Scania Annual Report 2011

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Scania Annual Report 2011

  1. 1. ANNUAL REPORT 2011
  2. 2. Scania’s objective is to provide the best profitability for its customers throughout the product life cycle by delivering optimised heavy trucks and buses, engines and services – thereby becoming the leading company in its industry. The foundation is Scania’s core values, focus on methods and dedicated employees.This English version of Scania’s Annual Report is a translation of the Swedish-language original, the binding version that shall prevail in case of discrepancies.Translation: Victor Kayfetz, Scan Edit and David Murphy, Word of Mouth.The Financial Reports encompass pages 74-141 and 144-151 and were prepared in compliance with International Financial Reporting Standards (IFRSs).The Report of the Directors encompasses pages 32-73 and 142-143.The Report of the Directors and accompanying Financial Reports also fulfil the requirements of the Swedish Annual Accounts Act and have been audited by Scania’s auditors.Scania’s Swedish corporate identity number: Scania AB (publ) 556184-8564.Unless otherwise stated, all comparisons in this Annual Report refer to the same period of the preceding year.
  3. 3. 1Operations 2–31 Statement of the President and CEO 2Scania in brief 4Scania’s strategy 6 –17 Scania’s strategic platform 6–7 A focus on the customer and sustainability 8–11 Profitable business through customised solutions 12–15 Methods for sustainable profitability 16–17Market 18–31 Trucks 18–21 Buses and coaches 22–25 Engines 26–27 Services 28–29 Financial services 30 –31Report of the directors 32–73, 142–143Market trends, 2011 32–35Production 36 –39Research and development 40 –43Scania’s sustainability work 44–55 Global driving forces 44–45 Key role for sustainable transport solutions 46–47 Safety, health and the environment in the value chain 48–49 Scania’s environmental work 50 –51 Competency, dedication and well-being 52–53 Management and monitoring of sustainability work 54–55Scania share data 56 –57Annual General Meeting and financial information 58Risks and risk management 59 – 62Corporate Governance Report 63– 68Articles of Association 69Board of Directors 70Executive Board and Corporate Units 72FINANCIAL REPORTS 74 –141, 144 –151Group financial review 76Consolidated income statements 80Consolidated balance sheets 82Consolidated statements of changes in equity 84Consolidated cash flow statements 85Notes to the consolidated financial statements 86 –137Parent Company financial statements, Scania AB 138Notes to the Parent Company financial statements 140Proposed guidelines for salary and other remuneration 142Proposed distribution of earnings 143Audit report 144Quarterly data 146Key financial ratios and figures 148Definitions 149Multi-year statistical review 150 S c a n i a 2 0 11
  4. 4. 2 Statement of the President and CEO Partnering with customers Scania showed strong earnings in 2011. Meanwhile demand slowed in the final months of the year, and we are entering 2012 with lower demand. We are, however, well prepared because of our strong balance sheet and product and service portfolio. Our focus is on continuing to develop Scania’s business model and brand – we will ensure long-term growth by strengthening the product and service offering to customers. In 2011, Scania achieved record high sales and deliveries of As a leading actor in the industry, we can achieve good results vehicles and services. Earnings per share were the best in the in cooperation with various stakeholders. We are develop- company’s history. However, profitability weakened compared ing better, more sustainable components together with our to our very strong performance in 2010. The Swedish krona sub-contractors. Through an active dialogue with legislators, appreciated and our operating costs increased, compared to we can improve knowledge about longer vehicle combinations, a low level in 2009 and 2010. The upturn that dominated the which provide significant reductions in emissions per tonne market in recent years also ended in 2011. During the second transported. half of 2011, we noticed that the demand for vehicles was Cooperation with MAN slowing, while service deliveries continued to rise. In November 2011, Volkswagen completed its acquisition of Growing service demand 55.9 percent of the voting rights in MAN, after the approval of We adjusted our production rate during the final months of competition authorities around the world. This removed impedi- 2011 and in early 2012 in response to lower demand. As a ments against deeper cooperation between Scania and MAN. consequence of this adjustment, we could not extend the A number of working groups are currently reviewing the fixed term temporary contracts of about 1,900 employees. potential for synergies in procurement, development and We have become restrictive about recruitment and are focus- production. This is taking place in line with Volkswagen’s ing increasingly on cost trends. well-­ stablished strategy of independent brands, in which e Our service operations are continuing to develop favour- competition between brands has high priority. The strategy ably. The average age of the truck population in Europe is means developing and strengthening each brand with its rising and this impacts demand for workshop hours and parts customer base. positively. It also means that there is an increasing need for 100th anniversary of Scania buses and coaches transport companies to invest in new vehicles. – tomorrow’s mode of transport We are continuing to invest in and develop our service Scania’s bus and coach operations have performed very well operations – being close to customers is crucial. It is not just in recent years. Bus chassis and trucks are assembled in the about workshops, but also about mobile solutions where we same production units, using a large number of common com- perform service out among our customers. Meanwhile we ponents. This has boosted productivity considerably. are introducing the same thinking and methods from the well- Scania delivered its first bus 100 years ago. Buses and known Scania Production System in our sales and services coaches are playing a key role in the establishment of sustain- operations in order to become more efficient and to reduce able transport systems. As global urbanisation continues and lead times for our customers. major cities expand, Bus Rapid Transit (BRT) systems will be a cost-effective investment for solving congestion and environ- Further development of Scania’s business model mental problems. These systems offer public transport that and brand combines the advantages of rail-bound traffic with the flexibility Like other companies in the transport industry, Scania is of buses. There are many advantages if passenger traffic can f ­acing major challenges. Demographic changes, urbanisation, be shifted from cars to buses: reduced climate impact, better economic growth and increased trade are driving the demand health and improved traffic flow. for transport services. Meanwhile there are increasing calls for sustainable and efficient transport systems. Long-term growth For our customers, it is ultimately a matter of meeting their Another interesting product in our bus and coach operations is day-to-day needs by having vehicles with the best possible Scania Touring, which is strengthening our position in the mar- uptime. The more hours the customer’s transport equipment ket for intercity services and tourist coaches. Our new Scania is available, the more revenue for the customer. However, Citywide model, which was launched during 2011, supplements ­ each customer is unique and has specific needs. In partner- our product range in the city bus segment. ship with customers, we develop packages of products and We foresee good growth in our industrial and marine engine services that deliver high efficiency, profitability and sustain- operations. As early as 2009, we launched industrial engines ability. that met the emission standards introduced in 2011. O per a t i o n s S c a n i a 2 0 1 1
