Published April 14, 2009

Volvo truck orders plunge in Asia

By PAULINE NG
IN KUALA LUMPUR

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VOLVO says it has suffered a 30-50 per cent plunge in orders for new trucks in Asia, with billions of dollars of government stimulus spending yet to kick in.

In the first two months of the year, Volvo suffered a drop of about 10% in commercial vehicle orders for M'sia.

'So far we are seeing little if any signs that the situation is improving,' said Volvo's senior vice-president & chairman of Trucks Asia Par Ostberg.

The construction equipment segment is faring even worse, he added.

The past few years have been positive for Volvo's Asian operations, but Asia's export-led economies are now reeling from the US-led global recession and a huge drop in demand.

'Basically, most of our major markets deteriorated at the end of last year,' Mr Ostberg said.

And because of this, Volvo will consolidate its operations in Asia after spending US$3 billion on regional acquisitions over the past two years, including that of Nissan Diesel.

Group turnover last year was US$40 billion - two-thirds of it derived from its trucks business - of which Asia contributed US$5 billion or about a fifth.

'Because of lower demand we are looking to adjust production rates, cost structures and to better manage inventory levels,' Mr Ostberg said at a media briefing here yesterday, citing the 'temporary closure' of Volvo's Bangalore production line as an example.

In Malaysia, the company plans to integrate its various truck brands - Mack, Renault, UD and Volvo and Nissan Diesel buses - more efficiently.

It does not assemble commercial vehicles locally, finding it more efficient to outsource this.

In the first two months of the year, Volvo suffered a drop of about 10 per cent in commercial vehicle orders for Malaysia, said managing director of Volvo Malaysia Eric LeBlanc.

Singapore orders were harder hit still, he said.

Mr Ostberg said the environment is challenging in North America, Europe and increasingly Asia.

But the crisis will pass and Asia will remain an important market because of its large population size and strong growth.

Japan is Volvo's biggest market in Asia for trucks, followed by India, China and South Korea.

In South-east Asia, Indonesia and Malaysia are key markets.