applied
IFRS in its financial statements.
The consolidated financial statements have been prepared on the
historical cost basis except for certain financial instruments that are carried at fair value, as explained in the accounting policies below. Preparing the financial reports in compliance with IFRS requires that Management make judgements and estimates as well as assumptions that
affect the application of accounting principles and amounts recognised.
The areas involving a higher degree of judgement or complexity, or areas
where assumptions and estimates have significant impact on the consolidated financial statements are disclosed in Note 2 - Critical accounting estimates and judgements.
The parent company applies the same accounting principles as the
consolidated Volvo Car Group, except in the cases specified in the section entitled notes to the parent company’s financial statements. As
required by IAS 1, Volvo Car Group companies apply uniform accounting
rules, irrespective of national legislation, as defined in the Volvo Car
Group Finance Manual, which is in compliance with IFRS. The principles
stated below have been applied consistently for all periods, unless otherwise indicated below. For new accounting standards the application
follows the rules in each particular standard. For information on new
standards, see the section on new and amended standards adopted by
the Volvo Car Group.
BASIS OF CONSOLIDATION
The consolidated accounts have been prepared based on the principles
set forth in IAS 27 - Consolidated and separate financial statements.
Volvo Car Group includes Geely Sweden AB and its subsidiary Volvo Car
Corporation AB. Volvo Car Group also includes all of Volvo Car Corporation AB’s subsidiaries, which means the companies in which Volvo Car
Corporation directly or indirectly owns more than 50 per cent of the voting rights of the shares or in any other way holds power to control. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control
ceases. IFRS 3 - Business combinations, is applied on acquisitions.
Non-controlling interests, that is equity in a subsidiary not attributable to the parent company, are recognised as a separate item in consolidated equity. In the consolidated income statement, the share of the
year’s earnings belonging to non-controlling interest is included in net
income. Separate disclosure of the portion belonging to non-controlling
interests is provided. For more information refer to note 14- Investments
in Associates.
geely sweden ab ANNUAL REPORT 2013
Balances and transactions with Shanghai Geely Zhaoyuan International
Investment Co. Ltd and its subsidiaries, companies that are not part of
the Volvo Car Group, are classified in the consolidated financial statements as balances and transactions with related companies.
Subsidiaries
The group applies the acquisition method to account for business combinations. The value of the acquired net assets is determined by measuring acquired assets and liabilities and contingent liabilities at fair value
on the date of acquisition. In business combinations where the cost of
acquisition exceeds the fair value of the acquired identifiable net assets,
the difference is accounted for as goodwill. If the acquisition cost is less
than the final fair value of the net assets and the acquisition is determined to be a bargain purchase, the difference is recognised directly as
income in the income statement. Acquisition-related costs are expensed
as incurred. Inter-company transactions, balances and unrealised gains
or losses on transactions between group companies are eliminated.
Associated companies and jointly controlled entities
Associated companies are companies in which Volvo Car Group has a
significant but not controlling influence, which generally is when Volvo
Car Group holds between 20 and 50 per cent of shares, but it also
includes investments with less participation if significant influence is
proven. Joint ventures refer to companies in which Volvo Car Group,
through contractual cooperation together with one or more parties, has
a joint control over the operational and financial management. Investments in associated companies and jointly controlled entities are
reported in accordance with the equity method and are initially recognized at acquisition cost. The group’s share of post-acquisition profit or
loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other
comprehensive income with a corresponding adjustment to the carrying
amount of the investment. When the group’s share of losses in an associate equals or exceeds its interest in the associate, the group does not
recognise further losses unless it has incurred legal or constructive obligations or made payments on behalf of the associate or jointly controlled entity.
Foreign currency
Translation of foreign group entities
Volvo Car Group’s functional currency is the Swedish krona (SEK). The
functional currency of each Volvo Car Group company is determined
based on the primary economic environment in which it operates. Volvo
Car Group’s and Geely Sweden AB’s presentation currency is SEK.
When preparing the consolidated financial statements, balance sheet
and income statements for all group entities whose functional currency
is not SEK are translated into Volvo Car Group’s presentation currency
using the procedures below, except for subsidiaries in hyperinflationary
economies. Currently none of the entities within Volvo Car Group operates in a hyperinflationary economy.
- Assets and liabilities are translated at the exchange rates at the
respective year end closing rate.
- Income and expenses are translated at the monthly exchange rates
reported in the income statement and statement of other comprehensive income.
27
- All translation differences that arise when translating the financial
statements of subsidiaries outside Sweden are recognised as a separate item under other comprehensive income in the statement of other
comprehensive income, without affecting income, until the disposal of
the subsidiary.
Leases
Any lease agreements in which the risks and rewards associated with
ownership have been essentially transferred to the related company are
classified as a finance lease. Other leased assets where ownership is
retained by the lessor are classified as operating leases.
Transactions and balance sheet items in foreign currency
Transactions in foreign currencies are translated to the functional currency at the exchange rate on the day of the transaction. Monetary
assets and liabilities in foreign currencies are translated to the functional
currency at the exchange rate at the respective year end (closing rate).
Exchange rate differences arising from translation of currencies are
reported in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and net investment
hedges. Operationally derived exchange gains and losses are shown
under other operating income and other operating expenses respectively. Financially derived exchange gains and losses are shown as financial income and financial expenses. The main exchange rates applied
are shown in the table below:
Volvo Car Group as lessor
Volvo Car Group currently has no finance leases as a lessor per the closing date. Transactions that include repurchase obligations or residual
value guarantees, and for which significant risks remain with Volvo Car
Group, are carried as operating leases. Operating leases are carried as
Assets held under operating leases among tangible assets. Revenue
from operating leases is recognised on a straight-line basis over the
leasing period. Depreciation of the asset occurs on a straight-line basis
under the terms of the commitment and the amounts are adjusted to
conform to the estimated realisable value when the commitment expires.
The estimated realisable value at the commitment termination is evaluated continuously. Principles related to repurchase obligations are further explained in the section Revenue recognition.
EXCHANGE RATES
Volvo Car Group as lessee
In the case of finance leases, the asset is recognised at the inception of
the lease period as a current or non-current asset at the lower of fair
value or the present value of the minimum lease payments. The asset is
depreciated using the straight-line method over the asset’s useful life or
over the term of the lease if this is shorter. The commitment to pay future
lease payments are discounted to net present value and recorded as a
current or non-current liability in the balance sheet. The lease payments
made are allocated between amortisation of liabilities and interest
expense. For operating leases, i.e., when the risks and rewards associated with the ownership of the asset have not been transferred to Volvo
Car Group, lease and rental payments are expensed as arised on a
straight-line basis over the lease contract period.
An arrangement that is not in the legal form of a lease is accounted
for as a lease if it is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
Average rate
Country
Close rate
Currency
2013
2012
2013
China
CNY
1,06
1,07
1,07
2012
1,05
Euro zone
EUR
8,65
8,71
8,89
8,59
10,50
Great Britain
GBP
10,19
10,71
10,64
United states
USD
6,53
6,75
6,46
6,52
Russia
RUB
0,21
0,22
0,20
0,21
Accounting principles
Revenue recognition
Volvo Car Group’s recognised net revenue mainly consists of sales of
goods and services. Net revenue is reduced by discounts and returned
goods. Revenue from the sale of goods is recognised when substantially
all risks and rewards are transferred to the customer (generally dealers
and distributors). However, if the sale of vehicles is combined with a
repurchase agreement, the transactions are accounted for as operating
lease contracts. Revenues related to an operating lease arrangement
are recognised straight-line over the lease period and the asset is recognised as an asset under operating lease in the balance sheet. Revenue from sale to an external party, subject to a subsequent issuance of a
residual value guarantee to an independent financing provider, is recognised at the time of sale and a provision is made for the estimated residual value risk, provided that significant risks related to the vehicle has
been transferred to the customer. When extended services have been
contractually agreed with the customer in addition to the sale of a vehicle, such as warranty extensions over a fixed period, the related revenue
is recorded on a linear basis in the income statement over the contract
period.
Interest income is reported as it is earned. The calculation is made on
the basis of the return on underlying assets in accordance with the
effective interest method. Dividend income is recognised when the right
to receive dividend is obtained. Royalties are recognized in accordance
with the substance of the relevant agreement, generally on an accrual
basis.
28
Government grants
A government grant is recognised when there is reasonable assurance
that Volvo Car Group will comply with the conditions attached to the
grant and that the grant will be received. Government grants are
recorded in the financial statements in accordance with their purpose,
either as reduction of expense or a reduction of the cost of the capital
investment. Government grants are recognised in the income statement
on a systematic basis over the periods necessary to match them with the
related expenses that they are intended to compensate. Government
grants related to assets are deducted from the carrying amount of the
asset and are recognized in the Income statement over the life of a
depreciable asset as a reduced depreciation expense. In cases where
the received government grant is not intended to compensate any
expenses or acquisition of assets the grant is recognised as other
income. Government grants for future expenses are recorded as
deferred income.
Income taxes
Volvo Car Group’s tax expense consists of current tax and deferred tax.
Taxes are recognised in the income statement except when the underly-
geely sweden ab ANNUAL REPORT 2013
ing transaction is recognised directly in equity or other comprehensive
income, whereupon related taxation is also recognised in equity or other
comprehensive income.
Current tax is tax that must be paid or will be received for the current
year. Current tax also includes adjustments to current tax attributable to
previous periods.
Deferred tax is calculated according to the balance sheet method for all
temporary differences that arise between the tax-related value and the
carrying amount of assets and liabilities. Deferred tax assets and liabilities are measured at the nominal amount and at the tax rates that are
expected to apply when the asset is realised or the liability is settled,
using the tax rates and tax rules that have been enacted or substantively
enacted at the balance sheet date. Deferred tax assets relating to
deductible temporary differences and loss carryforwards are recognised
to the extent it is probable that they will be utilised in the future. Deferred
tax assets and deferred tax liabilities are offset when they are attributable to the same taxation authority on either the same taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis and the affected company has a legally enforceable right to offset tax assets against tax liabilities. Tax laws in Sweden
and in certain other countries allow companies to defer tax payments
through allocation to untaxed reserves. These items are treated as temporary differences in the consolidated balance sheet where the untaxed
reserves are divided between deferred tax liability and equity. In the consolidated income statement an allocation to or withdrawal from, untaxed
reserves is divided between deferred taxes and net income for the year.
Classification of current and non-current assets and liabilities
An asset is classified as a current asset when it is held primarily for the
purpose of trading, is expected to be realised within twelve months after
the balance sheet date or consists of cash or cash equivalents, provided
it is not subject to any restrictions. All other assets are classified as noncurrent assets. A liability is classified as a current liability when it is held
primarily for the purpose of trading or is expected to be settled within
twelve months after the balance sheet date. All other liabilities are classified as non-current liabilities.
Intangible assets
An intangible asset is recognised when the asset is identifiable, the
Volvo Car Group controls the asset, and it is expected to yield future
economic benefits. Intangible assets comprise product development,
licences and patents, trademarks, dealer network and investments in IT
systems and software. Intangible assets such as trademarks and dealer
networks are normally identified and measured at fair value in connection with business combinations.
Both acquired and internally generated intangible assets, other than
research and development expenses, are recognised at acquisition cost,
less accumulated depreciation and any impairment loss. When applicable, internal costs directly related to the development of intangible
assets are included in the value of the intangible asset. Borrowing costs
are included in the cost of assets that take substantial period of time to
get ready. Subsequent expenditure on intangible assets increases the
cost only if it is likely that the Volvo Car Group will have future economic
benefit from the subsequent expenditure. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.
geely sweden ab ANNUAL REPORT 2013
Capitalised product development costs
Volvo Car Group’s research and development activities are divided into a
concept phase and a product development phase. Research costs during the concept phase are charged to the income statement as they
arise. Development costs for new products, production systems and
software are capitalised at manufacturing cost beginning on the date
when it is probable that the development expenditure will generate
future economic benefits. Development costs are capitalised to the
extent that attributable costs can be measured reliably and both technical feasibility and successful marketing are assured. If the conditions for
capitalisation are not met, the costs are recognized in the Income statement as expenses in the period they occur. Capitalised development
costs comprise all expenditures that can be directly attributed to the
development phase and that serves to prepare the asset for use, including development related overhead and borrowing cost. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Amortisation methods for intangible assets
Intangible assets with finite useful life are amortised on a straight-line
basis in the Income statement over their respective expected economic
life and are tested for impairment whenever there is an indication that
the intangible asset may be impaired. The amortisation period for contractual rights such as licenses does not exceed the contract period.
Trademarks are assumed to have indefinite useful lives since the Volvo
Car Group has the right and the intention to continue to use the trademarks for the foreseeable future and the useful life cannot be assessed
why no amortisation is made. Dealer network is estimated to have a useful life of 30 years based on the fact that it has been proven historically
to have had a stable basis of dealers.
The useful lives are to a large extent based on historical experience,
expected application as well as other individual characteristics of the
asset. The following useful lives are applied:
Dealer network
30 years
Software, mainframe
8 years
Product development costs
3–10 years
Patents, licences and similar rights
3–10 years
Software, PC
3 years
Amortisation is included in cost of sales, selling or administrative
expenses depending on where the assets have been used.
Property, plant and equipment
The Volvo Car Group applies the cost method for measurement of tangible assets. Cost includes expenditure that can be directly attributed to
the acquisition. Borrowing costs are included in the acquisition value of
an asset that takes substantial period of time to get ready for its
intended use or sale, a so called qualifying asset. Tangible assets are
recognised at acquisition cost, less accumulated depreciation and
potential impairment loss.
Subsequent expenditure on property, plant and equipment increases the
acquisition value only if it is probable that the Volvo Car Group will have
future economic benefit from the subsequent expenditure. The carrying
amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial
period in which they are incurred.
29
Depreciation methods for tangible assets
Depreciation according to plan is based on the acquisition value. Tangible assets are systematically depreciated over the expected economic
life of the asset.
Each part of an item of property, plant and equipment, with a cost
that is significant in relation to the total cost of the item, is depreciated
separately when the useful life for the part differs from the useful life of
the other parts of the item. Land is assumed to have an indefinite useful
life and is not depreciated.
A review of the useful lives applied in the Group has been done during the year. As a result of this review the useful lives for certain types of
machinery and equipment have been adjusted from December 1, 2013.
For further information regarding the effect on depreciations refer to
Note 17 - Tangible assets.
The following useful lives are applied:
Buildings (whereof frames 50 years)
Land improvements
14.5–50 years
30 years
Machinery
8–30 years (previously 14,5–25 years)
Equipment
3–20 years (previously 5–14,5 years)
Impairment of assets
The carrying amounts of intangible and tangible assets as well as all
shareholding investments are tested regularly to assess whether there is
an indication of impairment. Intangible assets that have an indefinite
useful life are tested for impairment annually or whenever there is an
indication of decline in value. The carrying amount of tangible assets
with definite useful lives is tested whenever events or changes in circumstances indicate that the value of the asset is reduced and there
might be an impairment loss. For these assets as well as assets with an
indefinite useful life, the asset’s recoverable amounts are calculated. The
recoverable amount is the higher of an asset’s fair value less costs to
sell or value in use. Value in use is defined as the present value of the
future cash flows expected to be derived from an asset. For the purpose
of assessing impairment, assets are grouped in one cash-generating
unit (CGU).
When an indication is confirmed, an impairment loss is recognized to
the extent that the carrying amount exceeds its recoverable amount.
Previously recognised impairment loss is reversed if reasons for the earlier impairment no longer exist. An impairment loss is reversed only to
the extent that the asset’s carrying amount after reversal does not
exceed the carrying amount, net of amortisation, which would have been
reported if no impairment loss had been recognized in prior years.