  5. 5. SCANIA’S STRATEGY 3Our solution will also enable customers to use essentially thesame installations to meet the new emission standards that takeeffect in 2014. In 2011, we began deliveries of engines to US- The outlook for 2012based Terex and South Korean-based Doosan Infracore. We are is difficult to assess,also seeing strong interest in our low-emission engines among but Scania is wellother machinery manufacturers. prepared. The share of our vehicle deliveries that go to Europe has de-creased in recent years, but demand for our type of products andservices is increasing strongly in many emerging market coun-tries. We are optimistic in the long term about Brazil and the othermarkets in Latin America. The middle class is growing and con-sumption is rising. Brazil is also facing major infrastructure invest-ments and has strong agricultural and mining sectors. In China,Scania sells to customers that have strict standards concerninguptime, performance and service life. There are increasinglystrong demands for efficiency in the transport sector in China andin other parts of Asia. This will mean higher demand for Scania’stype of vehicles and services. In early 2012, we strengthened ourpresence in India and started the construction of an assemblyfacility in Bangalore. About SEK 200 million will be invested duringthe coming year.2012 – a year of uncertaintyA number of national governments in Europe have financialproblems, and it is uncertain how this will affect demand in theeconomy generally and thus the demand for transport services.Meanwhile truck deliveries were at a high level during 2005–2008,followed by low deliveries in recent years. This means that theaverage age of the truck population is rising rapidly and replace-ment needs are thus growing. In Brazil, we have had high vehicle deliveries in recent years.The changeover to Euro 5 emission standards at year-end2011/2012 may impact demand this year. The outlook for 2012 is difficult to assess, but Scania is wellprepared. During the dramatic downturn in demand in the finalmonths of 2008, our organisation learned how to work understrong cost pressure – lessons we are deriving great benefit fromtoday. Good cash flow during 2010 and 2011 has strengthenedour balance sheet. We deliberately work with short delivery timesin order to reduce the risk of building up inventories of unsoldvehicles, and this is positive for our cash flow. Due to our productand service launches of recent years, we are well positioned in themarket. We have highly competent employees, who focus on continu-ously improving our working methods, efficiency and quality. Ouremployees have shown strong dedication during recent turbulentyears. I want to express my sincere gratitude for their excellentcontributions. Leif Östling President and CEO
  6. 6. 4 Scania in Brief Scania in figures Scania’s earnings in 2011 amounted to SEK 12,398 m. Scania’s vehicle deliveries rose by 26 percent to a record high 80,108 vehicles. Service revenue rose by 4 percent to SEK 17,048 m., which was also a record level. ■ Operating income fell to SEK 12,398 m. KEY FIGURES 2011 2010 2009 (12,746) and earnings per share rose to Deliveries, units SEK 11.78 (11.38). Trucks 72,120 56,837 36,807 ■ Net sales increased by 12 percent to Buses and coaches 7,988 6,875 6,636 SEK 87,686 m. (78,168). Engines 6,960 6,526 4,235 Net sales ■ Cash flow amounted to SEK 6,970 m. Vehicles and Services, SEK m. 87,686 78,168 62,074 (11,880) in Vehicles and Services. Operating income, SEK m. ■ The Board of Directors proposes a Vehicles and Services 11,881 12,575 2,648 dividend of SEK 5.00 (5.00) per share. ­­ Financial Services 517 171 –175 Total 12,398 12,746 2,473 Vehicles and Services Operating margin, percent 14.1 16.3 4.0 Operating income in Vehicles and Services Income before taxes, SEK m. 12,612 12,533 1,602 totalled SEK 11,881 m. (12,575) during 2011. Net income for the year, SEK m. 9,422 9,103 1,129 Higher vehicle deliveries and service volume Earnings per share, SEK 11.78 11.38 1.41 were offset by a significantly stronger Swedish krona and a higher cost level. Cash flow Vehicles and Services, SEK m. 6,970 11,880 5,512 A less favourable market mix and increased prices for raw materials had an adverse impact Return, percent on equity 29.5 34.7 5.1 on margins while higher prices had some on capital employed, Vehicles and Services 38.1 39.5 9.4 positive effect. Net debt/equity ratio* Vehicles and Services – 0.35 – 0.30 0.21 Financial Services Equity/assets ratio, percent 31.6 30.5 23.7 Operating income in financial services amounted to SEK 517 m. (171) during 2011. Net capital expenditures, excluding ­ cquisitions, a Vehicles and Services, SEK m. 3,776 2,753 3,031 Bad debt expenses decreased to SEK 298 m. Research and development expenditures, SEK m. 4,658 3,688 3,234 (493) during the year. Number of employees, 31 December 37,496 35,514 32,330 * Net debt (+), net surplus (-). Nettoomsättning per produktområde ENG Kassaflöde Avkastning på sysselsatt kapital ENG (ROCE) Net sales by product area, 2011 Return on capital employed (ROCE) Cash flow SEK m. Miscellaneous 2 % Trucks 64 % % 12,000 50 Used vehicles 5 % 10,000 40 Services 19 % 8,000 30 6,000 Engines 1 % 20 Buses 9 % 4,000 10 2,000 0 0 01 02 03 04 05 06 07 08 09 10 11 01 02 03 04 05 06 07 08 09 10 11 O per a t i o n s S c a n i a 2 0 1 1
  7. 7. SCANIA IN BRIEF 5The world of ScaniaScania is a global company with a sales and service organisation in more than 100 countries.Aside from sales and services, Scania offers financial services in many markets. Scania’sproduction units are located in Europe and Latin America.Scania has approximately 37,500 employees. Of these, administrative and other tasks. Also in Södertälje aresome 16,000 work with sales and services in Scania’s Scania’s research and development operations, withown subsidiaries worldwide. About 12,400 people work about 3,300 employees.at production units in seven countries and regional Scania’s central purchasing department in Södertäljeproduct centres in six emerging markets. is supplemented by local procurement offices in Poland, Scania’s Head Office is located in Södertälje, Sweden, the Czech Republic, the United States, China andwhere a total of 5,800 people work with sales as well as Russia.Sales and deliveries by region, 2011 eurasia Trucks 7,445 units Buses and coaches 84 units america Engines 103 units Trucks* 17,632 units Services SEK 477 m. Buses and coaches* 3,272 units Luleå Engines 2,809 units Services SEK 2,358 . m södertälje st. petersburg oskarshamn zwolle sŁupsk* Refers to Latin America Meppel angers Busan europe taipei Dubai Trucks 31,443 units Buses and coaches 1,916 units Engines 3,450 units kuala lumpur Services SEK 11,939 m. asia tucumÁn sÃo paulo johannesburg Trucks 12,485 units Buses and coaches 2,065 units Engines 453 units Services SEK 1,207 m. africa and oceania Trucks 3,115 units Buses and coaches 651 units Engines 145 units Services SEK 1,067 m. ■ SALES AND SERVICES■ REGIONAL PRODUCT CENTRE produCtion■ RESEARCH AND DEVELOPMENT O per a t i o n s S c a n i a 2 0 1 1
