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Volvo Trucks Penetrating the U.S. Market (The World Heavy Truck Industry,…

- - - - Products
        
        Cab-over trucks, where the cab was mounted over the engine
        
        Europe Market
        
        Conventional trucks, with a front-mounted engine and a large hood
        
        U.S. Market
- - - - The U.S. trucking market had been deregulated in 1981, opening entry and abolishing pricing restrictions.
        
        Leasing companies began to emerge
        
        It was estimated that in 1997 large purchasers (over 100 trucks per year) comprised about a third of the market; midsize buyers (10 to 99 trucks) just under a quarter; and small orders (under 10) the remainder
  - - - Financing was usually negotiated directly with the manufacturer or with a local bank.
- - - - Some suppliers Freightliner and Paccar as assemblers, Ford and Navistar manufactured drive-train components, while Mack produced its own engines. Cummins, Detroit Diesel, and Caterpillar (diesel engines), Fuller (gearboxes), and Eaton and Rockwell (rear axles) played an important role in the U.S. industry.
- - - - In the mid-1990s the conglomerate strategy was reversed and Volvo refocused on vehicles and heavy equipment.
        By 1998, total corporate sales had reached $27 billion. Cars had been the most important source of profits for Volvo, accounting for 48% of the total in 1998 versus 28% for trucks.
        
        Volvo was fully integrated, developing and producing all major drive-train components, including engines and transmissions
        
        Based on a modular concept in which tandardized components
        
        Reduce the number of components from 41,000 to under 25,000, while decreasing the number of suppliers from around 1,600 to under 400.
        
        Reduced the costs of warehousing, purchasing, and shipping
        
        Customer demands could be met more easily
- - - - Volvo acquired WMC for $70 million.
        
        The U.S. heavy truck market grew in the early 1990s, with 1994 total volume of 188,000 units finally surpassing the 1979 record. A new high of 202,000 trucks was reached in 1995. Volvo sold 23,410 units in 1995, and its total share fell slightly, to 11.6%.
        
        Volvo Truck Finance North America was formed at the end of 1995, offering both financing and service contracts for Volvo trucks.
        
        Volvo trucks could improve profitability in three ways: (1) the value of the engine was 25% of the total truck so a higher profit could be made on each sale; (2) after-sale service and spare parts revenue could be increased; and (3) costs could be reduced in engine production through increasing economies of scale.
        
        The U.S. operations are still not a sound business for us. It’s the world's most difficult market. Those who can succeed there can do it anywhere in the whole world. Therefore, we have to maintain our presence in the U.S. market