Financial assets and liabilities
Financial instruments are any form of contract that gives rise to a financial asset in one company and a financial liability or equity instrument in
another company. Financial assets in the consolidated balance sheet
encompass interest-bearing receivables, trade receivables, other financial assets, derivative assets and cash and cash equivalents. Derivative
instruments include forwards, options and swaps used primarily to cover
risks relating to exchange rate, exposure to interest rate risks and price
fluctuations on electricity. Financial liabilities in the consolidated balance
sheet mostly consist of trade payables, loans and derivative liabilities.
30
Recognition and Measurement of financial assets and liabilities
Financial assets and liabilities are recognised in the balance sheet when
the Volvo Car Group becomes a party to the contractual terms and conditions. Receivables are recognised in the balance sheet when Volvo Car
Group has a contractual right to receive payment and liabilities are recognised when the counterparty has performed and there is a contractual
obligation to pay. Financial assets and liabilities are reported on settlement date, with the exception of derivative instruments, which are
reported on the trade date.
Financial assets are initially recognised at fair value plus transaction
costs except for those financial assets carried at fair value through profit
or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the
income statement. Loans and receivables are subsequently measured at
amortised cost. Accounts receivable are recognised at the amount
expected to be received, i.e. after deduction of bad debts allowance. A
bad debt allowance has incurred when there has been a triggering event
for the customer’s inability to pay. The bad debts on accounts receivable
are recognised as operating expenses. Amortised cost is calculated
using the effective interest method, where any premiums or discounts
and directly attributable costs and revenue are capitalised over the contract period using the effective interest rate. Fair value is generally determined by reference to official market quotes. When market quotes are
not available the fair value is determined using generally accepted valuation methods such as discounted future cash flows.
Borrowings are initially recognized at fair value net of transaction
costs incurred. After initial recognition, borrowings are valued at amortised cost using the effective interest method.
Classification of financial assets and liabilities
The Group classifies its financial assets in the following categories; financial assets at fair value through profit and loss, loans and receivables,
financial liabilities through profit and loss and other financial liabilities.
Classification takes place at initial recognition. Exceptions from these
principles apply to financial instruments included in hedge accounting,
which are described further in the section “Hedge accounting”.
Financial assets carried at fair value through profit or loss
A financial asset is assigned to this category if it is held for trading.
Derivative instruments with a positive market value are assigned to this
category, unless they are included in hedge accounting. Changes in fair
value of these instruments are recognised in the income statement.
Based on the purpose of the contract, changes in fair value are reported
either under operating income or as financial income/expense. Derivatives with positive fair values (unrealised gains) are recognised as other
current assets.
Loans and receivables
Non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market, for example accounts receivable and
loan receivables, are assigned to this category. Cash and cash equivalents are also assigned to this category. Loans and receivables are carried at amortised cost except for accounts receivable that have a short
duration and are therefore valued at nominal value without discounting
to net present value. The nominal value for these short term items will
reflect the fair value.
geely sweden ab ANNUAL REPORT 2013
Financial liabilities at fair value through profit and loss
Derivative instruments with a negative fair value are assigned to this category, unless they are included in hedge accounting. Changes in the fair
values of these instruments are recognised in the income statement.
Based on the purpose of the contract, changes in fair value are reported
either under operating income or as financial income/expense. Derivatives with negative fair values (unrealised losses) are recognised as
other current liabilities.
Other financial liabilities
This category includes financial liabilities not held for trading, trade payables as well as borrowings and repurchase commitments.
Derecognition of financial assets and liabilities
A financial asset or a portion of a financial asset is derecognised in the
balance sheet when all significant risks and benefits linked to the asset
have been transferred to a third party. Where Volvo Car Group concludes
that all significant risks and benefits have not been transferred, the portion of the financial assets corresponding to Volvo Car Group’s continuous involvement is recognised.
Invoiced sales are sometimes subject to contracts for factoring with
a third party (bank or financial institution). This enables Volvo Car Group
to receive payment for its accounts receivable within a few days after
billing and thus free liquidity at an earlier stage. If the criteria for
derecognition of accounts receivable are not fulfilled, the receivable
remains on the balance sheet. A financial liability or a portion of a financial liability is derecognised from the balance sheet when the obligation
in the contract has been fulfilled or cancelled or has expired.
For further information regarding financial instruments refer to Note
21 - Financial risks and financial instruments.
Hedge accounting
Hedge accounting is adopted for derivative instruments that are
included in a documented hedge relationship. For hedge accounting to
be applied, a direct connection between the hedge and the hedged item
is required. Further, it is necessary for the hedge to protect the risk as
effectively as intended, that the effectiveness of the measure can be
demonstrated at all times to be sufficiently high through effectiveness
testing, and that hedging documentation has been prepared. Volvo Car
Group apply hedge accounting starting from April 1, 2012 for derivate
instruments related to hedging of currency risk in future commercial
cash flows. Volvo Car Group also applies hedge accounting of net
investments in foreign operations from December 2012.
Hedge accounting is applied for derivative instruments that were
acquired for the purpose of hedging expected future commercial cash
flows in foreign currencies against currency rate risks. A cash flow
hedge is a hedge held to reduce the risk of an impact on profit or loss
from foreign exchange changes in cash flow relating to a future transaction. In cash flow hedge accounting, the derivative is recognised in the
balance sheet at fair value, and changes in the fair value is recognised
under other comprehensive income and accumulated in the hedge
reserve in equity. Amounts that have been recognised in the hedge
reserve in equity are recognised in the income statement in the same
period as the payment flows reach the income statement. The hedging
relationship is regularly tested up until its maturity date. If the identified
relationships are no longer deemed effective, the fluctuation in fair value
geely sweden ab ANNUAL REPORT 2013
on the hedging instrument from the last period the instrument was considered effective is recognised in the income statement. If the hedged
transaction is no longer expected to occur, the hedge’s accumulated
changes in value are immediately transferred from other comprehensive
income to the income statement and are included in operating income.
Hedging of net investments in foreign operations refers to hedges
held to reduce the effect of changes in the value of a net investment in a
foreign operation due to changes in foreign exchange rates. The foreign
currency gains and losses on hedging instruments are recognised under
other comprehensive income. In the event of a divestment, the accumulated result from the hedge is immediately transferred from the hedge
reserve in equity to the income statement. For further information
regarding accounting treatment related to foreign currency see section
“Foreign currency” above. See also Note 21- Financial risks and financial instruments for more information regarding financial instruments.
Inventory
Inventories of raw material, consumables and supplies, semi-manufactured goods, work in progress, finished goods and goods for resale are
reported in inventories and carried at the lower of actual cost, less
deductions for any obsolescence, and net realisable value at the reporting date. Costs of inventories comprise costs of purchase, production
charges and other expenditures incurred in bringing the inventories to
their present location and condition. The cost of inventories of similar
assets is established using the first-in, first-out method (FIFO) and is
based on the standard cost method. The standard costs are updated
annually and adjustments are made at the turn of the model year. Net
realisable value is calculated as the selling price in the ordinary course
of business less estimated costs of completion and selling costs. For
groups of similar products a group valuation method is applied. Physical
stock counts are carried out annually or more often where appropriate in
order to verify the records.
Cash and cash equivalents
Cash and cash equivalents consist of cash and bank balances as well as
short-term liquid investments with a maturity of maximum 90 days,
which are subject to an insignificant risk of fluctuations in value. Cash
and cash equivalents are stated at nominal value.
Employee benefit obligations
Volvo Car Group has both defined contribution plans and defined benefit
plans. Under a defined contribution plan, Volvo Car Group pays fixed
contributions into a separate legal entity and will have no legal obligation
to pay further contributions if the fund does not hold sufficient assets to
pay all employee benefits. The contributions are recognised as
employee benefit expenses in the income statement when earned by
the employee. The assets of the plans are held separately from those of
Volvo Car Group in funds under the control of trustees.
A defined benefit plan is a pension plan that defines the amount of
post-employee benefit an employee will receive upon retirement, usually
dependent on one or more factors such as age, years of service and
compensation. Volvo Car Group has the obligation for the future benefits. For the funded defined benefits plans, the assets have been separated, with the majority invested in pension foundations.
The pension provision or asset recognised in the balance sheet in
respect of defined benefit pension plans is the present value of the
31
defined benefit obligation at the balance sheet date less the fair value of
plan assets. Prepaid contributions are recognised as an asset to the
extent that a cash refund or reduction in future payments is available.
The calculation of the present value of defined benefit pension
undertakings is performed according to the Projected Unit Credit
method, which also considers future earnings. The calculation is performed annually by independent actuaries. The present value of the
defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate and
government bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating to
the terms of the related pension liability. The discount rate for the Swedish pension obligation is determined by reference to mortgage bonds.
The most important actuarial assumptions are stated in Note 24 - Post
employment benefits.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity in
other comprehensive income in the period in which they arise.
Past service costs are recognized immediately in the income statement when the settlement occurs.
Interest cost and expected return on assets is calculated on a net
basis by applying the discount rate used to measure the defined benefit
obligation to the net defined benefit liability (asset).
Termination benefits are payable when employment is terminated by
the group before the normal retirement date, or whenever an employee
accepts voluntary redundancy in exchange for these benefits. The group
recognizes termination benefits at the earlier of the following dates: (a)
when the group can no longer withdraw the offer of those benefits; and
(b) when the entity recognizes costs for a restructuring that is within the
scope of IAS 37 and involves payment of termination benefits.
Provisions
Provisions are recognized in the balance sheet when a legal or constructive obligation exist as a result of a past event and it is deemed
more likely than not that an outflow of resources will be required to settle
the obligation and the amount can be reliably estimated. The amount
recognized as provision is the best estimate of the expenditure required
to settle the present obligation at the balance sheet date. Provisions are
regularly reviewed and adjusted as further information becomes available or circumstances change.
If the effect is material, non-current provisions are recognized at
present value by discounting the expected future cash flows at a pre-tax
rate reflecting current market assessments of the time value of money.
The discount rate does not reflect such risks that are taken into consideration in the estimated future cash flow.
Revisions to estimated cash flows (both amount and likelihood) are
allocated as operating cost. Changes to present value due to the passage of time and revisions of discount rates to reflect prevailing current
market conditions are recognised as a financial cost.
Warranty provisions include the Group’s cost of satisfying the customers with specific contractual warranty obligations, as well as other
costs not covered by contractual commitments. All warranty provisions
are recognised at the sale of the vehicles or spare parts. The initial calculations of the reserves are based on historical warranty statistics considering known quality improvements, costs for remedy of defaults etc.
The provisions for campaigns booked at point of sale are adjusted as
campaign decisions for specific quality problems are made. On a quar-
32
terly basis the provisions are adjusted to reflect latest available data
such as actual spend, exchange rates, discounting rates etc. The provisions are reduced by virtually certain warranty reimbursements from
suppliers.
Contingent liabilities
When a commitment does not meet the criteria for recognition of a liability or provision in the balance sheet it may be disclosed as a contingent
liability. These possible obligations derive from past events and their
existence will be confirmed only when one or several uncertain future
events, which are not entirely within the Volvo Car Group’s control, take
place or fail to take place. A contingent liability could also exist for a present obligation where an outflow of resources is not likely or when the
amount of the obligation cannot be measured with sufficient reliability.
CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
New and amended standards adopted by the group
The following standards have been adopted by the group for the
first time for the financial year beginning on 1 January 2013 and
have a material impact on the group:
IAS 19 was amended in June 2011 and effective from January 1 2013
with retrospective application. The changes on the Group’s accounting
policies relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of
changes in defined obligations and in fair value of plan assets when they
occur, and hence eliminate the “corridor approach” previously used by
Volvo Car Group and accelerate the recognition of past service costs.
The amendments has resulted in all actuarial gains and losses to be recognised immediately through other comprehensive income in order for
the net pension asset or liability recognised in the consolidated balance
sheet to reflect the full value of the plan deficit or surplus.
The impact of the new revised IAS 19 has changed the balance
sheet liability due to the removal of the corridor where the unrecognised
net actuarial loss and the unrecognised past service cost have disappeared with an increase to the pension liability as a consequence. Interest cost and expected return on assets have been replaced with a net
interest amount that is calculated by applying the discount rate used to
measure the defined benefit obligation to the net defined benefit liability
(asset).
See note 31- Changes of accounting principles for the impact on the
financial statements as a result of the amended IAS 19.
The following standards have been adopted by the group but have
no material impact on the group:
Amendment to IAS 1, Financial statement presentation regarding other
comprehensive income. The main change is a requirement to group
items presented in ‘other comprehensive income’ (OCI) on the basis of
whether they are potentially reclassifiable to profit or loss.
Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on asset
and liability offsetting. New disclosures are included in Note 21- Financial risks and financial instruments.
IFRS 13, ‘Fair value measurement’, aims to improve consistency and
reduce complexity by providing a precise definition of fair value and a
single source of fair value measurement and disclosure requirements for
use across IFRSs. For further information regarding financial instruments refer to Note 21 - Financial risks and financial instruments.
geely sweden ab ANNUAL REPORT 2013
New standards and interpretations not yet adopted by the Group
When preparing the consolidated financial statements as of December
31, 2013, a number of standards, interpretations and amendments have
been published, but have not yet become effective. None of these is
expected to have a significant effect on the consolidated financial statements of the Group except those stated below. The following is a preliminary assessment of the effect that the implementation of these standards and interpretations could have on Volvo Car Group’s financial
statements.
if the change affects both. The estimations and assessments described
below are those that are deemed to be the most important for an understanding of Volvo Car Group’s financial reports, taking into account the
degree of materiality and uncertainty. Changes in estimates used in
these and other items could have a material impact on Volvo Car Group’s
financial statements.
IFRS 11 – Joint arrangements
IFRS 11 provides guidance for the accounting of joint arrangements by
focusing on the rights and obligations of the arrangement, rather than
its legal form. Joint arrangements are divided into two categories – joint
operations and joint ventures. In joint operations each joint venture
accounts for the assets, liabilities, revenues and expenses relating to its
interest in the joint arrangement. In joint ventures, each joint venture
shall account for its interest using the equity method. Volvo Car Group
intends to adopt IFRS 11 for the year beginning January 1, 2014. A high
level assessment shows that there are no significant effects for Volvo
Car Group.
Impairment of non-current assets The Volvo Car Group has substantial values reported in the balance sheet regarding non-current assets.
Property, plant and equipment and intangible assets are depreciated on
a straight-line basis over their estimated useful lives; refer to Note 1 Accounting principles. Management regularly reassesses the useful life
of all significant assets. The carrying amounts of non-current assets are
tested for impairment in accordance with the accounting policies
described in Note 1 to the consolidated accounts, Accounting principles. An impairment is recognised if the carrying value of the asset
exceeds the recoverable amount. The recoverable amount is the higher
of the asset’s net selling price and its value in use. For these calculations, certain estimations must be made regarding future cash flows,
required return on investments and other adequate assumptions. The
estimated future cash flows are based on assumptions that represent
management’s best estimate of the economic conditions that will exist
during the asset’s remaining lifetime, and are based on internal business
plans or forecasts.
Future cash flows are determined on the basis of the long-term planning, which is approved by Management and which is valid at the date of
conduction of the impairment test. This planning is based on expectations regarding future market share, the market growth as well as the
products’ profitability.
IFRS 12 – Disclosure of interests in other entities
IFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates and structured entities. Volvo Car Group intends to
adopt IFRS 12 for the year beginning January 1, 2014. Volvo Car Group
will be affected by extended disclosure requirements in the financial
statements of 2014.