  8. 8. 6 SCANIA’S STRATEGY scania’s StrategY O per a t i o n s S c a n i a 2 0 1 1
  9. 9. scania’s strategY 7Scania’s strategic platformScania’s objective is provide the best profitability for its customers throughout thep­ roduct life cycle by delivering optimised heavy trucks and buses, engines and services– thereby becoming the leading company in its industry. Scania’s operations are basedon the company’s core values, its focus on working methods and dedicated employees.Core valuesScania’s core values permeate its entire corporate culture and influence its day-to-day work.Customer first, respect for the individual and quality are closely linked and are ­ pplied as a aunified concept. These core values are the point of departure for all business development.Customer first Respect for the individual QualityThrough good knowledge of its custom- Respect for the individual means recognis- High profitability for the customer throughouters’ business operations and conditions, ing and utilising each employee’s knowl- the product life cycle depends on delivery ofScania delivers solutions that contribute edge, experience and ambition in order to high-quality solutions from Scania. Throughto customer profitability by means of continuously improve and develop working good knowledge of customers’ needs, Scaniahigh earning capacity and low operat- methods. Inspiration and new ideas are can continuously improve the quality of itsing costs, while promoting a sustainable born out of day-to-day operations. This products and services. Elimination of all formsenvironment. The customer’s operations helps ensure higher quality, efficiency and of waste is the way Scania can ensure that allare at the centre of the entire value chain: job satisfaction. deliveries meet the expectations of demandingfrom research and development via customers. Deviations from targets and stand-procurement and production, to sales, ards are used as a valuable source of continu-financing and delivery of services. ous improvement in Scania’s processes. O per a t i o n s S c a n i a 2 0 1 1
  10. 10. 8 SCANIA’S STRATEGY A focus on the customer and sustainability Market and customer expectations are constantly changing and Scania must continuously review its strategies. Six times a year, the Executive Board of Scania holds meetings specially aimed at refining the company’s strategy and business model based on a global perspective. Leif Östling: Our overall strategy is crystal-clear: to highest possible quality in all product development for strengthen the customer’s profitability through optimised our vehicles, engines and services. Quality is vital if we transport solutions. To succeed with this, we must un- are to continue elevating Scania to higher levels. derstand our customers’ day-to-day operations. Quality is one of Scania’s core values and is Together, we Executive Board members have the crucial in order to maximise the time a vehicle competency in all the relevant fields to make decisions is performing transport work for its owner, on matters of a long-term, strategic nature. Our collec- thereby creating the potential for good profit- tive decisions clearly show the direction we are heading ability. in, so that all employees throughout the organisation Anders Nielsen: For many customers, vehicle reliability have the right preconditions and support for their work. is increasingly critical to profitability. All vehicles we Changes and new challenges in the transport manufacture must maintain the same high quality. The sector are constantly imposing new demands right vehicle for each transport task is the basis for the on Scania. In-depth knowledge of customers customer’s profitability, and we have to be capable of and their operations is thus crucial. producing a large number of different variants in order Our overall strategy Per Hallberg: We have to begin at the right point – in to meet all customer demands. The key is to work is crystal-clear: the research stage – and ensure that our processes flow more efficiently, since efficiency and quality go hand in to strengthen more effectively right from there, in order to minimise hand. We are now taking further steps in our systematic the customer’s lead times from idea to finished product. Knowledge efforts to ensure continuous improvements, in order to profitability through of our customers’ operations is not enough. We also make our production system even more efficient. optimised transport need to understand how our customers’ customers The Scania brand evolves in response to new solutions. think and act. customer demands. The brand is of direct The competition is unrelenting and will remain that way. importance not only to Scania, but also to its And we will stay in the forefront. This is why we need the customers and its customers’ customers. Martin Lundstedt: We have a strong brand, and our vehicles have a good reputation in terms of ­ uality and q performance. Scania should stand for more than a good vehicle – Scania should deliver profitable trans- port solutions. We do this by becoming more involved in the customer’s business. We deliver not only a ­ ehicle, v but a comprehensive solution including ­ ervices that s strongly contribute to customer profitability. This is ­ partly a matter of thinking in new ways, ­ocusing on the f logic of the customer’s industry and specific situation. It is a major challenge to fully implement. Today we already have customers who set clear environ­­ mental targets, both internally and in relation to consumers. Understanding these targets, we can more easily arrive at a comprehensive solution that leads to lower fuel consumption and thus lower carbon dioxide emissions. Greater focus on fuel costs, vehicle uptime and emissions not only helps reduce environmental i ­mpact but also directly benefits the customer’s busi- ness. This is the Scania brand. Leif Östling, President and CEO O per a t i o n s S c a n i a 2 0 1 1
