Improving Performance CAPITAL MARKETS DAY, ESKILSTUNA, MAY 23, 2017 10:00 WELCOME Volvo Group Capital Markets Day 10:10 DEMO AND SHOW AGENDA 11:00 – 12:45 TEST DRIVING 11:30 – 12:45 LUNCH OPEN Martin Lundstedt, President and CEO 13:00 INTRODUCTION Jan Gurander, Deputy CEO and CFO Strong global presence Claes Nilsson, President Volvo Trucks IMPROVING North American transformation Dennis Slagle, President Mack Trucks 13:25 PERFORMANCE Regain profitable market shares Bruno Blin, President Renault Trucks UD Trucks turnaround Joachim Rosenberg, Chairman UD Trucks Group Trucks Asia and JV strategy Martin Lundstedt, President and CEO Continuous improvements Jan Ohlsson, EVP Group Trucks Operations 15:00 COFFEE BREAK Transformation and focus on core products Martin Weissburg, President Volvo Construction Equipment 15:30 GROWING Capture untapped potential Martin Lundstedt, President and CEO SERVICES Case: Retail development Martin Merrick, SVP Retail Development, Volvo Trucks Case: Uptime center in North America Dennis Slagle, President Mack Trucks Product leadership for customer success Lars Stenqvist, EVP Group Trucks Technology 16:30 LEADING IN TECHNOLOGY Case: Automation in the real world Peter Burman, Program manager, Boliden Mine Automation 18:00 DINNER Volvo Group Headquarters IMPROVING PERFORMANCE MARTIN LUNDSTEDT PRESIDENT AND CEO Volvo Group Headquarters Capital Markets Day 2017 3 Improving performance THE JOURNEY Acquisition- Transformation Improving driven growth to close the gap performance Volvo Group Headquarters Capital Markets Day 2017 4 Reinforcing the performance culture . Clear leadership and profit & loss responsibility for each brand . Those closest to the customer are empowered to make the right decisions . More regionalized value-chain approach . Simplicity, improved speed . A mindset for continuous improvement Volvo Group Headquarters Capital Markets Day 2017 5 Leverage Group assets All business areas to deliver on P&L responsibility ... ... with ability to pull on Group-common assets: . Customers and dealers . Common Architecture and Shared Technology (CAST) . Powertrain technology . Financial services . Connectivity, electromobility and automation . Knowledge and talent . Etc. Volvo Group Headquarters Capital Markets Day 2017 6 IMPROVING PERFORMANCE JAN GURANDER DEPUTY CEO AND CFO Volvo Group Headquarters Capital Markets Day 2017 7 Improving performance WE CONTINUE TO REVIEW PERFORMANCE AND TAKE ACTIONS ILLUSTRATIVE for product lines, services, Develop market areas, segments, product projects, Examples: variants etc. High frequency Operating follow-ups income Exit . Outsourcing of UD Condor . Divestment of Real Estate . Divestment of external IT operations . Withdrawal of Renault Trucks from Argentina . DVT JV closed . Ownership in Sunwin JV scaled back . Eicher Pro 8000 production to VECV Volume . Divestment of Governmental Sales under way Volvo Group Headquarters Capital Markets Day 2017 8 Improving performance PROFITABILITY PER TRUCK BRAND AND REGION 2015 NORTH AFRICA & SOUTH NET EUROPE ASIA WORLD 2016 AMERICA OCEANIA AMERICA SALES 60% 16% 13% 11% TRUCKS 100% NET SALES 45% 26%17% 7% 5% 100% Good performance Medium performance Lower performance Volvo Group Headquarters Capital Markets Day 2017 9 Improving performance ON OUR WAY Increasing profitability despite Strengthened balance sheet volume decline ADJUSTED OPERATING MARGIN NET FINANCIAL DEBT* TO EQUITY, % INDUSTRIAL OPERATIONS 12 months 7.7% 9.1% *Excluding pensions 40 Target 6.1% below: 6.2% 30 35% 20 10 Net debt 0 2013 2014 2015 2016 Q1 -10 2017 29.0 14.2 -0.5 1.3 -0.3 Net cash Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Volvo Group Headquarters Capital Markets Day 2017 10 What we want to achieve IMPROVING PERFORMANCE THROUGH THE BUSINESS CYCLE Gradual and Reduced Discipline consistent volatility in capital earnings in earnings allocation/ improvement and cash flow investments Volvo Group Headquarters Capital Markets Day 2017 11 Strategic priorities Reinforce Volvo as a global premium HD truck brand and regain position and market 1 shares of Renault, Mack and UD as regional high-end truck brands Capture Asia growth through JVs and Value Truck in a separate value chain – 2 and leverage in other emerging markets Create the most desirable HD product and service portfolio tailored to selected premium, 3 high-end and value segments Secure robust profitability through leading R&D, quality, purchasing and manufacturing 4 operations using Volvo Production System Establish brand specific sales operations with focus on retail excellence and 5 a growing service business Leverage Group assets in our non-truck Business Areas, creating additional profits, 6 synergies and technology leadership Revitalize the Volvo Group culture with focus on Customer