Other changes in standards and interpretations that enter into force
on January 1 2014 or subsequently are not expected to have any
impact on the Group.
Revenue recognition When Volvo Car Group has entered into a residual value guarantee in relation to a vehicle sale, there may be a question
of judgement regarding whether or not significant risks and rewards of
ownership have been transferred to the customer. If the previous
assessment of retained risk by Volvo Car Group is proven to be incorrect
and it is instead determined that significant risks are retained by Volvo
Car Group, revenue in the coming period will decline and instead be distributed over several reporting periods. Refer to Note 1 - Accounting
principles for a description of Volvo Car Group’s revenue recognition policy relating to operating lease contracts.
IFRS 10 – Consolidated financial statements
IFRS 10 is based on existing principles by identifying the concept of
control as the determining factor for assessment of whether a company
should be included in the consolidated financial statements. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. Volvo Car Group intends to adopt
IFRS 10 for the year beginning January 1, 2014. A high level assessment shows that there are no significant effects for Volvo Car Group.
NOTE 2 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Preparation of the financial statements in accordance with IFRS requires
the company’s executive management and Board of Directors to make
estimations and assessments as well as to make assumptions that
affect application of the accounting policies and the reported assets, liabilities, income and expenses. The estimates are based on historical
experience and assumptions that are deemed reasonable and realistic
in the circumstances. The results of these estimations and assessments
are then used to establish the reported values of assets and liabilities
that are not otherwise clearly documented from other sources. The
actual outcome may differ from these estimates and assessments. The
estimates and underlying assumptions are reviewed on a regular basis.
Changes are recognised in the period of the change and future periods
geely sweden ab ANNUAL REPORT 2013
Residual value risk In the course of its operations, Volvo Car Group is
exposed to residual value risks through sales combined with repurchase
agreements and sales to external rental company subject to residual
value guarantees. Residual value risks are reflected in different ways in
the consolidated financial statements depending on the extent to which
the risk remains with the Group. In cases where significant risks pertaining to vehicles remain with Volvo Car Group, the vehicles are generally
recognised in the balance sheet as Assets under operating leases.
Accumulated depreciation on these vehicles reduces the value of the
vehicles from their original acquisition value to their expected residual
value, being the estimated net realisable value, at the end of the lease
term. The depreciations are charged on a straight-line basis over the
term of the commitment. Vehicles sold to an external party, subject to a
subsequent issuance of a residual value guarantee to an independent
financing provider, are derecognised from the balance sheet in cases
33
where no significant risks remain with Volvo Car Group. A provision is
made for the residual value risk related to the guarantee based upon
estimations of the used products’ future net realisable values. The estimated net realisable value of the products at the end of the commitment
is monitored individually on a continuing basis and is estimated by evaluating recent auction values, future price deterioration due to expected
change of market conditions, marketing incentive plans, vehicle quality
data and repair and reconditioning costs etc. High inventories in the
vehicle industry and low demand may have a negative impact on the
prices of new and used vehicles. A decline in prices of our vehicles may
negatively affect the consolidated income.
Warranty The recognition and measurement of provisions for product
warranties is generally connected with estimates. Estimated costs for
product warranties are charged to cost of sales when the products are
sold. Estimated warranty costs include contractual warranty, warranty
campaigns (recalls and buy-backs) and warranty cover in excess of contractual warranty or campaigns, which is accepted as a matter of policy
or normal practice in order to maintain a good business relation with the
customer. Warranty provisions are estimated based on historical claims
statistics and the warranty period. Quality index improvements based on
historical patterns have been reflected in all categories of warranty.
Refunds from suppliers that decrease Volvo Car Group’s warranty costs
are recognised to the extent these are considered to be virtually certain.
Employee benefit obligations The value of pension obligations for
defined benefit obligations is determined through actuarial calculations
based on assumptions about the discount rate, future salary increases,
inflation, mortality rates and demographic conditions. Every change in
these assumptions affects the calculated value of the post-employee
benefits obligations. The discount rate, which is the most critical
assumption, is based on market return on high-quality corporate and
government bonds that are denominated in which the benefits will be
paid and with maturities corresponding to the related pension liability. A
lower discount rate increases the present value of post-employee benefits obligations and their cost while a higher discount rate has the
reverse effect. Due to changing market and economic conditions, the
underlying key assumptions may differ from actual developments and
may lead to significant changes in pension and other post-employment
benefit obligations. For further information on pension provisions, see
Note 24 - Post employment benefits.
34
Inventories
In situations where the net realizable value is lower than cost, a valuation
allowance is recognised for inventory obsolescence. The total inventory
value, net of inventory obsolescence allowance, was 12,161 (11,812)
whereof value adjustment reserve –191 (–247) as of December 31,
2013.
Deferred tax assets The calculation of deferred tax assets requires
assumptions to be made with regard to the level of future taxable
income and the timing of recovery of deferred tax assets. These
assumptions take account of forecast operating results and the impact
on earnings of the reversal of taxable temporary differences. The measurement of deferred tax assets is subject to uncertainty and the actual
result may diverge from these judgements due for example to future
changes in business climate and altered tax laws. An assessment is
made at each closing date of the likelihood that the deferred tax asset
will be utilised. If needed the carrying amount of the deferred tax asset
will be altered. The judgements that have been made may affect net
income both positively and negatively. Further information is provided in
Note 15 - Taxes.
Legal proceedings Companies within Volvo Car Group are involved in
legal proceedings covering a range of different matters, which are pending in various jurisdictions. These include, but are not limited to, commercial disputes such as alleged breach of contract, insufficient supplies of
goods or services, product liability, patent infringement or infringement
of other intangible rights. The various matters raised are often of a difficult and complex nature and often legally complicated. It is therefore difficult to predict the final outcome of such matters. The companies within
Volvo Car Group work closely with legal advisors and other experts in the
various matters in each jurisdiction. A provision is made when it is determined that an adverse outcome is more likely than not and the amount
of the loss can be reasonably estimated. In instances where these criteria are not met, a contingent liability has been disclosed provided the risk
qualifies as such liability.
Tax processes Volvo Car Group is also, like other global companies, at
times involved in tax processes of varying scope and in various stages.
These tax processes are evaluated regularly and provisions are made
according to the accounting principles, i.e., when it is more likely than not
that additional tax must be paid and the outcome can be reliably estimated. If it is not probable that the additional tax will be paid but the risk
is more than remote, such amounts are shown as contingent liabilities.
geely sweden ab ANNUAL REPORT 2013
NOTE 3 – NET REVENUE
NOTE 5 – RELATED PARTies
The Net revenue allocated
to geographical regions:
2013
2012
China
18,793
13,830
USA
14,132
20,168
EU 201)
67,144
64,567
17,866
15,951
of which Sweden
During the year, Group companies entered into the following trading
transactions with related parties that are not consolidated in the Volvo
Car Group:
Sales of goods,
services and other
of which Germany
7,470
9,924
of which UK
6,931
7,134
Rest of the world
22,176
25,982
of which Russia
4,526
6,436
Related companies1)
of which Japan
4,595
5,009
Associated companies
122,245
124,547
Total
1)
Sweden, Norway, Denmark, Finland, The Netherlands, Belgium, Luxemburg,
France, Spain, Italy, Greece, Portugal, United Kingdom, Ireland, Germany,
­Switzerland, Austria, Poland, Hungary and Czech Republic.
For each significant category of revenue, see additional information in
the Board of Directors report.
NOTE 4 – OPERATING EXPENSES
2013
2012
Cost of sales
–76,459
–78,067
Personnel
–11,539
–11,079
Cost of sales
Amortisation/depreciation
–4,707
–5,358
Other
–9,229
–10,096
Total
–101,934
–104,600
Research and development expenses
Personnel
–1,700
–1,886
Amortisation/depreciation
–2,570
–2,078
Other
–1,594
–2,325
Total
–5,864
–6,289
–2,157
–2,150
Selling expenses
Personnel
Amortisation/depreciation
–96
–78
Other
–5,666
–6,414
Total
–7,919
–8,642
–3,161
–2,868
Administrative expenses
Personnel
Amortisation/depreciation
–343
–312
Other
–1,625
–2,012
Total
–5,129
–5,192
Capitalised product development costs has reduced the amounts
­presented as personnel and other.
geely sweden ab ANNUAL REPORT 2013
2013
2012
Associated companies
1)
2013
2 012
945
908
–350
–152
2,975
3,053
–1,145
–1,169
Receivables from
Related companies1)
Purchases of
goods, services
and other
Payables to
2013
2012
2013
2012
1,098
965
562
164
65
58
7
21
Related companies are other companies outside Volvo Car Group, but within
the Geely sphere of companies. For associated companies see Note 14 –
Investments in associates.
Since 2012, Volvo Car Group has an agreement with a subsidiary within
the Shanghai Geely Zhaoyuan International Investment Co. Ltd Group
for licensing intangible property rights from Volvo Car Group, to enable
production of cars in the Chengdu plant.
In China two new manufacturing joint ventures were established:
Daqing Volvo Car Manufacturing Co. Ltd and Zhangjiakou Volvo Car
Engine Manufacturing Co Ltd. Volvo Car Group holds 30 percent in
each. In 2013 Volvo Car Group granted a licence to engine technology
to a subsidiary with Zhejiang Geely Holding Group Co.Ltd. The license
resulted in an income 2013 since significant risk and rewards had been
transfered to the buyer. During 2013 Geely Sweden AB has received a
contribution from Geely Sweden Automotive AB amounting to SEK 293
million. The contribution was initially received by Geely Sweden Holdings AB from Shanghai Geely Zhaouyan International Investment Co Ltd
and was then given to Geely Sweden Automotive AB as an unconditional shareholder’s contribution. During 2012 a loan of SEK 1767 million from Geely Sweden Automotive AB ( ultimately from Shanghai
Geely Zhaoyuan International Investment Co. Ltd) was transformed in an
unconditional shareholder’s contribution. Also an additional shareholder’s contribution of SEK 12 million from Shanghai Geely Zhaouyan International Investmenst Co. Ltd was made during 2012.
Business transactions between Volvo Car Group companies and
related parties or associated companies all arise in the normal course of
business and are conducted on the basis of arm’s length principles.
Volvo Car Group does not engaging any transactions with Board
members or senior executives except ordinary remuneration for services.
For further information about remunerations, see Note 9 - Employees
and remuneration.
35
NOTE 6 – AUDIT FEES
NOTE 8 – LEASING
2013
2012
Deloitte
–22
–24
Audit-related fees
Audit fees
–3
–3
Tax services
–1
–2
Other services
–9
–11
–35
–40
Total
Audit fees involve audit of the Annual Report, financial accounts and
the administration by the Board of Directors and the Managing Director.
The audit also includes advice and assistance as a result of the observations made in connection with the audit.
Audit-related fees refer to other assignments to ensure quality in the
financial statements including consultations on reporting requirements
and internal control.
Tax services include tax-related consultancy.
All other work performed by the auditor is defined as other services.
NOTE 7 – OTHER OPERATING INCOME AND EXPENSES
2013
2012
Other operating income
Licences
323
73
Foreign exchange gain
775
104
–
590
Technology transfer
Other
411
265
Total
1,509
1,032
2013
2012
Restructuring costs
Royalty
–191
–191
–60
–49
–351
–
–65
–67
Other
–501
–507
Total
–1,168
–814
Property tax
Future lease revenue of operating lease contracts
Rental income
2013
No later than 1 year
549
493
Later than 1 year and no later than 5 years
420
393
Later than 5 years
–
Total
969
2012
–
886
Volvo Car Group as lessee
Operating lease contracts
The operating lease contracts Volvo Car Group holds are mainly
­contracts for premises and office equipment around the world. Also
some production equipment such as forklifts for the factories are under
operating lease contracts.
Operating lease expenses
2013
2012
Minimum lease payments
–934
–819
Contingent rents
–47
–46
Less subleases
15
27
–966
–838
Total
Other operating expenses
Amortisation and depreciation
of intangible and tangible assets
Volvo Car Group as lessor
Operational lease contracts are recognised as non-current assets in
assets held under operating leases in the balance sheet and mainly
relate to vehicles sold with repurchase agreements. The difference
between the original sales price and the repurchase price is recognised
in the income statement as revenue on a straight-line basis over the
lease term. The remaining lease revenue yet to be recognised in income
is presented as part of current and non-current liabilities in the balance
sheet, see Note 26 – Other non-current liabilities and Note 27 – Other
current liabilities. The repurchase obligation is considered to be a financial liability and is presented as part of current and non-current liabilities.
Volvo Car Group does currently not have any finance lease engagements as a lessor.
Minimum
lease
­payments
Less
­subleases
Total
Present value of
operating lease
commitments
less subleases
901
26
875
857
–L
ater than 1 year and
no later than 5 years
1,885
104
1,781
1,587
– Later than 5 years
2,158
164
1,994
1,417
Total
4,944
294
4,650
3,861
Operating lease
commitments
per Dec 31, 2013
– No later than 1 year
Finance lease contracts
Volvo Car Group holds finance lease contracts for production equipment
and some buildings used in production. The assets will be owned by
Volvo Car Group at the end of the lease contracts at no additional cost.
All leases are fixed terms with fixed payments.
36
geely sweden ab ANNUAL REPORT 2013
Finance lease assets
Buildings
and land
Machinery and
equipment
Acquisition cost
Balance at January 1, 2012
72
1,682
Additions
23
–
–
–6
Divestments and disposals
Effect of foreign currency
exchange differences
–3
–
Balance at December 31, 2012
92
1,676
Divestments and disposals
–2
–
Effect of foreign currency
exchange differences
–3
–
Balance at December 31, 2013
87
1,676
–37
–1,277
–4
–180
–
6
–41
–1,451
NOTE 9 – EMPLOYEES AND REMUNERATION
Average number of
employees by region:
Sweden
2013
Of whom
women
20124)
Of whom
women
15,786
23%
15,458
22%
Nordic countries
other than Sweden
Belgium
342
29%
360
17%
4,171
12%
4,155
11%
Europe other than the Nordic
countries and Belgium
991
39%
984
40%
North and South America
421
23%
419
23%
1,432
33%
1,406
53%
99
35%
99
37%
23,242
22%
22,881
22%
Asia
Other countries
Total for Volvo Car Group
Accumulated depreciation
Balance at January 1, 2012
Depreciation expense
Divestments and disposals
Balance at December 31, 2012
Divestments and disposals
–7
–95
–48
–1 546
Net balance at December 31, 2012
51
225
Net balance at December 31, 2013
39
130
Balance at December 31, 2013
Gross finance lease liabilities –
minimum lease payments
Dec 31,
2013
Dec 31,
2012
33
34
122
134
– No later than 1 year
– Later than 1 year and no later than 5 years
– Later than 5 years
6
30
Total
161
198
Future finance charges on finance leases
–22
–34
Present value of finance lease liabilities
139
164
The present value of finance lease liabilities is as follows:
Gross finance lease liabilities –
minimum lease payments
– No later than 1 year
Dec 31,
2013
Dec 31,
2012
25
24
109
112
5
28
139
164
Dec 31,
2013
Dec 31,
2012
25
24
Other non-current liabilities (Note 26)
114
140
Total
139
164
– Later than 1 year and no later than 5 years
– Later than 5 years
Total
The finance lease liabilities are
included in the financial statement as:
Other current liabilities (Note 27)
Number of Board
­members and
senior executives1)
Dec 31,
2013
Parent company
Of whom
women
Dec 31,
2012
Of whom
women
4
0%
4
0%
Subsidiaries
98
(218)
18%
(20%)
105
(209)
12%
(22%)
Total for Volvo
Car Group
102
(218)
109
(209)
2013
Salaries
and other
­remunerations,
total for Volvo
Car Group
Parent company
Wages and
­salaries,
other­
remune­
rations
2012
Social
­security
expenses
(of which
­pension
expenses)
Wages and
salaries,
other
remune­
rations
Social
­ ecurity
s
expenses
(of which
­pension
expenses)
6
2 (–)
10
3 (–)
Subsidiaries
11,087
4,808
(2,194)
9,989
4,319
(2,021)
Total for Volvo
Car Group
11,093
4,810
(2,194)
9,999
4,322
(2,021)
2013
Salaries and
other remuneration to the
Board2), CEO,
Excecutive
­management
team (EMT)3)
and other
employees
Wages and
salaries,
other
remunerations (of
which
variable
­salaries)
2012
Social
security
expenses
(of which
pension
expenses)
Wages and
salaries,
other
remunerations (of
which
variable
­salaries)
Social
security
expenses
(of which
pension
expenses)
194
(34)
108
(33)
145
(7)
103
(32)
Other
employees
10,899
4,702
(2,161)
9,854
4,219
(1,989)
Total for Volvo
Car Group
11,093
(34)
4,810
(2,194)
9,999
(7)
4,322
(2,021)
Board, Chief
Executive Officer
and EMT
Senior excecutives are defined as key personnel within the subsidiaries.