  11. 11. SCANIA’S STRATEGY 9The change in customers’ needs towardsencompassing complete transport solutionsplaces great demands on Scania’s serviceoperations.Christian Levin: We see that customers are makingnew, much more detailed demands. We must respondto this, among other things by spending even more timeon meetings with customers in order to understand theirbusiness. We also have to offer more services based oncustomer needs. This presupposes broader expertiseand greater knowledge of customers’ business andoperations in our sales and service organisation. Today vehicle uptime is incredibly important to cus-tomers. In response, we can offer shorter repair times Martin Lundstedt, Executive Vice President, Franchise and Factory Salesand increase our ability to quickly service the customer’sentire rig, not just the parts of the truck or bus thatS­ cania manufactured. Our continuous improvement a good return. By growing within our existing ­ tructure, sefforts will enable us to achieve this with reasonable in- based on continuous improvements, we will havevestments. The number of Scania vehicles on the roads good potential to continue building more vehicles withis steadily growing. We must constantly become more improved profitability. We deliver notefficient, both in the sales process and in our service Meanwhile we face ever-increasing demands for only a vehicle, butworkshops. fl ­ exibility. In recent years, we have had major turbulence a comprehensiveRoad transport services will be a major ele- in the world economy and in the financial markets, ­solution includingment of transport systems in the future, and which has led to rapid changes in the economic services that stronglya growing number of markets will demand situation. We will have to become accustomed to this,efficient transport solutions. contribute to customer but we are prepared for it and can benefit from all the lessons we learned during the sharp downturn of profitability.Martin Lundstedt: There are several long-term trendsthat, in our judgement, will increase demand for Scania 2008/2009.vehicles, engines and services. The trend towardsmore energy-efficiency and higher uptime is also beingdriven by increased demands on transport services forboth people and goods. This is why Europe, our mainmarket, will continue to grow in the long term. There isgreat potential for growth in Eurasia, and Latin Americais facing large infrastructure investments. In Asia, Africaand Oceania, there is an increasing focus on profitabilitythroughout the service life of a vehicle, and demand isbecoming increasingly similar to the European market. Scania has to be capable of delivering individually The number oftailored, comprehensive solutions that contribute to the Scania vehicles oncustomer’s business. Our strategy is clear. Scania’s the roads is steadilybusiness model and brand are identical in all markets.At the next peak in demand, we foresee the potential for growing. We must150,000 vehicles and 15,000 engines per year. Given constantly becomemore in-depth collaboration with customers, this will more efficient, bothcontinue to drive the volume of related services. in the sales processJan Ytterberg: We have been successful by following and in our serviceour customers as they have expanded their opera- workshops.tions. To remain a long-term partner we have to achievegrowth, at the same time as our owners must receive Christian Levin, Executive Vice President, Sales and Services Management O per a t i o n s S c a n i a 2 0 1 1
  12. 12. 10 SCANIA’S STRATEGY up drivers in their day-to-day work in terms of safety, profitability, efficiency and the environment. Even today, Scania can make a big difference by o ­ ffering its customers solutions that boost their profit- ability and reduce their environmental impact. Martin Lundstedt: One example of this is our “green” solution, Ecolution by Scania, which was developed together with customers in Sweden. Ecolution by Scania is a package of products and services specially adapted to the needs of a given customer’s opera- tions. Through vehicle optimisation, driver training and coaching and a specially adapted programme of regular maintenance, fuel consumption and thus carbon dioxide emissions can be reduced substantially. Climate impact Per Hallberg, Executive Vice President, Research and Development, Purchasing can be reduced further by using renewable fuels. It also makes a major contribution to society, here and now. As a leading player in the transport sector, Safe, efficient and easily accessible public Scania has an important role in efforts to transport helps reduce environmental impact, generate long-term value and contribute while enabling people to enjoy a more efficient solutions to the challenges faced by society. everyday life. To a growing extent, Scania de- Scania works actively to minimise both its livers buses to bus systems for which we also assume responsibility for all servicing. resource consumption and the environ­­ - mental impact of its products. Martin Lundstedt: Many fast-growing cities have realised the advantages of building efficient bus systems Anders Nielsen: Scania’s environmental work is pro­ that simplify people’s everyday lives and encourage a active and based on a life cycle perspective, from sup- shift of passenger traffic from cars to buses. This will plier to end-of-life treatment. First, of course, we have greatly reduce both congestion and environmental im- our own operations. We are constantly working to lower pact, which is true even if the buses run on fossil fuels. our use of energy and other resources. Bus systems are a good example of how the needs When we invest in new production capacity, we must of our customers encompass more than vehicles alone. use the best possible technology, but it is also a matter It is a matter of services, workshops, parts and so on. of being able to produce more vehicles per employee. We have to make sure that together with operators and By manufacturing more vehicles without increasing the other players, we have the expertise related to these area of our production units and the number of employ- systems that enables us to provide a genuinely attractive ees, we become more resource-efficient. solution for passengers. That will make public transport Per Hallberg: Scania has an important role to play in a genuinely important element of future urban develop- reducing carbon dioxide emissions. We are thus work- ment. ing in a number of areas to reduce climate impact – for Christian Levin: In many markets, we have an extensive example through engine technology, aerodynamics service network. That is a clear advantage when we dis- and renewable fuels – and we are also improving our cuss bus system solutions. It is also of interest here that services, which has similar effects. Even today, Scania we can station our service technicians in the customer’s In addition to our customers’ demands for low fuel workshop or completely take care of the customer’s can make a big consumption we also have our vision for 2020: that v ­ ehicle service needs. City bus traffic is highly demand- difference by the carbon dioxide emissions related to completing a ing and wearing on vehicles, so the buses require offering its customers given transport task should be halved compared to the a ­ ccess to service and parts round the clock. solutions that boost year 2000. Here the vehicle plays an important role, their profitability and of course, but so does the driver. Our own haulage Martin Lundstedt: During 2011 we launched the new company, the Scania Transport Laboratory, enables us Scania Citywide bus series. These are city buses built reduce their environ­ to evaluate vehicle properties and performance, but also entirely out of aluminium. The body sections are modu- mental impact. test and practice the use of various driver support sys- larised so the buses can be adapted to the customer’s tems. The results are leading to new services that back operations. O per a t i o n s S c a n i a 2 0 1 1
