It’s been almost 80 years since Volvo began exporting trucks and buses to the United States. But these days the Swedish firm’s bottom line is being sorely punished Stateside. Sales in North America fell 23% in the fourth quarter, and by a third in the year 2007, the company said Wednesday.
The firm blamed “continued low demand and low deliveries of trucks.” Adding to its difficulties were stringent pollution laws that came into force at the beginning of 2007.
The decline is made all the more potent by how well Volvo, the world’s third-largest truck maker and biggest manufacturer of heavy diesel engines, is doing in Asia and Eastern Europe. Sales in Asia rocketed 104%, to 11.5 billion Swedish kronor ($1.8 billion), while in Eastern Europe they rose 72%, to 8.9 billion Swedish kronor ($1.4 billion), in the fourth quarter.
Net profit for the quarter rose 7.3%, from a year earlier, to 5.6 billion Swedish kronor ($870 million). But that was below market expectations of 6.2 billion Swedish kronor ($963 million), according to a survey by SME Direkt.
Operating margins also fell to 6.8%, from 7.6%, which Chief Executive Leif Johansson blamed on difficulties in North America.
Volvo’s CEO waxed optimistic about the U.S., the truck maker’s second-largest market after Western Europe, and said that while it was difficult to asses the American market, things there would eventually recover. “North America is not declining any longer. The first couple of quarters will be flat, but over time we expect it to return to the normal trend line,” Johansson said Wednesday, adding that Volvo was putting more money toward increasing capacity in the U.S.
The company has two main subsidiaries there: Volvo Truck North America and Allentown, Pa.-based Mack Trucks. The former primarily makes 18-wheelers, while the latter manufactures dump trucks, cement mixers and garbage trucks.
Some analysts have recently complained that the firm isn’t doing enough to fully utilize its North American plants.
But Volvo said Wednesday that it was more bullish about prospects in America than its rivals, which include Sweden’s Scania and Daimler Trucks North America. “We don’t see anything which would make us less optimistic than our competitors,” Johansson added. His optimism may have some credence since the truck industry is notoriously cyclical.
Shares in Volvo, which delisted from the Nasdaq stock market last year, were down 1.7%, to 84.50 Swedish kronor ($13.12), in Stockholm on Wednesday. Volvo’s shares have fallen about 20% in the last year.
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