The Board includes all board members in the subsidiaries within Volvo Car
Group.
3) The Excecutive management team (EMT) consists of the CFO and key
­management personnel other than board members. For further information
regarding EMT, see Board of Directors’ report.
4) Previous year has been adjusted.
1)
2)
Volvo Car Group’s outstanding post-employee benefits obligations to
the Board members, Chief Executive Officer and EMT amount to SEK
113 million (101).
The notice period for a member of EMT is maximum 12 months in
case of termination by Volvo Car Corporation. Furthermore the employee
is, in that case, entitled to severance pay calculated based on the fixed
salary, during a period of maximum 12 months. During 2013, 3 (4)
geely sweden ab ANNUAL REPORT 2013
37
members of EMT, including the CFO, left the Volvo Car Group.
­Remunerations during the notice period and severance pay amounted to
SEK 21 million (38), excluding social expenses.
NOTE 12 – FINANCIAL INCOME
Interest income on bank deposits
87
120
Incentive programmes
Volvo Car Group has two global incentive programmes; a short term
incentive programme (STI) including all employees and a long term
incentive programme for Executives and Senior Managers (LTI). The
design and payout of the programmes are subject to the Board of Directors’ annual approval.
The purpose of the STI-programme is to strengthen global alignment
among employees around Volvo Car Group’s vision, objectives and
­strategies and to encourage all employees to achieve and exceed the
business plan targets in order to reach the long term targets.
The purpose of the LTI-programme is to attract, motivate and retain
key competence within Volvo Car Group. The LTI-programme is based on
calculated market value of Volvo Car Group.
Total
87
120
2013
2012
–82
–151
–197
–172
NOTE 10 – DEPRECIATION AND AMORTISATION
2013
2012
Software
–265
–275
Capitalised product development cost
–1,165
–711
Other intangible assets
–1,263
–1,273
–471
–465
–3,772
–4,102
Machinery & equipment
Assets under operating leases
Total
Depreciation and amortisation
according to plan by function:
–971
–1,190
–7,907
–8,016
2013
2012
Cost of sales1)
–4,707
–5,358
Research and development expenses
–2,570
–2,078
Selling expenses
–96
–78
Administrative expenses
–343
–312
Other income and expense
–191
–190
–7,907
–8,016
Total
1)
2012
NOTE 13 – FINANCIAL EXPENSES
Net foreign exchange loss on financing activities
Interest effect from the measurement
of repurchase obligations
Interest on loans from related companies
–
–218
Other interest expenses
–333
–179
Other financial expenses
–262
–333
Effect of changes in accounting policies
Total
–
–127
–874
–1,180
2013
2012
NOTE 14 – INVESTMENTS IN ASSOCIATES
Operating income includes depreciation
and amortisation as specified below:
Buildings and land
2013
Of which impairment loss SEK 7 million (50).
Share of income in associates
179
24
Total
179
24
2013
2012
Share of income in associates is specified below:
V2 Plug-In Hybrid Vehicle Partnership HB1)
Volvofinans Bank AB2)
Other companies
–4
39
15
26
13
179
24
Dec 31,
2013
Dec 31,
2012
At beginning of the year/acquired acquisition value
550
340
Share of net income
179
24
Capital contribution (+)/repayment (-) V2
Plug-In Hybrid Vehicle Partnership HB1)
–85
263
Investment in Daqing Volvo Car Manufacturing Co.Ltd3)
133
–
Investment in Zhangjiakou Volvo Car Engine
­Manufacturing Co Ltd 4)
387
–
–5
–14
Total
Dividends
NOTE 11 – GOVERNMENT GRANTS
114
Reclassification from previous year
negative participation1)
Total
–
–63
1,159
550
Volvo Car Group receives grants mainly from the Swedish Government.
Grants are also received in Belgium and from the EU. In 2013, the
­government grants received amounted to SEK 81million (65) and the
government grants realised in the income statement amounted to SEK
76 million (116).
38
geely sweden ab ANNUAL REPORT 2013
Volvo Car Group’s carrying amount
on investments in associates:
Corp. ID no.
Country of
­incorporation
% interest held
Dec 31, 2013
Dec 31, 2012
Volvo Trademark Holding AB
556567-0428
Sweden
50
5
6
Volvohandelns PV-Försäljnings AB
556430-4748
Sweden
36
9
8
Volvohandelns PV-Försäljnings KB
916839-7009
Sweden
37
10
7
VCC Tjänstebilar KB
969673-1950
Sweden
37
2
2
VCC Försäljnings KB
969712-0153
Sweden
37
1
1
Göteborgs Tekniska College AB
556570-6768
Sweden
26
2
2
V2 Plug-In Hybrid Vehicle Partnership HB1)
969741-9175
Sweden
50
226
196
Volvofinans Bank AB2)
556069-0967
Sweden
10
337
303
IUC i Olofström AB
556263-1217
Sweden
18
–
–
First Rent a Car AB
556434-7820
Sweden
45
52
24
444517742
Belgium
33
1
1
Daqing Volvo Car Manufacturing Co.Ltd3)
Volvo Event Management Corporation
100000400012348
China
30
133
–
Zhangjiakou Volvo Car Engine Manufacturing Co.Ltd4)
100000400012356
China
30
381
–
1,159
550
Carrying amount, participation in associates
The share of voting power corresponds to holdings in per cent as per
above.
For practical reasons, some of the associates are included in the
consolidated financial statements with a certain time lag, normally
one month.
1)
V2 Plug-In Hybrid Vehicle Partnership HB is a joint venture, however reported
in accordance with the equity method since none of the holding companies,
Volvo Cars PHEV Holding AB and Vattenfall PHEV Holding AB, has the
­decision-making power over the operation. During 2013 V2 Plug-In Hybrid
Vehicle Partnership HB received a shareholders’ contribution of SEK14 million
(263) from Volvo Cars PHEV H
­ olding AB. During 2013 V2 Plug-in Hybrid Vehicle Partnership HB provided a repayment of SEK 99 million (0) to Volvo Cars
PHEV Holding AB. As per December 31, 2013 the total equity of V2 Plug-In
Hybrid Vehicle Partnership HB amounted to SEK 233 million (403).
geely sweden ab ANNUAL REPORT 2013
2)
Volvo Car Group holds 10 per cent of the equity shares of Volvofinans Bank AB
and due to significant volume transactions and board representation, Volvo Car
Group exercises significant influence on the operations which qualifies for the
use of the equity method. As per December 31, 2013 the total adjusted equity
of Volvofinans Bank AB amounted to SEK 3,431 million ( 3,065).
3)
Volvo Car Group holds 30 percent of Daqing Volvo Car Manufacturing Co.Ltd.
The company is reported according to the equity method due to the ownership
share. In 2013 the Daquing Volvo Car Manufacturing Co.Ltd received a shareholder contribution of SEK 133 million from Volvo Car Group. As per December
31, 2013 the total equity in Daqing Volvo Car Manufacturing Co Ltd amounted
to SEK 444 million (-).
4) Volvo Car Group holds 30 percent of Zhangjiakou Volvo Car Engine Manu­
facturing Co Ltd. The company is reported according to the equity method due
to the ownership share. In 2013 the Zhangjiakou Volvo Car Engine Manufacturing Co ltd received a shareholder contribution of SEK 387 million from Volvo
Car Group. As per December 31, 2013 the total equity in Zhangjiakou Volvo
Car Engine Manufacturing Co Ltd amounted to SEK 1,274 million (-).
39
NOTE 15 – TAXES
Income tax recognised in income statement
2013
2012
Current income tax for the period
–867
–610
Current income tax for previous years
Deferred taxes
Total
15
20
680
1,042
–172
452
Information regarding current year
tax expense compared to tax expense
based on the applicable Swedish tax rate
2013
2012
Income before tax for the year
1,132
–994
Tax according to applicable Swedish tax rate1)
–249
261
Capital gains or losses, non-taxable
Effect of different tax rates
Tax effect on deferred tax due to change of tax rate
–
4
–90
–1
–
153
Utilisation of previously unrecognised tax losses
–10
17
Revaluation of previously non-valued losses
and other temporary differences
161
–
Other
16
18
Total
–172
452
1 )
As from January1, 2013 the Swedish tax rate has been changed from 26,3%
to 22%.
Income tax recognised directly in equity
2013
2012
3
39
Tax effect of remeasurement of provisions for post
employment benefits
455
–28
Tax effects on translation difference, hedge
­instruments of net investments in foreign operations
–28
13
Total
430
24
Deferred tax
Tax effects on cash flow hedge reserve
Specification of deferred tax assets
Dec 31,
2013
Dec 31,
2012
333
360
Provision for employee benefits
769
1,146
4,067
3,174
Reserve for unrealised income in inventory
364
363
Provision for warranty
271
160
Other temporary differences
542
588
Total deferred tax assets
6,346
5,791
Netting of assets/liabilities
–4,181
–3,971
2,165
1,820
Dec 31,
2013
Dec 31,
2012
5,873
5,511
Total deferred tax assets, net
Specification of deferred tax liabilities
Fixed assets
Other temporary differences
Total deferred tax liabilities
Netting of assets/liabilities
Total deferred tax liabillities, net
40
Changes in deferred tax assets and
liabilities during the reporting period
Net book value of deferred taxes at January 1
Deferred tax income/expense recognised
through income statement
67
16
5,940
5,527
–4,181
–3,971
1,759
1,556
Dec 31,
2013
Dec 31,
2012
264
–735
681
1,042
Change in deferred taxes recognised directly in equity
–430
–24
Exchange rate impact
–109
–19
406
264
Dec 31,
2013
Dec 31,
2012
2014
–
–
2015
–
–
2016
–
14
2017
–
14
2018
25
–
2019-
18,023
14,525
Total
18,048
14,553
Net book value of deferred taxes at December 31
Goodwill arising from the purchase
of the net assets of a business
Unutilised tax loss carry-forwards
Deferred tax assets and deferred tax liabilities are offset when the item
relates to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities which intend either
to settle current tax liabilities and assets on a net basis, or to realise the
assets and settle the liabilities simultaneously.
Deferred tax assets are only accounted for to the extent there are
taxable temporary differences or other factors that convincingly indicate
there will be sufficient future taxable profit. The main part of losses
­carried forward is related to jurisdictions where temporary differences
exceed losses carried forward and where periods of utilisation are
in­definite.
Deferred tax that may arise on distribution of remaining unrestricted
earnings of foreign subsidiaries has not been booked, hence they can
be distributed free of tax or Volvo Car Group may consider them permanently reinvested in the subsidiaries.
Unutilised tax-loss carryforwards expire as follows
Due date
Significant tax loss carry forwards are related to countries with long or
indefinite periods of utilisation. Of the total unused tax loss carry forwards, SEK 0 million (SEK 99 million), relates to unused tax losses for
which no deferred tax asset is recognised in the statement of fi
­ nancial
position.
geely sweden ab ANNUAL REPORT 2013
NOTE 16 – INTANGIBLE ASSETS
Capitalised product
Software development cost1) ,2)
Trademark
Other intangible
assets3)
Total
Acquisition cost
Balance at January 1, 2012
3,615
3,287
3,598
9,045
19,545
504
2,591
–
1
3,096
–446
–
–
–
–446
–3
–
–
–4
–7
3,670
5,878
3,598
9,042
22,188
Additions
208
4,089
–
–
4,297
Divestments and disposals
–41
–1
–
–
–42
8
–
–
–4
4
3,845
9,966
3,598
9,038
26,447
–2,399
–279
–
–2,027
–4,705
–275
–711
–
–1,273
–2,259
440
–
–
–
440
2
–
–
–
2
–2,232
–990
–
–3,300
–6,522
Additions
Divestments and disposals
Effect of foreign currency exchange differences
Balance at December 31, 2012
Effect of foreign currency exchange differences
Balance at December 31, 2013
Accumulated amortisation and impairment
Balance at January 1, 2012
Amortisation expense
Divestments and disposals
Effect of foreign currency exchange differences
Balance at December 31, 2012
Amortisation expense
–265
–1,165
–1,263
–2,693
Divestments and disposals
45
1
–
–
46
Effect of foreign currency exchange differences
–9
–
–
2
–7
–2,461
–2,154
–
–4,561
–9,176
Net balance at December 31, 2012
1,438
4,888
3,598
5,742
15,666
Net balance at December 31, 2013
1,384
7,812
3,598
4,477
17,271
Balance at December 31, 2013
1)
2)
3)
Volvo Car Group has capitalised borrowing costs related to product development of SEK 108 million (38). A capitalisation rate of 4,8 % (5,4%) was used to determine the
amount of borrowing costs eligible for capitalisation.
During 2013 additional areas of product development activities are reflected in the capitalised figures.
Other intangible assets refers to licences, dealer network, patents and similar rights.
Intangible assets with indefinite useful lives, ie Trademark, and other
intangible assets not yet ready for use, are tested for impairment annually as well as if there are any indications of need for impairment. Assets
with definite useful lives are tested if there are any indications of need
for impairment. An impairment test is made by calculating the recoverable value. If the recoverable value is less than the carrying value, the
asset’s recoverable value is impaired. The recoverable amounts are
geely sweden ab ANNUAL REPORT 2013
based on a discounted cash flow model, with Volvo Car Group as one
single Cash Generating Unit. Management’s business plans and volume
­programmes for 2014–2022 are used as a basis for the calculation. A
discount rate of 11.1% (11.1%) has been used. In 2013 the operating
cash flow exceeded the carrying amount, and no impairment loss was
recognised.