  13. 13. SCANIA’S STRATEGY 11The aluminium body saves weight, and the body panelsare easy to repair. This reduces environmental impactand improves the bus company’s operating economyand vehicle uptime.A responsible, sustainable approach is partof Scania’s day-to-day work – both inside andoutside the company. It is essential if the com-pany is to be competitive in the long term.Anders Nielsen: At Scania, for two decades now, wehave seen the positive effects on our employees whenthey assume greater responsibility for improving andboosting the efficiency of their own work. High healthy The key is to workattendance and motivated employees are central more ­ fficiently, since eelements of the Scania Production System and are efficiency and qualitye­ ssential for good growth. go hand in hand.Christian Levin: And now we have embarked on thesame journey in the sales and service organisation. Anders Nielsen, Executive Vice President,We can see the results in many places. It is a matter Production and Logisticsof keeping in mind – right from the pre-productionengineering stage – that a vehicle should be easy to managers. In this way, we can ensure that our opera-service and maintain. This means less wear on our tions are in line with our values. This follow-up includesemployees and it increases their efficiency, which is monitoring health-related statistics and environmentalalso good for our customers. factors, aside from the classic financial key figures. We are refining our Scania Blue Rating monitoring system To enjoy the con-Anders Nielsen: To further strengthen its sustainability and improving the quality of the data that we gather. fidence of all ourwork, during 2011 Scania established a cross-functionaldecision making forum for safety, health and environ- We are also clarifying our internal management target groups, it is systems when it comes to corruption and anti-com- important for us toment, the SHE Council, which includes four members of petitive behaviour issues. For many years, we have be transparent aboutthe Executive Board. This new structure will enable us also monitored our sub-contractors from a quality andto achieve further progress and ensure that Scania is a the results of our financial perspective. Here, too, we are broadening oursustainable organisation, by means of consensus and work, not only our cooperation.a coordinated approach in all our areas of operation. finances. To enjoy the confidence of all our target groups, it isWe have a major challenge ahead of us, for example to ­ important for us to be transparent about the results ofpersuade all our employees to think in terms of safety. our work, not only our finances.D­ uring the year, we intensified our efforts, for examplewith regard to preparing and training new managers.Per Hallberg: Scania has a large number of suppli-ers. We know that ensuring good conditions for theemployees in these companies goes hand in hand withgood quality for our products and services. We makedemands of our suppliers, both regarding environmentaland working conditions. We work closely with them andback them up in various ways. Among other things, weoffer training in our leadership model, with continuousimprovements and evaluations according to Scania’srating systems. Sustainable development is also a matter of monitor-ing and evaluating operations.Jan Ytterberg: A responsible approach to oureconomic, social and environmental impact includesactually following up the instructions that we give to our Jan Ytterberg, Chief Financial Officer (CFO) O per a t i o n s S c a n i a 2 0 1 1
  14. 14. 12 SCANIA’S STRATEGY O per a t i o n s S c a n i a 2 0 1 1
  15. 15. SCANIA’S STRATEGY 13Profitable business through customised solutionsScania works closely with customers to enable them to perform their transport tasksoptimally, from both economic and environmental perspectives. Through a good knowledgeof customers and their operations, Scania designs customised vehicle and service solutionsand thereby contributes to their profitability. The hub is Scania’s modular product system,which also plays a key role in ensuring an efficient, profitable Scania.Scania is traditionally associated with its products – Services support the customer’s businesstrucks, buses and engines. Defining exactly the right A deep knowledge of customers’ operations is alsoproduct for the customer’s tasks is a fundamental fundamental to Scania’s service-related products. Scaniaelement of the company’s operations. However, Scania endeavours to build long-term relationships with its custom-increasingly focuses on designing a comprehensive ers and is dedicated all the way to the customer’s businesssolution together with the customer. – from specifying the best-suited vehicle to providing the best servicing and support in day-to-day transport work.The right products are profitable Scania’s service workshops are one of its mostCorrect product specification is the hub of Scania’s important points of contact with customers. They arebusiness. Through Scania’s modular product system, strategically located near transport arteries and logisticsvarious customer wishes – as well as new environmental centres in order to ensure high uptime. Through continu-requirements – can quickly be met, without expanding ous advice and regular, professional servicing at Scania,the number of parts included in its in vehicles propor- customers can minimise downtime. Maintenance andtionately. repairs are available 24 hours a day. Scania also offers The modular system is an effective method for mobile workshops that satisfy servicing needs and fieldoptimising customer vehicles. Meanwhile the concept workshops that are integrated with customer opera-contributes to short lead times, high quality and less tions, for example at mines.downtime, more efficient servicing and a smaller Scania’s range of services is organised in modules,number of parts in stock. where customers may choose a single service or a cus- Scania’s modular system also maximises the number tomised package of services. For customers with strictof vehicle variants, while minimising the number of demands, Scania has designed the Ecolution by Scaniacomponents. This lowers Scania’s research, develop- concept, in which the vehicle is specified in detail, forment, production and servicing costs. Quality is high example to deliver the best fuel efficiency and environ-and production series are longer, which is cost-effective mental qualities. The service element of Ecolution byboth for customers and for Scania. Scania includes maintenance and repair agreements, roadside assistance, driver training, ­ river support and d Fleet Management, financing and follow-up. A focus on customer profitability For a European long-haulage company, about 70 percent of costs are related to driver salaries and fuel. The company’s profitability thus depends largely on the driver’s proficiency, which in turn may be con- nected to his salary. A knowledge of the customer’s business enables Scania to deliver the right product, kundens kostnader backed up by services that provide reliability and high uptime – a comprehensive solution that boosts the customer’s earning capacity. Customer costs Administration 7 % Tyres 3 % Higher revenue Reduced costs Repair and Drivers – The right vehicle for Maintenance 9 % salaries 35 % – Low fuel consumption the right task – Driver training – High uptime Vehicles 11 % – Effective financing – Fast repairs – Long service life and – Attractive to the driver high resale value Fuel 35 % O per a t i o n s S c a n i a 2 0 1 1