Success, Trust, 7 Passion, Change and Performance Volvo Group Headquarters Capital Markets Day 2017 12 Strategic priorities IMPROVING PERFORMANCE 1 Strong global presence Claes Nilsson, EVP and President Volvo Trucks North American transformation Dennis Slagle, EVP and President Mack Trucks Regain profitable market shares Bruno Blin, EVP and President Renault Trucks 2 UD Trucks turnaround Joachim Rosenberg, EVP and Chairman UD Trucks Group Trucks Asia and JV strategy Martin Lundstedt, President Volvo Group and CEO 3 Continuous improvements Jan Ohlsson, EVP Group Trucks Operation Transformation and focus on core products Martin Weissburg, EVP and President Volvo CE 4 GROWING SERVICES Capture untapped potential Martin Lundstedt, CEO Case: Retail development Martin Merrick, SVP Retail Development Volvo Trucks 5 Case: Uptime center in North America Dennis Slagle, EVP and President Mack Trucks LEADING IN TECHNOLOGY 6 Product leadership for customer success Lars Stenqvist, EVP Group Trucks Technology Case: Automation in the real world Peter Burman, Boliden 7 Volvo Group Headquarters Capital Markets Day 2017 13 STRONG GLOBAL PRESENCE CLAES NILSSON • Increasing market share PRESIDENT VOLVO TRUCKS • Strong recovery in Russia • Growth in construction • Growth in service market Capital Markets Day 2017 14 Capital Markets Day 2017 15 Capital Markets Day 2017 16 Growing in construction Improving our customers’ business with a competitive product line-up CONSTRUCTION SALES VOLUME • Extensive feature development 12,000 – I-Shift with crawler gears 10,000 – Automatic traction control 8,000 – Tandem axle lift 6,000 10,300 – Volvo Dynamic Steering 4,000 9,000 5,800 6,500 – Rear air suspension 2,000 0 • Reinforced commercial focus 20142015 2016 F2017 Construction unit sales Capital Markets Day 2017 17 Capital Markets Day 2017 18 Capital Markets Day 2017 19 Capital Markets Day 2017 20 New truck and feature launches NEW REGIONAL HAUL FAMILY IN NORTH AMERICA Capital Markets Day 2017 21 NORTH AMERICAN TRANSFORMATION DENNIS SLAGLE PRESIDENT MACK TRUCKS Volvo Group Headquarters Capital Markets Day 2017 22 North American transformation CONTINUOUS IMPROVEMENT JOURNEY SINCE 2008 . Right-size, restructure & manage brands . Consistent strategic direction . Price optimization & customer mix . Restructured used truck operations . Continuous dealer network improvement . Proprietary driveline penetration . Service business focus . Productivity & quality improvements Volvo Group Headquarters Capital Markets Day 2017 23 North American transformation KEY METRICS Captive Captive Parts per Engines Transmissions Vehicle in for Volvo (AMT) Operation 100 100 97% 91% 90 80 80 70 87% 126% 60 60 50 Volvo 40 40 I-shift 36% 30 Mack 20 20 highway Parts per VIO 10 mDRIVE Truck population (10 year) 0 0 07 08 09 10 11 12 13 14 15 16 YTD 06 07 08 09 10 11 12 13 14 15 16 YTD 17 17 Volvo Group Headquarters Capital Markets Day 2017 24 North American transformation PROVEN STRENGTH THROUGH THE CYCLE 2016 - Volumes down 34% Lowered break-even unit volume by 40% - Profitable Lowered break-even unit volume by 40% Service business fully absorbing sales & marketing costs Firmly established lean organization mindset Volvo Group Headquarters Capital Markets Day 2017 25 REGAIN PROFITABLE MARKET SHARES BRUNO BLIN PRESIDENT RENAULT TRUCKS Capital Markets Day 2017 26 FUNDAMENTALS IN PLACE Lean and dedicated organization Right-sized cost base High service network density New model for market management in Europe Competitive and acclaimed product ranges Capital Markets Day 2017 27 NEXT STEP – DRIVE SALES TO GAIN POSITIVE MOMENTUM INCREASED SALES IMPROVES A FUTURE PROFIT IMPROVES WE ALL & IMAGE BELIEVE IN MARKET & PRESENCE ENGAGEMENT >> USE AND SELL THE GREAT OFFER WE HAVE Capital Markets Day 2017 28 KEY LEVERS TO INCREASE SALES PARTNERSHIPS . Right and optimized set up for DEEPER MARKET . Increase number of dedicated International markets PRESENCE salesmen . Rebuild partnership with markets . Strict management of our dealers and dealers based on performance . Close monitoring of our commercial presence RESALE VALUE . Truck range well received SALES SKILLS & . Sales managers training . Used trucks center in Dubai and . Sales force training Hungary PERFORMANCE . Dedicated label “Used Trucks by . Technical training dedicated to Renault Trucks” salesmen . Cross market governance to boost sales Capital Markets Day 2017 29 KEY LEVERS TO INCREASE SALES PARTNERSHIPS . Right and optimized set up for DEEPER MARKET . Increase number of dedicated International markets PRESENCE salesmen . Rebuild partnership with markets . Strict management of our dealers and dealers based on performance . Close monitoring of our commercial presence RESALE VALUE . Truck range well received SALES SKILLS & . Sales