41
NOTE 17 – TANGIBLE ASSETS
Buildings
and land1), 2), 3)
Machinery and
equipment1), 3), 4),5)
Construction
in progress
Assets under
­operating leases
Total
Aquisition cost
Balance at January 1, 2012
Additions
Divestments and disposals
13,054
60,238
1,085
4,822
79,199
279
3,180
1,599
5,256
10,314
–104
–1,113
–
–3,825
–5,042
32
917
–949
–
–
–189
–375
–7
–87
–658
13,072
62,847
1,728
6,166
83,813
Reclassification
Effect of foreign currency exchange differences
Balance at December 31, 2012
Additions
331
2,098
1,897
6,052
10,378
–359
–2,029
–
–5,124
–7,512
Reclassification
64
1,341
–1,405
–
–
Effect of foreign currency exchange differences
45
293
–
18
356
13,153
64,550
2,220
7,112
87,035
–6,427
–42,405
–
–1,789
–50,621
–465
–4,102
–
–1,191
–5,758
Divestments and disposals
87
993
–
346
1,426
Effect of foreign currency exchange differences
90
236
–
10
336
–6,715
–45,278
–
–2,624
–54,617
Divestments and disposals
Balance at December 31, 2013
Accumulated depreciation and impairment
Balance at January 1, 2012
Depreciation expense
Balance at December 31, 2012
Depreciation expense
–471
–3,772
–
–971
–5,214
Divestments and disposals
283
1,914
–
621
2,818
Effect of foreign currency exchange differences
–40
–191
–
7
–224
–6,943
–47,327
–
–2,967
–57,237
Balance at December 31, 2013
Net balance at December 31, 2012
6,357
17,569
1,728
3,542
29,196
Net balance at December 31, 2013
6,210
17,223
2,220
4,145
29,798
1)
2)
3)
4)
5)
Buildings and land includes finance leases of SEK 39 million (51) and Machinery and equipment includes finance leases of SEK 130 million (225).
For further information regarding finance leases, see Note 8 – Leasing.
Depreciation expense include impairment loss of SEK 7million (50). For further information regarding depreciations, see Note 10 – Depreciation and amortisation.
Volvo Car Group has no mortgages in property, plant and equipment. For further information regarding pledged assets, see Note 28 – Pledged assets.
Machinery and equipment includes capitalised borrowing costs of SEK 123 million (148).
During 2013 the useful lives applied in Volvo Car Group were adjusted. The impact in the income statement amounted to SEK –56 million.
NOTE 18 – OTHER NON-CURRENT ASSETS
Restricted cash
Rental deposition
Receivable against Ford Motor Company
Other non-current assets
Total
NOTE 19 – INVENTORIES
Dec 31,
2013
Dec 31,
2012
930
506
27
35
–
7
120
186
1,077
734
For further information see Note 21 – Financial risks and financial
­instruments.
Dec 31,
2013
Raw materials and consumables
Products in progress
Finished goods and goods in resale
Total
Of which value adjustment reserve:
Dec 31,
2012
130
151
2,118
2,046
9,913
9,615
12,161
11,812
–191
–247
The cost of inventories recognised as an expense and included in cost
of sales amounted to SEK 99,549 million (102,380).
The cost of inventories recognised as an expense includes SEK 50
million (28) in respect of write-downs of inventory to net realisable value.
NOTE 20 – ACCOUNTS RECEIVABLE AND OTHER CURRENT ASSETS
Accounts receivable including
receivables from related companies
VAT receivables
Dec 31,
2012
5,618
4,735
896
821
1,078
1,011
Other financial receivables
434
353
Other receivables
373
402
8,399
7,322
Prepaid expenses and accrued income
Total
42
Dec 31,
2013
geely sweden ab ANNUAL REPORT 2013
Aging analysis of accounts receivable and receivables from related companies
2013
Accounts receivable gross
Provision doubtful accounts receivable
Accounts receivable net
Not due
1–30
days
­ verdue
o
30–90
days
­ verdue
o
>90 days
overdue
Total
4,782
242
15
651
5,690
–8
–
–29
–35
–72
4,774
242
–14
616
5,618
4,245
131
166
334
4,876
–
–
–5
–136
–141
4,245
131
161
198
4,735
2012
Accounts receivable gross
Provision doubtful accounts receivable
Accounts receivable net
Accounts receivable amounting to SEK 5,618 million (4,735) includes provision for doubtful accounts receivable of SEK 72 million (141).
Change in provision for doubtful
accounts receivable is as follows:
Balance at January 1
2013
2012
141
131
Additions
24
58
Reversals
–83
–44
Write-offs
–10
–3
Translation difference
Balance at December 31
–
–1
72
141
NOTE 21 – FINANCIAL RISKS AND FINANCIAL INSTRUMENTS
In its operations, Volvo Car Group is exposed to various types of financial
risks such as currency risk, interest rate risk, credit risk, commodity price
risk, refinancing risk and liquidity risk.
Volvo Car Group treasury function is responsible for management
and control of the financial risks. The management of financial risks is
governed by Volvo Car Group treasury policy which is approved by the
Board of Directors and is subject to annual approval. The Policy is
focused on minimizing the negative effects from fluctuating financial
markets on Volvo Car Group’s financial earnings.
Financial Instruments – Classification
Financial instruments are divided into three levels depending on the
market information available.
• Level 1: Level 1 inputs are quoted prices (unadjusted) in active
­markets for identical assets or liabilities that the entity can access at
the measurement date.
• Level 2: Level 2 inputs are inputs other than quoted prices included
within level 1 that are observable for the asset or liability, either
directly or indirectly.
• Level 3: Level 3 inputs are unobservable inputs for the asset or liability.
and liabilities are measured at amortised cost or fair value depending on
their initial ­classification. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Amortised cost is calculated using the effective interest method, where any
premiums or discounts and directly attributable costs and revenue are
capitalied over the contract period using the effective interest rate. Fair
value is generally determined by reference to official market quotes.
When ­market quotes are not available the fair value is determined using
­generally accepted valuation methods such as discounted future cash
flows.
The fair value of a financial asset or liability reflects non-performance
risk including the counterparty’s credit risk for an asset and an entity’s
own credit risk for a liability. For Volvo Car Group this only applies to
derivatives and marketable securities since no other classes of assets
and liabilities are recorded at fair value. Volvo Car Group has chosen to
use PD (Probability of Default ) of the counterparty to adjust the positive
market value on derivatives and marketable securities. Own credit risk is
adjusted for by taking an average of the PD of a peer group of auto manufacturers.
All derivative financial instruments that Volvo Car Group holds as at
December 31, 2013 belong to level 2. No transfers between the levels
of the fair value hierarchy have occurred during the year. Financial assets
geely sweden ab ANNUAL REPORT 2013
43
The table below shows Volvo Car Groups financial assets and liabilities at fair value
Level 1
Level 2
Level 3
Total
Derivative instruments for hedging of currency risk in future commercial cash flows
December 31, 2013
–
393
–
393
Electricity hedges
–
18
–
18
Marketable securities
–
88
–
88
Total assets
–
499
–
499
167
Derivative instruments for hedging of currency risk in future commercial cash flows
–
167
–
Derivative instruments for hedging of currency risk related to financial assets and liabilities
–
70
–
70
Electricity hedges
–
70
–
70
Total liabilities
–
307
–
307
Derivative instruments for hedging of currency risk in future commercial cash flows
–
326
–
326
Electricity hedges
–
16
–
16
Total assets
–
342
–
342
119
December 31, 2012
Derivative instruments for hedging of currency risk in future commercial cash flows
–
119
–
Derivative instruments for hedging of currency risk and interest rate risk related to financial assets and liabilities
–
39
–
39
Electricity hedges
–
91
–
91
Total liabilities
–
249
–
249
Financial assets and liabilities by category
Finacial instruments at fair value
through profit or loss
Instruments
held for trading
Derivatives
used in hedge
accounting
Loans and
­receivables
Financial liabilities
at amortised cost
TOTAL
Fair Value
Other non-current assets1)
–
–
1,054
–
1,054
1,054
Accounts receivable
–
–
5,618
–
5,618
5,618
Derivative assets
58
353
–
–
411
411
Marketable securities
88
–
–
–
88
88
Other current assets1)
–
–
260
–
260
260
December 31, 2013
Cash and cash equivalents
Total assets
–
–
15,372
–
15,372
15,372
146
353
22,304
–
22,803
22,803
Other long-term liabilities1)
–
–
–
792
792
792
Liabilities to credit institutions
–
–
–
12,853
12,853
12,853
13,632
–
–
–
13,632
13,632
143
164
–
–
307
307
–
–
–
3,460
3,460
3,460
143
164
–
30,737
31,044
31,044
Other non-current assets1)
–
–
658
–
658
658
Accounts receivable
–
–
4,735
–
4,735
4,735
55
287
–
–
342
342
–
–
297
–
297
297
Trade payables
Derivative liabilities
Other current liabilities1)
Total liabilities
December 31, 2012
Derivative assets
Other current assets1)
–
–
9,607
–
9,607
9,607
55
287
15,297
–
15,639
15,639
Other long-term liabilities1)
–
–
–
676
676
676
Liabilities to credit institutions
–
–
–
7,367
7,367
7,367
12,626
Cash and cash equivalents
Total assets
Trade payables
Derivative liabilities
Other current liabilities1)
Total liabilities
1)
–
–
–
12,626
12,626
140
109
–
–
249
249
–
–
–
2,896
2,896
2,896
140
109
–
23,565
23,814
23,814
Pre-payments, accruals, statutory receivables and liabilities are excluded, as this analysis is required only for financial instruments.
No financial assets and liabilities are offset in the balance sheet.
­Derivative contracts are subject to master netting agreements (ISDA)
and the carrying amount of derivative assets that are not offset in the
balance amount to SEK 411 (342) million and the carrying amount of
the related derivative liabilities amount to SEK –307 million (–249).
No collateral has been received or posted. The carrying amount essentially equals the fair value for all current items. For liabilities to credit
44
institutions, the carrying amount is a good estimate of the fair value
since this item mainly consists of loans that have a short interest fixing
term. For aging analysis regarding accounts receivable refer to Note 20
– Accounts receivable and other current assets. For aging analysis
­regarding liabilities to credit institutions refer to Note 26 – Other noncurrent liabilities. Trade payables are for the most part due within 60
days.
geely sweden ab ANNUAL REPORT 2013
Nominal amounts and fair values of derivative instruments
Derivative instruments for
­hedging of currency risk related
to financial assets and liabilities
Dec 31, 2013
Nominal
amount
Dec 31, 2012
Fair
Value
Nominal
amount
Fair
Value
Foreign exchange swaps
39
–
–
–
8,552
–70
3,568
–18
– receivable position1)
–
–
–
–
– payable position2)
–
–
2,576
–21
8,591
–70
6,144
–39
– receivable position1)
– payable position2)
Forward contracts
Subtotal
Derivative instruments for
­hedging of currency risk in
future commercial cash flows
Foreign exchange swaps
– receivable position1)
6,643
111
3,439
84
– payable position2)
5,968
–117
901
–6
13,203
215
5,598
178
3,904
–39
4,642
–103
8,915
67
5,312
64
Forward contracts
– receivable position1)
– payable position2)
Currency options
– receivable position1)
853
–11
5,549
–10
39,486
226
25,441
207
– payable position2)
Subtotal
Electricity hedges
– receivable position1)
– payable position2)
Subtotal
Total
1)
2)
–104
18
–80
16
422
–70
517
–91
318
–52
437
–75
48,395
104
32,022
93
Financial instruments included in the balance sheet under other c­ urrent assets.
Financial instruments included in the balance sheet under other current
­liabilities.
Currency risk management
The currency exposure arises from the production in various countries,
procurement and the mix of sales currencies and has a direct impact on
the Volvo Car Group’s operating income, balance sheet and cash flow as
well as the long-term competitiveness.
Transaction risk
The sales to different markets in combination with purchases in different
currencies determine the transaction exposure.
Sales to markets other than Sweden generate transaction exposure.
For the majority of the sales Volvo Car Corporations’ invoices to national
sales companies are in local currencies. The total currency inflow was
distributed between EUR 25 (23)%, SEK 19 (18)%, CNY 15 (11)%,
USD 13 (18)%, GBP 6 (5)%, RUB 4 (5)% and other currencies 18
(20)%. The major part of the production is in the plants in Sweden and
Belgium at cost mainly in EUR and SEK. The total currency outflow was
split into EUR 47 (50)%, SEK 30 (29)%, CNY 5 (4)%, JPY 5 (4) and
other currencies 13 (13)%.
The policy for transaction risk management states that up to 80 per
cent of the future expected cash flows in the coming 15 months can be
hedged with adequate financial instruments: options, forwards or combined instruments with maturities matching expected timing of cash
flows. Hedging of cash flows with maturity more than 15 months
requires a Board of Directors’ decision.
The currency exposure is expressed in terms of Cash Flow at Risk
(CFaR), which is the maximum loss at a 95 per cent confidence level in
one year. The CFaR is dependent on the cash flow forecast for the coming 15 months, market volatility and correlations. The CFaR at year end
for the cash flows in one year, excluding hedges, was approximately SEK
3 billion. Another way of expressing the currency sensitivity in revenue
and cost in foreign currencies is to say that during 2013, a one per cent
change in SEK against major currencies, excluding currency hedges,
has a net impact on operating income of approximately SEK 127 million.
A steering model with a benchmark level of CFaR is decided and a
stipulated mandate to deviate from that benchmark is given to Group
Treasury.
Forward contracts and options are used to reduce the currency risk
in expected future cash flows from sales and purchase in foreign currencies. At year end 39 (38) per cent of the forecasted cash flows in foreign
currencies the coming 15 months was hedged and during 2013 the
average hedge level has been 35 (32) per cent. The transaction exposure in the Group, measured as Cash Flow at Risk (CFaR) based on 15
months net cash flows, is reduced by 46 per cent as of end December
2013.
The currency risk is related to:
• expected future cash flows from sales and purchase in foreign
­currencies (transaction risk)
• changes in value of loans and investments (translation risk)
• net assets and liabilities of foreign subsidiaries (translation risk)
Maturities of cash flow hedges (forwards and call options), in millions, local currency
Maturity
0–6 months
7–12 months
>12 months
Total
EUR
USD
GBP
CNY
NOK
RUB
AUD
CHF
CAD
PLN
CZK
1,420
–664
–182
–4,188
–300
–6,348
–98
–86
–62
–62
–100
109
–308
–
–1,000
–
–2,047
–20
–
–16
–
–
–
–
–
–
–
–
–
–
–
–
–
1,529
–972
–182
–5,188
–300
–8,395
–118
–86
–78
–62
–100
The average duration of the portfolio was 3 months (5 months). The fair value of the outstanding derivatives as at December 31, 2013 amounted to
SEK 226 million (207).
geely sweden ab ANNUAL REPORT 2013
45
Hedge accounting
Hedge accounting is applied for cash flow hedging of currency risk and
for net investment of foreign operations. Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting and net investment of foreign operations are recognized in other
comprehensive income.
The highly probable forecast transactions in foreign currencies that
are hedged are expected to occur at various dates during the next 15
months. Gains and losses recognized in the hedge reserve in equity on
forward foreign exchange contracts as at December 31, 2013 are
­recognized in the income statement in the periods when the hedged
forecast transaction affects the income statement.
Based on cash flow hedging portfolio, a one per cent change in the
Swedish krona (SEK) against major currencies has a net impact of SEK
39 million on other comprehensive income.
The cash flow hedge reserve in shareholders’ equity as at December
31, 2013 amounts to SEK 189 million (177) before tax. The ineffectiveness in the cash flow hedges that has affected net income amounts to
SEK 4 million (–4). The hedge reserve for net investment of foreign
operations as at December 31, 2013 amounts to SEK –68 million (61)
before tax. No ineffectiveness has affected net income for 2013 and
2012.
Fair value of derivatives for cash flow hedging
2013
2012
Hedge reserve
189
177
Recognised in other comprehensive income
189
177
Time value in options
37
29
Ineffective contracts
–
–8
Non hedge accounting
–
9
37
30
Recognised in other operating income and
expenses
Hedge reserve
–68
61
–68
61
Total fair value
158
268
2013
2012
Net gains/losses on derivative financial
­instruments recognised in the income statement
Gains/ losses on commercial currency hedges
836
–287
Total
836
–287
Translation risk
Translation risk in Volvo Car Group relates to the net assets in foreign
subsidiaries. This exposure can generate a positive or negative impact
on Group earnings or change the value of equity.