  16. 16. 14 SCANIA’S STRATEGY Long crew cab Crew cab Low-entry Scania’s modular system Trucks Scania’s modular product system has been built up over P-serieS Scania’s P-series featuring a several decades. It enables Scania to provide individual low-mounted cab is mainly used specifications for each customer with a limited number for distribution and construction haulage. The P-series is also the Sleeper cabs Day cabs Short cabs of components in its product range. The modular system base for Scania’s low-entry and means that different customer wishes can quickly be met crew cabs. without expanding the number of parts included in its vehicles proportionately. g-serieS Scania’s G-series is a versatile model Standardisation of interfaces featuring a spacious cab for long-haulage Modularisation is based on standardisation of the inter- and construction haulage and with more powerful engines than the P-series. faces – connection points – between component series to ensure that they fit together in different combinations. R-serieS Topline Highline Normal Low These interfaces are designed in such a way that they When equipped with a V8 engine, the R-series provides do not change over time. This makes it possible to install the highest performance and new components with improved product performance has become a legend in the road transport business. without any need to change the surrounding components. Same need, identical solution Customer needs may be the same as regards specific Buses and Coaches components despite different applications, in which case Scania Citywide LF Scania uses the principle “same need, identical solu- All Scania Citywide models are based on the same range of body tion”. A large percentage of the components in a bus are modules. The low-floor LF version shared with a truck. The shortest truck cab variant may be is available with two axles or articulated. needed in order to maximise cargo capacity both in light distribution service and in a heavy tipper truck operat- ing in a mine. A powerful, high-torque engine may satisfy the need for maximum tractive power in a demanding Scania Citywide LE operation or for maintaining a uniform speed during long The low-entry LE version has a low floor in the front section highway journeys. and can be specified in several lengths with two or three axles or articulated. Components based on performance needs Together with the customer, the Scania sales person specifies components with the right performance steps. Scania OmniExpress Examples of performance steps are different cab sizes, An exceptionally flexible modular engine output steps, frame strengths and number of axles. design offered with two or three axles and lengths in 10 cm steps The factors that influence the customer’s profitabil- from 11 to 15 metres, as well as ity vary, depending on the customer’s operations and in three optional heights. transport task. A truck transporting timber in the Nordic region drives up to 200,000 km per year under difficult conditions, especially in winter. The engine also powers a crane while the vehicle is standing still during loading and Scania Touring The modularised Scania Touring unloading, which puts a heavy strain on the engine. Differ- high-decker coach is available with two or three axles. ent capabilities are required in a vehicle operating in a hot climate at Brazilian sugar cane plantations, with a gross combination weight of 120 tonnes. The truck and bus variants built are continuously evalu- ated, enabling Scania to have the smallest possible num- Scania Engines ber of parts and the largest possible selection of variants Scania’s industrial and marine engines are based entirely on the corresponding vehicle in its product portfolio. engines. All business areas benefit from common development work, which also includes auxiliary equipment such as engine management, cooling 9-litre, 13-litre, 16-litre 5 cylinders 6 cylinders V8 systems, fuel injection and exhaust treatment. O per a t i o n s S c a n i a 2 0 1 1
  17. 17. SCANIA’S STRATEGY 15Component modularisationThe wide range of choices available to customers is achieved through the design of the interfacesbetween different components. Each interface is very precisely defined to allow the greatest pos-sible flexibility when components are combined into the correct performance steps in the vehicle.Cabs Doors and sidewallsScania’s cabs are strongly modularised, with a common frame and Between the front and rear wall, which are the same in all cabcommon outer panels. Cabs are fitted at different heights to suit series, is the same door structure (different heights) and modu-different applications. larised side panels (different heights and lengths). The wind- With three roof heights for the P- and G-series and four for the screen is the same on all cabs. A few door and sidewall variantsR-series, customers have ample opportunities to optimise space cover the entire cab range.and comfort in the cab. P-series G-series R-series P-series G-series R-seriesAxles GearboxesDriven, steered and live beam axles are part of Scania’s modularised With two main gearboxes in combination with range and splitterrange, which is used in various combinations in 2- and 3-axle trucks units, Scania covers the need for haulage ranging from 16 tonnesand buses, as well as in 4- and 5-axle trucks, tandem bogies etc. to 200 tonnes gross train weight. Gearboxes are available withSome driven axles are available with hub reduction and can also be manual or automated gearchanging (Scania Opticruise) and can ­utilised as driven front axles. be ordered with an integrated Scania Retarder. Single-reduction axle Axle with hub reductionFramesFrames are manufactured in several strength classes, the most Scania Opticruise Scania Retarderrugged with an inner frame to handle extra heavy loads.EnginesScania’s engine range is based on three engine seriesfeaturing five, six or eight cylinders, with the cylinder andrelated components ­ haring a common design. This means sthat engine development work can focus on optimising thecombustion in one cylinder, which is used in all engines. The 9-litre, 13-litre, 16-litrebasic design of these engines is very similar and they share 5 cylinders 6 cylinders V8many parts and components, radically reducing the ­ umbernof unique parts that are included. Many engine components are common to the entire engine range, regardless of the number of cylinders. O per a t i o n s S c a n i a 2 0 1 1
