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Scania CEO: “Global transport needs will expand”

For Scania, 2010 was a year of recovery. Earnings and cash flow were the best ever in the company’s history. Leif Östling, President and CEO, says that Scania has emerged stronger from the financial crisis and that long-term economic trends favour the company.

How would you summarise 2010??
“Both transport flows and transport prices increased last year in Europe. The demand for our products and services rebounded, especially in northern Europe. It is also heartening that we succeeded in meeting continued rapid growth in Brazil and captured market share there. This was made possible thanks to the flexibility of our global product range and production system. We are more efficient than before the crisis. This is in part because we preserved and strengthened our core competency during the downturn.”

Are occasional crises needed to make companies as efficient as possible??
“In any case they have quite a lot of positive effects. Management was forced to prioritise. We carried out an extensive review in the organisation, which has made Scania better. You only need to look at how our earnings and cash flow have grown to realise that. We are also gradually carrying out a generation change in our management, and experience from a crisis is always important to carry with us into the future. Good organisations often emerge stronger from crises.”

How do you foresee developments in Scania’s markets during 2011? Many observers are warning of new financial trouble spots in Europe.?
“We should remember that only a small part of Europe has financial problems. Places with a strong manufacturing sector such as northern Italy, Germany and the Netherlands are in a good starting position and have also benefited from the weakened euro. The Nordic countries enjoy stable economies as well. What I am more worried about is how the financial imbalances in the United States will affect the world economy and the dollar. In my opinion, compared to the US, the financial problems of Europe are considerably smaller.”
What is your view of the biggest market, Brazil??“Brazil was one important reason why Scania was profitable even in a year like 2009. Brazil has enormous agricultural and mineral resources as well as incredibly low production costs. This has enabled it to benefit greatly from Asia’s economic progress and increased demand for these products. Meanwhile middle class consumption is growing rapidly, also increasing the need for transport services. We have a positive long-term view of Brazil, but making short-term forecasts is more difficult since, among other things, they depend on what is happening in China and the rest of Asia.”

And what is Scania’s position early in 2011??
“Scania is very well equipped to face 2011. We have a strong product portfolio, including the new R-series and a new V8 truck range. We also enjoy very high efficiency, now that we have increased the production rate. Overall, this means that we have maintained short delivery times to customers ? around six to eight weeks for a chassis, thanks to a more efficient order delivery process. Meanwhile we have been working in recent years to translate the principles from the Scania Production System (SPS) to the sales and service network by means of the Scania Retail System (SRS), in order to improve efficiency and business volume in the service network. I expect this to have a significant impact within a few years.”

What is the role of the new Euro 6 emission standards that take effect on 31 December 2013??
“Since our V8 launch we already have the technologies required for Euro 6, so Scania has a competitive position. It is important to remember that Euro 6 is about reducing particulate and nitrogen oxide emissions. The big challenge in the future will be reducing carbon-dioxide emissions. This goes hand in hand with what all customers want ? to decrease fuel consumption. Here we are working with everything from alternative fuels and hybrids to aerodynamics and driver training. And the computerised Scania Driver Support system makes it possible to reduce fuel consumption by 10–12 percent. That is equivalent to many years of engine development work. For a typical long-haul truck, it adds up 6,000 litres less fuel consumption per year.”

So if you look at Scania’s markets in the long term, what factors point towards continued growth??
“There is a strong connection between GDP and transport demand. Given continued global economic growth, transport services will expand, too. We will also benefit from increased trade, a greater need for energy efficiency and the effect increasing urbanisation will have on city transport systems. In addition, there will be demand for more service and support for drivers ? areas in which Scania is highly advanced.”

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