EUR
CNY
GBP
AUD
USD
Other
Total
Investments in
Foreign Operations
4,510
1,928
483
472
–118
1,016
8,291
Translation
­exposure
4,510 1,928
483
472
–118
1,016 8,291
46
2013
2012
Gains/ losses on foreign exchange swaps
for hedging of external debt
141
–166
Gains/losses on foreign exchange swaps
for liquidity hedging
54
–47
Net gains/ losses reported in financial income and
expenses
Total
Recognised in other comprehensive income
MSEK
Net gains/losses on derivative financial
­instruments recognised in the income statement
Gains/ losses on interest-rate swaps
Fair value of financial instruments for hedging of
net investment of foreign operations
Net gains/losses recognised in other income and
expenses
A one per cent change in the Swedish krona against major currencies
has a net impact of approximately SEK 83 million. The translation risk is
primarily covered by matching the currency composition of debt with the
composition of assets. Part of the investments in operations in the Euro
zone is used for hedge accounting. The residual translation risk is part of
the strategic risk management and is not hedged with financial instruments, the translation effect is recognized in equity.
Total translation effect of net investments in foreign operations was
SEK –160 million (–324). This effect does not impact the income statement but is r­ ecognized in equity.
Volvo Car Group uses EUR 420 million of the EUR 922 million debt
to reduce the translation exposure on net investments in EUR. The currency gains or losses from the translation of the net investments in operations in EUR used for hedge accounting are recognized in other comprehensive income.
The currency risk arising from the part of the external debt of EUR
922 million that has not been used to hedge the net investments in EUR
is managed by currency swaps. Currency gains or losses from the currency swaps are recognized in the income statement and offset the currency gains or losses from the residual part of the loan.
The translation effect arising from the external debt of USD 466
­million is naturally hedged by the translation effect on internal net receivables in USD, effects are recognized in the income statement.
–
6
195
–207
Capital Structure
Volvo Car Group treasury policy stipulates that the medium term objective is to have a capital structure that enables the company to deliver
according to the requirements in the business plan. The longer term
objective is to have a capital structure that enables investment grade
­rating; currently Volvo Car Group has no external rating. The equity ratio
as per December 31, 2013 is 28 (29) per cent.
Funding and liquidity risk management
Long term funding
All draw down on new loans is evaluated against future liquidity needs
and investment plans. Volvo Car Group should for the coming 12 months
at any given time have available committed financing for investments
and maturing loans. To limit the risk of refinancing, debt maturing over
the next 12 months should not exceed 25 per cent of total debt. Less
than 50 per cent of the long term debt should be re-financeable within 3
years.
During first quarter of 2013 a second tranche of EUR 107 million
was drawn from China Development Bank (CDB) and in February 2013
geely sweden ab ANNUAL REPORT 2013
Volvo Car Group signed a new loan with Svensk Exportkredit of SEK
1,000 million, with maturity in 2016.
In the fourth quarter 2013, a new loan agreement for USD 800
­million was signed with CDB, with maturity in 2021. In November USD
466 million was drawn. The loan will support Volvo Car Group in further
developing the product program. The majority of the remaining USD 334
million is expected to be drawn during 2014. The amortisation structure
and terms of this loan agreement are similar to the loan agreement of
EUR 922 million.
The outstanding amount of long term funding for Volvo Car Group as
per year end 2013 was SEK 11 919 (6 917) million. Remaining credit
duration of the outstanding facilities was 4.8 years.
Outstanding loans are shown below.
Currency
Committed
Facilities
Utilized
Available
Maturity
Bank loan
EUR
922
922
–
2020
Bank loan
USD
800
466
334
2021
Bank loan
SEK
1,000
1,000
–
2016
Funding
maturity profile of external loans
million SEK equivalent
1,5000
12,000
9,000
6,000
3,000
0
2013
2014
2015
Outstanding loans 2013
2016
2017
2018
2019
2020
Liquidity risk management
Liquidity risk is the risk that Volvo Car Group is unable to meet ongoing
financial obligations on time. In order to meet seasonal volatility in cash
requirements, Volvo Car Group shall always have committed back up
facilities or free cash available corresponding to 5 per cent or more of
net revenue. The rolling 12 months cash flow forecasts are the basis for
the risk assessment of the liquidity risk management.
As at December 31, 2013, Volvo Car Group had cash and cash
equivalents of SEK 15,372 million (9,607), approximately 13 (8) per
cent of net revenue.
Volvo Car Group has a revolving credit facility of 360 MEUR with a
bank group of six banks with maturity in 2016. The purpose of the
arrangement is to serve as back up facility. During 2013, the facility has
remained undrawn. Including backup facilities Volvo Car Group have 15
per cent as liquidity reserve.
Interest rate risk management
Changes in the interest rate levels will impact Volvo Car Group’s net
financial income/expense or the value of financial assets and liabilities.
The return on cash and cash equivalents, short term investments and
credit facilities are impacted by changes in the interest rates. The
­exposure can be either direct from interest rate bearing debt or indirect
through leasing or other financing arrangements.
As at December 31, 2013, Volvo Car Group’s interest-bearing assets
consisted of cash in the form of cash at bank, short term deposits and
marketable securities. The average interest fixing term on these assets
was less than one month. The average interest fixing term on outstanding loans was less than 6 months. The average cost of borrowing was
4.8 (5.4) per cent. A 100 basis points change in market interests would
have an impact of SEK 93 million (27) on interest expenses.
According to the policy the interest rate risk in Volvo Car Group’s net
cash position has a benchmark duration of 6 months. The policy allows a
deviation of –6/+3 months from the benchmark. At year end the duration was 5 (2) months.
2021
Outstanding loans 2012
The repayment structure of outstanding long term funding is shown
below.
In relation to all external loans there are information undertakings
and covenants according to LMA (Loan Market Association) standards.
These are monitored and calculated quarterly to fulfil the terms and conditions stated in the financial agreements. Covenants are based on standard ratios such as EBITDA and Net debt.
Commodity price risk management
Changes in commodity prices impact Volvo Car Group’s cash flow and
earnings. Volvo Car Group has large procurement volumes in steel,
­aluminum, resin and rubber. Commodity price risk is managed both in
strategic (medium to long-term) and operating (short to medium-term)
levels of transaction risk. The strategic commodity price risk arises from
procurement mix of commodities and the impact on our long term
­competitiveness. The management of the strategic commodity price risk
means primarily price management in the procurement contract using
price contract clauses or similar constructions and fixed prices with
­suppliers. A one per cent change in the prices of commodities has an
impact on operating income of approximately SEK 73 million.
Volvo Car Group manages the changes in prices for electricity by
using forward contracts. The hedging is managed by V
­ attenfall Power
Management AB on discretionary account with certain risk limits
decided by Volvo Car Group.
Loan repayment structure
2013
2014
2015
2016
2017
2018
2019
2020
2021
Loan Repayment Structure 2013
0
137
389
2,002
1,668
2,335
2,531
2,182
813
Loan Repayment Structure 2012
0
105
455
766
1,154
1,544
1,609
1,285
0
geely sweden ab ANNUAL REPORT 2013
47
Net gains/losses on derivative financial
­instruments recognised in the income statement
2013
2012
Net gains/losses recognised in operating income
and expenses
Gains/losses on electricity hedges
22
–5
Total
22
–5
Credit risk management
Volvo Car Group’s credit risk focus mainly in counterparty risk in financial
market transactions, investments of cash surplus and counterparty risk
in connection with customer and dealer financing.
Financial counterparties The maximum amount exposed to financial
credit risk is the total of bank accounts, deposits with banks and market
value of outstanding derivatives. The maximum amount exposed to
credit risk for financial instruments is best represented by their carrying
amounts, see table ‘Financial assets and liabilities by category‘ in this
note. Investments of cash surplus are made in the money and capital
markets. All investments must meet the requirements of low credit risk
and high liquidity. All counterparties used for investments and derivative
transactions have credit rating A or better from one of the well-established credit rating institutions and ISDA agreements are in place with all
counterparties used for derivative transactions which is required according to Volvo Car Group treasury policy. Limits are set and limit usage is
followed up for the Volvo Car Group treasury counterparties and deposits are diversified between relationship banks. Subsidiaries’ bank balances are diversified in order to limit credit risk.
Dealers, importers and other counterparties
For the credit risk in customer and dealer financing, the objective is to
have a sound and balanced credit portfolio and to engage in credit monitoring by means of detailed procedures which include follow-up and
repossession. In cases where the credit risk is considered unsatisfactory
a letter of credit or other instruments are used. The maximum amount
exposed to credit risk is the carrying amount of accounts receivable, see
table ‘Financial assets and liabilities by category’ in this note. For quantification of credit risk in accounts receivable refer to Note 20 – Accounts
receivable and other current assets.
NOTE 22 – MARKETABLE SECURITIES AND CASH
AND CASH EQUIVALENTS
Marketable securities
Cash and Cash equivalents includes SEK 1,047 million (878) where limitations exist, mainly liquid funds where exchange controls or other legal
restrictions apply. It is not possible to immediatly use the liquid funds in
other parts of Volvo Car Group, however there is normally no limitation
for use in the Group’s operation in the respective country.
NOTE 23 – EQUITY
The Share Capital of Geely Sweden AB consists of 1,000,000,000
shares fully paid with a par value of 1 SEK and with voting rights of one
vote per share.
The Share premium relates to the business combination, through
­contribution in kind.
Other Contributed Capital consists of contribution from Shanghai
Geely Zhaoyuan International Investment Co. Ltd. The contribution was
initially received by Geely Sweden Holdings AB from Shanghai Geely
Zhaoyuan International Investment Co. Ltd. and was then given to Geely
Sweden Automotive AB and thereafter to Geely Sweden AB as an
unconditional shareholders’contribution.
The hedge reserve consists of the change in fair value of commercial
cash flow hedging instruments in cases where hedge accounting is
applied according to IAS 39, Financial Instruments: Recognition and
Measurement.
The currency translation reserve comprises all exchange rate
­differences resulting from the translation of financial reports of foreign
operations that have prepared their financial reports in a currency other
than Volvo Car Group’s reporting currency. The parent company and
Volvo Car Group present their financial reports in Swedish kronor (SEK).
Retained earnings comprises net income for the year and preceding
years.
Non-controlling interest refers to the share of equity that belongs to
external interests without a controlling influence.
Total equity consists of the sum of equity attributable to the owners of
the parent company and equity attributable to non-controlling i­nterests.
At year end 2013 the Volvo Car Group’s total equity amounted to SEK
24,638 million (21,901-restated).
Change in other reserves
Dec 31, 2013
Dec 31, 2012
Commercial paper
88
–
Total short-term investments
88
–
The investment has a term of more than three months from acquisition
date.
Cash and cash equivalents
2013
2012
Balance at January 1
138
–
Change in fair value of currency risk derivatives
during the year
189
–160
–177
337
Currency risk contracts recognised
in the income statement1)
Tax attributable to items recognised
in other comprehensive income
Balance at December 31
1)
Dec 31, 2013
Dec 31, 2012
Cash in banks
11,223
8,482
Bank deposits
4,149
1,125
15,372
9,607
Total
48
–3
–39
147
138
Included in the income statement under other operating income/expenses.
geely sweden ab ANNUAL REPORT 2013
NOTE 24 – POST EMPLOYMENT BENEFITS
Volvo Car Group has various schemes for post-employment benefits,
mainly relating to pension plans. Other benefits can in some locations
include disability, life insurance and health benefits. Pension plans are
classified either as defined contribution or defined benefit plans. Volvo
Car Group has both defined contribution and defined benefit plans.
held in separate pension funds or funded through insurance payments.
The “funded through insurance payments” plans are defined benefit
plans accounted for as defined contribution plans. These plans in
­Sweden are secured with the mutual insurance company Alecta.
The portion secured through insurance with Alecta refers to a
defined benefit plan that comprises several employers and is reported
according to a pronouncement by the Swedish Financial Reporting
Board, UFR 3. For 2013, Volvo Car Group did not have access to the
information to report it´s proportinate share of the plan´s obligations,
assets under management and cost, that would make it possible to
report this plan as a defined benefit plan. The ITP 2 pension plan, which
is secured through insurance with Alecta, is therefore reported as a
defined contribution plan.
The collective funding ratio is of the market value of Alecta’s assets
as a percentage of the insurance obligations calculated according to
Alecta’s actuarial methods and assumptions, which do not conform to
IAS 19. The collective funding ratio should normally be allowed to vary
between 125 and 155 percent. At year end 2013, Alecta’s surplus in
the form of the collective funding ratio amounted to 148 percent (129).
In case local legal requirements exist, funded or unfunded plans are
credit insured with an external party.
Defined contribution plans
Under a defined contribution plan, Volvo Car Group pays fixed contri­
butions into a separate entity outside Volvo Car Group and will have no
future financial obligations. The contributions are recognised as
employee benefit expense in the income statement.
Defined benefit plans
Defined benefit plans are all plans that are not classified as defined
­contribution plans. A defined benefit plan is a pension plan where the
employee will receive a defined pension benefit upon retirement, usually
dependent on factors such as age, years of service and compensation.
Volvo Car Group has defined benefit plans for qualifying employees in
some subsidiaries and the largest plans are in Sweden and Belgium.
The largest plan overall is the Swedish ITP 2 plan which is a collectively
agreed pension plan for white collar employees. ITP 2 is a final salarybased plan.