  18. 18. 16 SCANIA’S STRATEGY O per a t i o n s S c a n i a 2 0 1 1
  19. 19. SCANIA’S STRATEGY 17Methods for sustainable profitabilityOne core element of Scania’s strategy is involving its employees, who take responsibility forboosting efficiency and for making improvements. Scania encourages a holistic perspectivethrough cross-functional (interdepartmental) groups and other methods that provide the basisfor high productivity, the best possible quality and healthier employees.Scania has worked to involve its employees in continu-ous improvements efforts since the early 1990s. Goodexperience of these efforts at production units, includinghigher healthy attendance, lower employee turnover,higher quality and less waste of resources, has led tothe application of similar principles in administration andthe sales and service organisation as well as in researchand development. Improvement activities are driven by Scania’s employ-ees, with the support of managers and Group execu-tives. There is a strong emphasis on working methodsinstead of traditional earnings targets. The focus iscutting lead times and boosting flexibility by eliminatingwaste of time and resources.Cross-functional working method Visualisation makes cross-functional improvement work easier.An important part of efficiency improvement workoccurs in cross-functional (interdepartmental) groups.Representatives from research and development, tions from working optimally. Deviations must not be sentproduction, purchasing, sales and services cooperate onward, either internally or to the customer. By finding de-in these groups. All employees are aware of the value of viations, it is possible to test and evaluate new solutions,their delivery to the next stage in the work flow, reducing which later lead to a new standard. When a new solutionthe risk of waste, ensuring quality at an early stage and has been introduced at a unit, it is spread methodically toshortening lead times to customers for both new prod- other units in the global Scania organisation.ucts and services. While ensuring that the need for specialised expertise Steady productivity and quality improvementsis met, Scania encourages its employees to change Continuous efforts to identify deviations and improvework duties within different areas of the company in methods and processes occur according to variousorder to gain a holistic perspective on its operations. concepts adapted to the different branches of operations. These are the Scania Production System (SPS) at produc-Everyone is responsible for improvements tion units, the Scania Retail System (SRS) in the sales andInvolving all employees is at the core of efforts to im- service organisation and R&D Factory at research andprove efficiency. Time to work with continuous improve- development units.ments is part of normal operations. This has led to a way Continuous improvements are crucial in order forof thinking that is very important for the development of Scania to grow in a capital-efficient manner. With limitedScania’s employees and organisation. A large propor- investments, it is possible to sell more products andtion of improvement efforts has shifted from staff and services, build more vehicles, serve a larger number ofmanagement levels to the individual employee. customers more quickly and develop more products, without equally large growth in the workforce, resourcesIdentifying and eliminating deviations or need for premises.Scania’s working methods are described in “standards”. Established working methods are of crucial importanceEmployees are encouraged to find deviations from the to Scania’s ability to continuously improve its productivitystandard described which disrupt or prevent opera- and quality and thereby grow within its existing structure. O per a t i o n s S c a n i a 2 0 1 1
  20. 20. 18 SCANIA’S–STRATEGY Market TRUCKS The right solution for each transport task To ensure good customer profitability, Scania must deliver a truck that is optimised for each transport task. Scania also supports the customer’s business by providing various services and thereby contributing to sustainable profitability. Scania’s customers work in long-distance haulage and Euro 6 is the name of the new European Union emission distribution; transport services in the forest product, standard that goes into effect on 31 December 2013. construction, commodity and mining industries; and One challenge has been to meet stringent emission public services. Each customer is unique and requires requirements without increasing fuel consumption. individual solutions. Scania’s de facto success with the Euro 6 engines has been demonstrated, among other ways, in tests Low fuel consumption a priority in road documented by the truck trade press. Fuel consumption transport in Scania’s Euro 6 engines has been unchanged com- Fuel accounts for a large part of the customer’s road pared to Euro 5 engines, while performance has been transport costs. Recruiting and retaining skilled drivers comparable or better. is vital in enabling transport companies to influence fuel Starting in 2011, Scania has sold vehicles with Euro 6 consumption and thus their profitability. engines to customers that prioritise the environment. Recurrent driver training is important for reducing This gives customers the opportunity to plan invest- fuel consumption and unplanned repairs and also for ments and also take advantage of any incentives offered improving road safety. by public authorities to haulage firms that choose to Scania continually develops its driver support change over to Euro 6 performance at an early stage. systems and during 2011 unveiled a new cruise control s ­ ystem – Scania Active Prediction – which adapts Major investment in construction vehicles v ­ ehicle speed to save as much fuel as possible, using Cargo capacity, robustness and mobility are important GPS and topographical data. parameters for trucks in the construction and min- ing sectors. Demanding conditions and the need for New fuel-efficient Euro 6 engines continual vehicle uptime require swift access to service Scania has always been at the leading edge as regards and repairs. low fuel consumption. O per a t i o n s S c a n i a 2 0 1 1
  21. 21. SCANIA’S STRATEGY 19Scania is strenghtening its position in the mining indus- Used vehicles a core businesstry. The new Off-road truck series is intended for very For Scania, used trucks are a strategic part of thedemanding operating conditions, for example in mines. business, both because of actual vehicle sales andScania trucks are a flexible alternative to traditional the opportunity to provide continued service at Scaniaheavier dumpers in mines – mainly due to their lower workshops.investment, fuel and maintenance costs. A used Scania truck is a premium product, and its By having mobile or stationary workshops, Scania condition is important for the Scania brand. Scaniacan perform service and repairs at the customer site thus manages used vehicles in a systematic way: fromin order to maximise uptime. trade-in, reconditioning and technical upgrading, for example, with regard to environmental performanceKeener competitiveness in distribution – which is made easier by the Scania modularLow fuel consumption, good manoeuvrability and envi- s ­ ystem – to warranties for the new owner. In this way,ronmental performance are important factors in vehicles the ­ ustomer can feel secure when investing in a cfor transport tasks in cities and towns. Scania also used Scania vehicle.strives to minimise the noise level from its vehicles, sincethis is important to customers that provide services in Short-term rental business is growingthe distribution segment. To increase the customer’s flexibility, for example by There is increasing interest in alternative fuels for providing greater capacity during peak working periods,urban traffic, and Scania offers engines that run on all Scania engages in short-term truck rentals. Rentalthe alternative fuels available today. o ­ perations are now being established in additional markets and include tractor units for use with trailersStrong position in special-purpose vehicles as well as trucks with bodywork.Scania has a strong position as a supplier of productsfor public services such as rescue, fire-fighting, cleaningand waste management. There is an ever-increasingneed for vehicles that are exactly specified for their task.Reliability and robustness are also of great importancehere. In this segment, too, the demand for vehicles thatrun on renewable fuels is increasing significantly. O per a t i o n s S c a n i a 2 0 1 1
  22. 22. 20 market – TRUCKS Cooperation means greater efficiency Wholesaler with ambitious climate targets The Norwegian wholesaler ASKO has the ambi- tion of being Norway’s most customer-oriented, efficient logistics company. ASKO assumes responsibility for the complete flow of goods from producer to consumer in the convenience goods trade. The company wants to be the best in its industry in Norway when it comes to environmental matters. A high load factor and the shortest possible driving distance are critical factors for achieving this. Every day almost 600 trucks carry goods to ASKO and to ASKO’s customers. The company has a fleet of trucks that meet high standards. It imposes strict demands as regards technology and environmental characteristics. Clear environmental goals ASKO’s ambition is to be climate neutral. Its environmental targets are to reduce energy consumption by 20 percent and carbon dioxide emissions from its haulage services by 50 percent from 2008 to 2014. At-source sorting of 90 percent of the company’s waste shall also be achieved by 2014. Partnership with Scania One important reason why ASKO chose Scania as its overall truck supplier was the strong network of Scania workshops throughout Norway. Another key factor was that Scania can deliver complete transport equipment including bodywork. A winning concept Post-Kogeko is a Dutch all-round provider Safer, more efficient drivers This partnership has helped to ensure that of logistics services with 30 years experi- Post-Kogeko cooperates with Scania in ASKO is well on the way to achieving its ence in conditioned food logistics. The a comprehensive programme for drivers, environ­ ental targets. It has also provided m company has 700 employees and its fleet which includes training, continuous coach- ASKO with higher vehicle uptime, a newer fleet, consists of 350 trucks and 400 trailers. ing and driver support. Each driver has easier administration of its haulage services The company’s profitability depends a development plan which is followed up and standardisation of equipment – factors that on being able to optimise flows, achieve a regularly. translate to high efficiency in transport work. high load factor, maximise the number of orders per stop, avoid load damage and Rapid results minimise fuel consumption. Since expanded cooperation with ­ cania S Post-Kogeko has a central planning began in early 2010, Post-Kogeko has been department to obtain the best flows. The able to save about 4 percent in fuel, and Scania Fleet Management service offers downtime has fallen from 27 to 17 percent. the company continual information via Awareness among drivers and throughout e-mail or a web portal about vehicle and the company about the importance of driver performance as well as vehicle e ­ fficiency, fuel economy and carbon dioxide positions. emissions has increased significantly. O per a t i o n s S c a n i a 2 0 1 1
  23. 23. market – TRUCKS 21Effective overall solution supports logisticsHAVI Logistics is a Lead Logistics Provider Scania vehicles include McDonalds, OMV, responsibility for servicing entire rigs, HAVIfor the European food service industry. The Vapiano and Coffee­ eaven. h Logistics can concentrate on its main task,company has about fifty distribution centres ­ogistics. For example, Scania operates a lin Europe and its head office in Germany. Long-term relationship with Scania workshop in Warsaw which focuses exclu-Scania delivers complete vehicles to HAVI The relationship between HAVI Logistics and sively on serving HAVI Logistics’ vehicles.Logistics including trucks and bodywork Scania goes back many years and has inten- Since its founding in 1981, the companyand provides service for the entire rig. sified in recent years as Scania has extended has pursued ambitious environmental goals. HAVI Logistics offers its customers flex- its range of products and services. Its partnership with Scania has resulted in ­ible, integrated overall solutions covering From HAVI Logistics’ perspective, it is r ­ educed costs as well as lower carbonthe entire supply chain. The company has e ­ fficient that Scania can deliver trucks or dioxide emissions.5,400 employees and about 650 trucks. t ­ractor units as well as trailers and cool-Customers serviced by HAVI Logistics’ ing units. Because Scania assumes overall ­Close working relationship ensures high uptimeVale is a Brazilian mining company with Contributing to development workworldwide operations and more than Scania conducts field tests at Vale’s mines as100,000 employees. Production mainly part of its product development work. Opera-consists of iron ore and nickel. tional deviations are jointly analysed with the Vale is a Scania customer that prioritises customer so that products can be updated.a close working relationship and coopera-tion with its sub-contractors in many areas. Service on siteThis long-term relationship enables Scania Scania’s presence at Vale’s mines makes itto become familiar with how Vale works and possible to provide tailor-made maintenanceto propose effective solutions. The partner- and parts supply and immediate support inship provides Scania with information about the event of faults or downtime. Service canthe trucks’ operational performance. The be performed swiftly and efficiently, whichparties can exchange ideas about product together with a driver training programmeimprovements and how the products should helps the customer achieve high vehiclebe used optimally. uptime. O per a t i o n s S c a n i a 2 0 1 1

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