For the defined benefit plans operated, Volvo Car Group has the
­obligation for the future benefits. Volvo Car Group’s defined benefit
plans are secured in three ways: as a liability in the balance sheet, assets
Total
Financial year ending on
of which Sweden
of which Belgium
Dec 31, 2013
Dec 31, 2013
Dec 31, 2013
Dec 31, 2012
Total
of which Sweden
Dec 31, 2012
of which Belgium
Dec 31, 2012
Principal actuarial assumptions
Weighted-average assumptions
to determine benefit obligations
Discount rate
3.89%
4.00%
3.15%
3.52%
3.50%
3.05%
Rate of salary increase
3.20%
3.00%
3.17%
3.10%
3.00%
3.17%
Rate of price inflation
2.13%
2.00%
2.00%
2.08%
2.00%
2.00%
Rate of pension increases
2.16%
2.00%
N/A
2.11%
2.00%
N/A
3.52%
3.50%
3.06%
3.80%
3.50%
4.42%
Weighted-average assumptions
to determine net pension cost
Discount rate
Expected long-term rate
of return on plan assets
–
–
–
4.99%
4.75%
5.00%
Rate of salary increase
3.09%
3.00%
3.18%
3.52%
3.50%
3.17%
Rate of price inflation
2.08%
2.00%
2.00%
2.09%
2.00%
2.00%
Rate of pension increases
2.10%
2.00%
N/A
2.12%
2.00%
N/A
Mortality:
Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each
territory. Mortality assumptions for Sweden are based on the same assumption recommended by the Financial Supervisory Authority (FFFS 2007:31),
a generational-based table but with one year “age set-back” i.e. a 65-year-old would have the life expectancy of a 64-year-old.
geely sweden ab ANNUAL REPORT 2013
49
Total
Financial year ending on
of which Sweden
of which Belgium
Dec 31, 2013
Dec 31, 2013
Dec 31, 2013
Dec 31, 2012
Total
of which Sweden
Dec 31, 2012
of which Belgium
Dec 31, 2012
Change in defined benefit obligation
Defined benefit obligation at beginning
of year
14,602
9,866
1,908
13,492
9,342
1,529
Service cost
588
385
125
473
312
110
Interest expense
507
338
59
501
323
65
–371
–217
–80
–369
–206
–91
–1,494
–1,806
266
655
87
356
80
–
68
-150
–
–61
13,912
8,566
2,346
14,602
9,858
1,908
9,184
5,913
1,182
8,397
5,484
1,052
335
207
41
318
192
49
90
–
61
100
–
62
637
264
266
469
237
60
56
–
42
–100
–
–41
10,302
6,384
1,592
9,184
5,913
1,182
Defined benefit obligation
13,912
8,565
2,346
14,602
9,866
1,908
Fair value of plan assets
10,302
6,384
1,592
9,184
5,913
1,182
Funded status
3,610
2,181
754
5,418
3,953
726
Net liability (asset)
3,610
2,181
754
5,418
3,953
726
Service cost
588
385
125
472
312
109
Net interest cost
172
131
19
183
131
17
62
–
60
–
–
–
8
–
–
6
–
–
830
516
204
661
443
126
Pension cost for defined contribution plans
1,480
1,321
123
1,324
1,187
116
Total pension cost recognised in Income
Statement
2,310
1,837
327
1,985
1,630
242
–2,194
–2,070
–60
126
–142
297
Cash flows
Remeasurements
Effect of changes in foreign exchange rates
Benefit obligation at end of year
Change in fair value of plan assets
Fair value of plan assets
at beginning of year
Interest income
Cash flows
Remeasurements
Effect of changes in foreign exchange rates
Fair value of plan assets at end of year
Amounts recognised in
the statement of financial position
Components of defined benefit cost
Remeasurements of Other Long Term
Benefits
Administrative expenses and taxes
Total pension cost for defined benefit
plans
Remeasurements (recognosed in OCI)
Effect of changes in demographic
assumptions
Effect of changes in financial assumptions
Effect of experience adjustments
16
–
–
11
–
–
–1,730
–1,748
–6
455
–
240
157
–58
212
129
95
117
(Return) on plan assets (excluding interest
income)
–637
–264
–266
–469
–237
–60
Total defined benefit cost recognized in
Income Statement and OCI
–1,364
–1,554
144
787
301
423
50
geely sweden ab ANNUAL REPORT 2013
of which Sweden
of which Belgium
Dec 31, 2013
Total
Dec 31, 2013
Dec 31, 2013
Dec 31, 2012
Dec 31, 2012
Dec 31, 2012
5,418
3,953
726
5,094
3,858
477
830
515
203
661
443
126
–2,194
–2,070
–60
126
–142
297
Cash Flows
–469
–217
–141
–474
–206
–153
Employer contributions
–183
–
–105
–205
–
–118
Employer direct benefit payments
–286
–217
–36
–269
–206
–35
25
–
26
11
–
–21
3,610
2,181
754
5,418
3,953
726
Actives
8,038
4,247
2,166
8,408
5,164
1,712
Vested deferreds
2,489
1,809
122
2,864
2,182
144
Retirees
3,385
2,509
58
3,330
2,520
52
13,912
8,565
2,346
14,602
9,866
1,908
Financial year ending on
Total
of which Sweden
of which Belgium
Net defined benefit liability (asset)
reconciliation
Net defined benefit liability (asset) at the
beginning of the year
Defined benefit cost included in P&L
Total remeasurements included in OCI
Effect of changes in foreign exchanges rates
Total defined benefit liability (asset)
as of end of year
Defined benefit obligation
Defined benefit obligation
by participant status
Total
History of experience gains and losses
2013
2012
Defined benefit obligation
13,912
14,602
Fair value of plan assets
10,302
9,184
3,610
5,418
Amount
–637
–469
Per centage of plan assets
–6%
–5%
Deficit/(surplus)
Difference between the expected
and actual return on plan assets
–
–
Amount
Experience (gain)/loss on plan liabilities
158
130
Per centage of present value
of plan liabilities
1%
1%
Plan assets
Of which
with a
quoted
2013 market price
Fair value of plan assets
Cash and cash equivalents
333
5
Equity instruments
2,262
931
Debt instruments
2,791
609
9
–
Investment funds
Real estate
3,243
178
Other
1,664
308
Total
10,302
2,031
Risks
There are mainly three categories of risks related to defined benefit obligations and pension plans. The first category relates to risks affecting
the actual pension payments. Increased longevity and inflation of salary
and pensions are the principle risks that may increase the future pension payments, and hence, increase the pension obligation. The second
category relates to investment return. Pension plan assets are invested
in a variety of financial instruments and are exposed to market fluctuations. Poor investment return may reduce the value of investments and
render them insufficient to cover future pension payments. The final category relates to measurement and affects the acounting for pensions.
The discount rate used for measuring the present value of the obligation
may fluctuate which impacts the valuation of the defined benefit obligation. The discount rate also impacts the size of the interest income and
expense that is reported in the Financial items and the service cost. The
risk related to pension obligations, e.g., mortality exposure discount rate
and inflation, are monitored on an ongoing basis.
Below is the sensitivity analysis for the main financial assumption and
the potential impact on the present value of the defined benefit obligation on the major plans.
Sensitivity analysis on defined benefit obligation
Total
Discount rate +0,5%
–1,000
Discount rate –0,5%
1,000
The responsibility for governance of the pension plans and the plan
assets lies with the Company and Volvo Personvagnar’s Pension Fund.
Volvo Personvagnar’s Pension Fund is managed internally on the basis
of capital preservation strategy and the risk profile is set accordingly. The
investment horizon is long-term and the asset allocation ensures that
the investment portfolios are well diversified.
geely sweden ab ANNUAL REPORT 2013
51
NOTE 25 – CURRENT AND OTHER NON–CURRENT PROVISIONS
Warranties
Service contracts
Other sales ­generated
obligations
Other provisions
Total
5,001
3,313
3,302
1,477
13,093
Balance at January 1, 2013
Provided for during year
Utilised during year
Reversal of unutilised amounts
3,210
3,044
7,668
7,043
20,965
–2,928
–3,193
–7,123
–6,246
–19,490
–802
–531
–
–86
–185
Translational differences and other
–58
–82
13
–8
–134
Balance at December 31, 2013
4,694
3,082
3,774
2,081
13,632
Of which current
1,993
879
3,774
1,523
8,169
Of which non–current
2,701
2,203
–
558
5,463
For additional information regarding accounting principles for provisions, see Note 1 – Accounting principles and Note 2 – Critical accounting estimates and judgements..
NOTE 26 – OTHER NON - CURRENT LIABILITIES
Dec 31,
2013
Dec 31,
2012
Liabilities to credit institutions
and finance lease contracts
Liabilities to credit institutions
Liabilities related to finance lease contracts
Total
11,919
6,917
114
140
12,033
7,057
Liabilities to credit institutions
Liabilities to credit institutions mature until 2021 (2020). The average
cost of borrowing paid 2013 amounted to 4.8% (5.4%). In 2013 the
shares of Geely Sweden AB and Volvo Car Corporation were pledged for
the liabilities to credit institutions of SEK 10,919 million (In 2012 the
libilities for which a share pledge was provided amounted to SEK 6,917
milion).
Dec 31,
2013
Dec 31,
2012
Other long-term liabilities
Liabilities related to repurchase agreements
745
627
Deferred leasing revenue
420
393
–
–12
47
49
1,212
1,057
Dec 31,
2013
Dec 31,
2012
1–5 years
8,924
2,480
Over 5 years
2,995
4,437
11,919
6,917
Effect of remeasurement of other long-term liabilities
for payroll taxes
Other liabilities
Total
Repayment structure of liabilities
to credit ­institutions
Total
1–5 years
Total
52
Dec 31,
2013
Dec 31,
2012
EUR
7,964
6,917
USD
2,955
–
SEK
1,000
–
11,919
6,917
919
Total
Volvo Car Group has the following
undrawn borrowing facilities:
Floating rate
– Expiring within one year
2,159
- Expiring after one year but within five years
3,202
-
Total
5,361
919
Dec 31,
2013
Dec 31,
2012
Accrued expenses and prepaid income
5,624
5,306
Liabilities related to repurchase agreements
3,460
2,896
Personnel related liabilities
2,906
2,592
VAT liabilities
1,475
934
Hedging instruments
308
249
Deferred leasing revenue
549
493
Other liabilities
933
690
15,255
13,160
Dec 31,
2013
Dec 31,
2012
NOTE 27 – OTHER CURRENT LIABILITIES
Total
NOTE 28 – PLEDGED ASSETS
Exposure of interest rate changes related
to liabilities to credit institutions
6 months or less
The carrying amounts of Volvo Car Group’s
­liabilities to credit institutions are denominated
in the following currencies:
11,919
6,917
–
–
11,919
6,917
Shares in subsidiaries
14,844
16,662
Restricted cash
930
507
Inventory
486
–
1
1
16,261
17,170
Other pledged assets
Total
geely sweden ab ANNUAL REPORT 2013
NOTE 29 – CONTINGENT LIABILITIES
Investment commitments in contractual manufacturer
Share of packaging supply in logistic company
NOTE 31 – cHANGES IN ACCOUNTING PRINCIPLES
Dec 31,
2013
Dec 31,
2012
266
349
–
208
Guarantees to insurance company FPG
116
112
Legal claims
113
–
70
39
565
708
Other contingent liabilities1)
Total
1) Apart
from the above contingent liabilities, there are other commitments and
guarantees that are not recognised since the likelihood of an outflow of
resources is very low. Legal proceedings are further explained in note 2 - Critical
accounting estimates and judgements.
2013
2012
36
Share of income in associates
–179
–24
Interest effect from the measurement
of repurchase obligations
–197
–172
–14
–263
Other non-cash items
Total
Operating expenses/income
Operating income
33
Effect of changes in accounting policies
Dec 31,
2012
Gross income
Adjustments for items not affecting
cash flow consist of:
Shareholders’contribution to associates offset
against invoiced services
Impact of changes in accounting policy on the consolidated
income statement
SEK million
NOTE 30 – CASH FLOW STATEMENTS
Capital gains/losses on sale of
tangible and intangible assets
The revised employee benefit standard IAS 19 introduces changes to
the recognition, measurement, presentation and disclosure of postemployment benefits. The standard also requires net interest expense/
income to be calculated as the product of the net defined benefit liability/asset and the discount rate as determined at the beginning of the
year. The effect of this is to remove the previous concept of recognizing
an expected return on plan assets.
The new principles have been adopted retrospectively as stated
below:
–
–48
76
61
–281
–410
Acquisition of the remaining shares in Pininfarina Sverige AB (Volvo Car
Uddevalla AB) is classified as an investing activity and is included in
“Investments in shares and participation”.
Sale of intagible assets relates to a sale of technology of a Volvo
platform to Geely Group Ltd Co. The sale was recognised in the Income
statement in 2012 and payment was received during 2013, which has
affected this year’s cash flow from investing activities by 500 MSEK.
Adopt
IAS 19
Dec 31, 2012
(restated)
19,947
–
19,947
–19,929
48
–19,881
18
48
66
Financial expenses/income
–933
–127
–1,060
Income before tax
–915
–79
–994
435
17
452
–480
–62
–542
Income tax
Net income
Impact of changes in accounting policy on the consolidated
statement of comprehensive income
SEK million
Net income for the year
Dec 31,
2012
Adopt
IAS 19
Dec 31, 2012
(restated)
–480
–62
–542
–
–98
–98
Other comprehensive income,
net of income tax
Items that will not be reclassified
susequently to income statement:
Items that may be reclassified
susequently to income statement:
–138
Total comprehensive income
for the year
–138
–618
–160
–778
–618
–160
–778
–668
–160
–828
50
–
50
–618
–160
–778
Total comprehensive income
attributable to
Owners of the
parent company
Non-controlling interests
Total
Cont. note 31
Impact of changes in accounting policy on the consolidated balance sheet
SEK million
Jan 1, 2012
Adopt IAS 19
Deferred tax assets
1,636
103
Non current assets
44,582
–
Total non-current assets
46,218
103
Total current assets
34,242
–
Total assets
80,460
103
Jan 1, 2012
(restated)
Dec 31, 2012
(restated)
Dec 31, 2012
Adopt IAS 19
1,739
1,701
118
1,820
44,582
46,156
–
46,156
46,321
47,857
118
47,976
34,242
28,829
–
28,829
80,563
76,686
118
76,804
Assets
Equity & liabilities
Total equity
22,648
–1,483
21,165
23,544
–1,643
21,901
Provisions for post employee benefits
2,846
2,298
5,144
2,948
2,545
5,493
Deferred tax liabilities
2,790
–316
2,474
1,902
–346
1,556
Non-current liabilities
15,433
–396
15,037
14,462
–438
14,024
Total non-current liabilities
21,069
1,586
22,655
19,312
1,761
21,073
Total current liabilities
36,743
–
36,743
33,830
–
33,830
Total equity & liabilities
80,460
103
80,563
76,686
118
76,804
geely sweden ab ANNUAL REPORT 2013
53
INCOME STATEMENTS AND
COMPREHENSIVE INCOME – PARENT COMPANY
SEK million
Note
2013
2012
Other income
15
51
Gross income
15
51
–13
–13
Administrative expenses
3
Other operating income
Other operating expenses
1
–
–2
–142
1
–104
Operating income
4
Financial income
5
30
500
Financial expenses
5
–103
–742
–72
–346
–
12
Income before tax
Appropriation to tax allocation reserve
Income tax
Net income
6
14
43
–58
–291
Other comprehensive income and net income are consistent since there are no items in other comprehensive income.
54
geely sweden ab ANNUAL REPORT 2013
BALANCE SHEETS – PARENT COMPANY
SEK million
Note
Dec 31, 2013
Dec 31, 2012
Participation in subsidiary
7
11,280
10,987
Deferred tax assets
6
175
161
Receivables from group companies
2
567
543
ASSETS
Non-current assets
Other non-current assets
Total non-current assets
2
7
12,024
11,698
26
13
Current assets
Receivables from group companies
2
Other current assets
Cash and cash equivalents
Total current assets
TOTAL ASSETS
11
50
136
110
173
173
12,197
11,871
EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital (1,000,000,000 shares with par value of 1 SEK)
1,000
1,000
1,000
1,000
Share premium reserve
5,509
5,509
Retained earnings
2,385
2,383
Non-restricted equity
Net income for the year
Total equity
–58
–291
7,836
7,601
8,836
8,601
Non-current liabilities
Non-current liabilities
Liabilities to group companies
2
Total non-current liabilities
1
–
3,342
3,245
3,343
3,245
Current liabilities
Current provisions
3
–
Trade payables
–
1
Liabilities to group companies
Other current liabilities
Total current liabilities
TOTAL EQUITY AND LIABILITIES
geely sweden ab ANNUAL REPORT 2013
2
–
1
15
23
18
25
12,197
11,871
55
CHANGES IN EQUITY – PARENT COMPANY
Restricted equity
SEK million
Non-restricted equity
Share Capital
Share premium
reserve
Other contributed
capital
Retained earnings
Total
Total equity
1,000
5,509
1,127
–523
6,113
7,113
–
–
–
–291
–291
–291
Balance at January 1, 2012
Net income
Transactions with owners
Unconditional shareholder’s
­contribution
Balance at December 31, 2012
Net income
–
–
1,779
–
1,779
1,779
1,000
5,509
2,906
–814
7,601
8,601
–
–
–
–58
–58
–58
Transactions with owners
Unconditional shareholder’s
­contribution
Balance at December 31, 2013
–
–
293
–
293
293
1,000
5,509
3,199
–872
7,836
8,836
STATEMENT OF CASH FLOWS– PARENT COMPANY
SEK million
Note
2013
2012
Operating income
1
–104
Interest and similar items received
–
243
Interest and similar items paid
–
–236
5
141
6
44
Change in other current receivable
28
61
Proceeds from borrowings
–
1,337
Change in accounts payable
–1
–
Repayments of borrowings
–
–1,362
Received shareholders contribution
293
12
Cash flow from financing activities
293
–13
28
66
110
47
OPERATING ACTIVITIES
Adjustments for items not affecting cash flow
Note
2013
2012
Investments in shares and participations
–293
–13
Cash flow from investing activities
–293
–13
Cash flow from operating and investing activities
–265
79
INVESTING ACTIVITIES
9
Movements in working capital
Change in provisions
SEK million
FINANCING ACTIVITIES
4
–
Change in provisions working capital liabilities
–9
–13
Cash flow from movements in working capital
22
48
Cash flow from operating activities
28
92
Cash flow for the year
Cash and cash equivalents at beginning of year
Exchange difference on cash and cash equivalents
Cash and cash equivalents at end of year
56
–2
–3
136
110
geely sweden ab ANNUAL REPORT 2013
NOTES TO THE parent company FINANCIAL STATEMENTS
All amounts are in SEK million unless otherwise stated.
Amounts in brackets refer to the preceding year.
NOTE 1 – ACCOUNTING PRINCIPLES
The parent company has been prepared in compliance with Swedish
Annual Accounts Act and Recommendation RFR 2, Accounting for
Legal Entities of the Swedish Financial Reporting Board. There are no
effects of the transition. RFR 2 implies that the parent company in the
Annual Report of a legal entity shall apply all International Financial
Reporting Standards and interpretations approved by the EU as far as
this is possible within the framework of the Annual Accounts Act and
taking into account the connection between reporting and taxation.
The operation of the parent company consist for the most part of
share ownership in Group companies and financing. Volvo Car Group’s
accounting principles apply except for the following areas:
Income taxes
Due to the relationship between accounting and taxation, the deferred
tax liability on untaxed reserves are included in the untaxed reserves.
Shares in subsidiaries
The shares in subsidiaries are accounted for according to the acquisition
cost method. Acquisition-related costs directly atttributable to the acquisition are capitalised as part of the participation in Geely Sweden AB.
Investments are carried at cost and only dividends are accounted for in
the income statement. An impairment test is performed annually and
write-downs are made when permanent decline in value is established.
Financial assets
Financial assets that are intended as a long-term investment are carried
at cost. Impairment tests are conducted annually and impairment losses
are recognised if it is likely that a decline in value is permanent.
Transaction costs directly attributable to the acquisition of Volvo Car
Corporation in 2010 have been accounted for as an increase in the
­carrying amount of the shares.
Hedging
The parent company hedges future interest flows related to assets and
liabilities. When hedging future interest flows, hedging instruments are
not revalued at the exchange rate fluctuations. Instead the entire effect
of changes in exchange rates is recognised in the income statement
when the hedging instrument matures.
In cases where the parent company holds derivative financial instruments not used for hedging receivables and liabilities in foreign currency
or interest flows associated with these, they are reported at the lower of
cost and net realisable value.
Equity
In accordance with the Swedish Annual Accounts Act, the equity is split
between restricted and non-restricted equity.
Shareholders’ contribution
Shareholders’ contributions are recognised in shares in subsidiaries
and as such they are subject to impairment testing.
NOTE 2 – related parties
During the year, the parent company entered into the following transactions with related parties:
Part of sales to related parties
Companies within the Volvo Car Group
Part of purchases from related parties
2013
2012
2013
2012
100%
100%
71%
43%
2013
2012
2013
2012
592
556
3,342
3,246
Receivables from
Companies within the Volvo Car Group
Geely Sweden Holdings AB
– whereof short-term
Of the total receivables from related parties, SEK 594 million (556) is
due within five years. Of the total liabilities to related parties SEK 3,342
million (3,246) is due within five years.
Business transactions between the parent company and related
­parties all arise in the normal course of business and are conducted on
the basis of arm’s length principles.
During 2013 the company has received an unconditional shareholders’ contribution from Geely Sweden Automotive AB amounting to
geely sweden ab ANNUAL REPORT 2013
Liabilities to
1
–
–
–
26
13
–
1
593
556
3,342
3,246
SEK 293 million (1,779). The contribution was initially received by Geely
Sweden Holding AB from Shanghai Geely Zhaoyuan International
­Investment Co Ltd and was then given to Geely Sweden Automotive AB
as an unconditional shareholders’ contribution.
Volvo Car Group does not engage in any transactions with Board
­members or senior executives except ordinary remunerations for services. For further information regarding remunerations, see Note 9 –
Employees and remuneration in the consolidated statements.
57
NOTE 3 – AUDIT FEES
SEK thousand
NOTE 5 – FINANCIAL INCOME AND EXPENSES
2013
2012
Deloitte
Audit fees
–84
–44
–3
–145
Other services
–327
–3
Total
–414
–192
Audit-related fees
2013
2012
30
340
Financial income
Audit fees involve audit of the Annual report, financial accounts and the
administration by the Board of Directors and the Managing Director. The
audit also includes advice and assistance as a result of the observations
made in connection with the audit.
Interest income from subsidiaries
Net foreign exchange gain on financing activities
Total
All other work performed by the auditor is defined as Other services.
NOTE 4 – REMUNERATION TO THE BOARD OF DIRECTORS
Information on remuneration to Board members by gender is shown in
Note 9 – Employees and remuneration, in the consolidated statements.
160
30
500
–
–598
Financial expenses
Interest expenses to parent company
Interest expenses to subsidiaries
Other interest expenses
Net foreign exchange loss on financing activities
Total
Audit-related fees refer to other assignments to ensure quality in the
financial statements including consultations on reporting requirements
and internal control.
–
–96
–
–
–105
–7
–39
–103
–742
2013
2012
NOTE 6– TAXES
Income tax recognised in income statement
Deferred taxes
14
43
Total
14
43
–72
–334
Information regarding current year tax expense
compared to tax expense based on the applicable
Swedish tax rate
Income before tax for the year
Tax according to applicable Swedish tax rate, 22%
(26.3%)
16
88
Tax effect on deferred tax due to change of tax rate
–
–32
Additional deferred tax relating to previous years
–3
–
Other
1
–13
Total
14
43
As from January 1, 2013, the Swedish tax rate has changed from 26.3%
to 22.0%, affecting deferred tax items.
Total deferred tax asset SEK 175 million (161) relates to loss-carry
forward. Deferred tax assets are only accounted for to the extent there
are taxable temporary differences or other factors that convincingly
­indicate there will be sufficient future taxable profit. The tax loss
­carry-forward has an indefinite period of utilisation.
58
geely sweden ab ANNUAL REPORT 2013
NOTE 7 – PARTICIPATION IN SUBSIDIARY
At beginning of the year/acquired acquisition value
Dec 31,
2013
Dec 31,
2012
10,987
10,974
Shareholders´contribution
Total
Geely Sweden AB’s investments
in subsidiaries:
Volvo Car Corporation
293
13
11,280
10,987
Corp. ID no.
Registered office
No. of shares
% interest held
Book value
Dec 31, 2013
Book value
Dec 31, 2012
556074-3089
Göteborg
1,000,000,000
100
11,280
10,987
The share of voting power corresponds to holdings in per cent as per above.
NOTE 8 – PLEDGED ASSETS
Dec 31,
2013
Dec 31,
2012
Shares in Volvo Car Corporation
11,280
10,987
Total
11,280
10,987
Pledged shares in subsidiaries per December 31, 2013 refer to a
loan in Volvo Car Corporation.
NOTE 9 – CASH FLOW STATEMent
Adjustments for items not affecting cash flow consist of:
2013
2012
Reversal of transaction costs in connction with refinancing
–
38
Unrealised foreign exchange losses
-
103
Other non-cash items
geely sweden ab ANNUAL REPORT 2013
5
-
5
141
59
Subsidiaries
Legal Entity
Corp. ID No.
Volvo Personvagnar AB
556074-3089
Volvo Car Austria GmbH
Volvo Car do Brasil Automoveis Ltda
Volvo Cars Brasil Importacao e Comercia de
Veiculos Ltda
Registered office
Holding in per cent
Gothenburg / Sweden
100
Austria
100
Brazil
100
Brazil
100
Volvo Cars of Canada Ltd
Canada
100
Volvo Car Switzerland AG
Switzerland
100
Volvo Cars (China) Investment Co Ltd
China
100
Volvo Cars Technology (Shanghai) Co
China
100
Czech Republic
100
Volvo Cars Germany GmbH
Germany
100
Volvo Car Denmark AS
Denmark
100
Spain
100
Volvo Car Finland Auto Oy
Finland
100
Volvo Automobiles France SAS
France
100
Volvo Car UK Ltd
United Kingdom
100
Volvo Car Hellas
Greece
100
Hungary
100
Ireland
100
India
100
Italy
100
Volvo Cars Japan
Japan
100
Volvo Car Korea Co., Ltd
Korea
100
Mexico
100
Malaysia
100
Volvo Car Nederland BV
The Netherlands
100
Snita Holding BV
The Netherlands
100
Swene Holding BV
The Netherlands
100
Snebe Holding BV
The Netherlands
100
Volvo Car Norway AS
Norway
100
Volvo Auto Polska Sp Z.o.o
Poland
100
Portugal
100
Volvo Auto Czech Sro
Volvo Car Espana S.L
Volvo Car Hungary Trading and Service Ltd
Volvo Car Ireland Ltd
Volvo Auto India Pvt. Ltd
Volvo Car Italia Spa
Volvo Auto de Mexico S.A de C.V
Volvo Car Manufacturing Malaysia Sdn Bhd
Volvo Car Portugal SA
Volvo Personbilar Sverige AB
556034-3484
Gothenburg / Sweden
100
Volvo Cars Overseas Corp AB
556223-0440
Gothenburg / Sweden
100
Volvo Personvagnar Norden AB
556413-4848
Gothenburg / Sweden
100
Volvo Car Australia Holding AB
556152-2680
Gothenburg / Sweden
100
Goldcup 9397 AB
556955-6441
Gothenburg /Sweden
100
Volvo Bil i Göteborg AB
556056-6266
Gothenburg / Sweden
100
Volvo Car Uddevalla AB
556232-0142
Uddevalla / Sweden
100
Volvo Car NSC Holding AB
556754-8283
Gothenburg / Sweden
100
Volvo Cars PHEV Holding AB
556785-9375
Gothenburg / Sweden
100
Volvo Cars Real Estate and Assets 1 AB
556205-7298
Gothenburg / Sweden
100
Volvo Cars Investment and Borrowing AB
556130-4246
Gothenburg / Sweden
100
Volvo Car Center Uddevalla AB
556651-0193
Uddevalla / Sweden
100
Volvo Cars Services 1 AB
556877-5778
Gothenburg / Sweden
100
Volvo Cars Services 2 AB
556877-5760
Gothenburg / Sweden
100
Singapore
100
Volvo Otomobil Ticaret Ltd
Turkey
100
Volvo Cars Taiwan Ltd
Taiwan
100
South Africa
100
Volvo Cars Financial Services US LLC
USA
100
Volvo Cars of North America LLC
USA
100
Volvo Car Asia Pacific Ltd
Volvo Car South Africa Pty Ltd
60
geely sweden ab ANNUAL REPORT 2013
Signatures
Stockholm, April 24 2014
Li Shufu
Chairman of the Board
Hans-Olov Olsson
Board member
Zhang Ran Board member
Li Donghui
Board member
Our audit report was submitted, April 24 2014
Deloitte AB
Jan Nilsson
Authorized Public Accountant
geely sweden ab ANNUAL REPORT 2013
61
AUDITOR’S REPORT
To the annual meeting of the shareholders of Geely Sweden AB
Corporate identity number 556798-9966
This is a translation of the Swedish language original in the events of
any differences between this translation and the Swedish original the
latter shall prevail.
Report on the annual accounts and consolidated
accounts
We have audited the annual accounts and consolidated accounts of
Geely Sweden AB for the financial year 2013-01-01 – 2013-12-31.
accounts have been prepared in accordance with the Annual Accounts
Act and present fairly, in all material respects, the financial position of
the group as of 31 December 2013 and of their financial performance
and cash flows for the year then ended in accordance with International
Financial Reporting Standards, as adopted by the EU, and the Annual
Accounts Act. The statutory administration report is consistent with the
other parts of the annual accounts and consolidated accounts.
We therefore recommend that the annual meeting of shareholders
adopt the income statement and balance sheet for the parent company
and the group.
Responsibilities of the Board of Directors for the annual accounts
and consolidated accounts
The Board of Directors are responsible for the preparation and fair
­presentation of these annual accounts in accordance with the Annual
Accounts Act and of the consolidated accounts in accordance with
International Financial Reporting Standards, as adopted by the EU, and
the Annual Accounts Act, and for such internal control as the Board of
Directors determine is necessary to enable the preparation of annual
accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
Report on other legal and regulatory requirements
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the proposed appropriations of the company’s profit or loss and the administration of the Board of Directors of
Geely Sweden AB for the financial year 2013-01-01 – 2013-12-31.
Auditor’s responsibility
Our responsibility is to express an opinion on these annual accounts and
consolidated accounts based on our audit. We conducted our audit in
accordance with International Standards on Auditing and generally
accepted auditing standards in Sweden. Those standards require that
we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the annual accounts and
consolidated accounts are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to
fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the company’s preparation and fair presentation of the annual accounts and consolidated accounts in order to
design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the annual accounts and consolidated
accounts.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinions.
Auditor’s responsibility
Our responsibility is to express an opinion with reasonable assurance on
the proposed appropriations of the company’s profit or loss and on the
administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.
As a basis for our opinion on the Board of Directors’ proposed
­appropriations of the company’s profit or loss, we examined whether the
­proposal is in accordance with the Companies Act.
As a basis for our opinion concerning discharge from liability, in
­addition to our audit of the annual accounts and consolidated accounts,
we examined significant decisions, actions taken and circumstances of
the company in order to determine whether any member of the Board of
Directors is liable to the company. We also examined whether any
­member of the Board of Directors has, in any other way, acted in
­contravention of the Companies Act, the Annual Accounts Act or the
Articles of Association.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions.
Opinions
In our opinion, the annual accounts have been prepared in accordance
with the Annual Accounts Act and present fairly, in all material respects,
the financial position of the parent company as of 31 December 2013
and of its financial performance and its cash flows for the year then
ended in accordance with the Annual Accounts Act. The consolidated
62
Responsibilities of the Board of Directors
The Board of Directors is responsible for the proposal for appropriations
of the company’s profit or loss, and the Board of Directors are responsible for administration under the Companies Act.
Opinions
We recommend to the annual meeting of shareholders that the profit
be appropriated in accordance with the proposal in the statutory
­administration report and that the members of the Board of Directors be
discharged from liability for the financial year.
Gothenburg, April 24 2014
Deloitte AB
Signature on the Swedish original
Jan Nilsson
Authorized Public Accountant
geely sweden ab ANNUAL REPORT 2013
information and contact
You are welcome to contact us:
Nils Mösko, Vice President, Head of Investor Relations.
nils.mosko@volvocars.com, +46-(0)31-59 22 55.
For media queries, please contact:
David Ibison, Corporate Spokesman.
david.ibison@volvocars.com, +46-(0)31-59 22 39.
Volvo Car Group Headquarters
50400 – HA2S
SE-405 31 Gothenburg, Sweden
www.volvocars.com
definitions
Comparative figures:
The equivalent period is
shown in brackets
Retail Sales:
Sales to end customers
Wholesales:
Sales to dealers
IV
VOLVO CAR GROUP financial report jan–DEC 2013