Volvo Car AB (publ.)

Good morning and a very warm welcome to the presentation of VolvoCars' third quarter financial results. I'm Ron in communications. And as always this morning, I'm joined by our President and Chief Executive Håkon Samuelsson, our CFO Frederik Hansen, and our Chief Commercial Officer Erik Severinsson. Like we do, it should be quite familiar to you by now, Håkan, Erik and Fredrik will walk up and take us through our performance during the third quarter and the road ahead. Thereafter, we will open it up for a question and answer round. How you participate, I'll come back on the other side. But for now, I give the word to you, Håkan. Thank you.

So good morning and welcome to this quarterly report, and we start This was, of course, a very negative result of quarter three. And I think the conclusion is the business environment have turned worse than we anticipated. I think that is really a conclusion you could draw now. And compared with what we saw 12 or maybe six months ago, it has gone faster and has affected us more. And in China, the market is rapidly declining, and especially for the Western premium manufacturers. So our revenues are more or less down with 50%. And that's, of course, the major reason for our result in the quarter. United States is also of course very challenging. We were strong in electrified cars and then the incentive systems was discontinued and that has of course influenced our possibility to sell our plug-in hybrids. And the profitability was also impacted by the tariffs. And that's of course especially serious for us, which import basically all our cars and have a very limited production locally. And here is also not to expect any tailwind in the near term, very low consumer sentiment. So Europe is now where we still contribute to profitability. It's a relatively stable market and we also see something very positive is that electrification is now really speeding up. and we are in the lead here in the premium segment and we already have a BEV share of 45% in the quarter and that is class leading. So that's very positive for us and we of course also will bring out more electric cars on the market and we see also a strong order intake for our BEV cars in Europe. So Europe is now holding the business up for us. And in this critical situation, what should you do? And I think the only thing we can do is to do things which you can control and influence. And that means we need to look at the cost side again. So we will be reinforcing our turnaround plan, which we are successfully implementing, and we need additional cost actions of over 5 billion SEK on the direct and indirect cost side. And this will also mean a 2,500 reduction of number of jobs. And this we will do in the overhead side. So, I mean, we have two things really driving this. One is the empowering of our regions, which means that we of course need to do in the same time a reduction and have a more corporate, leaner corporate structure here in Sweden. And of course, also on the R&D side, we are now through very intense development projects with development of the SPA3 platform, the Hygge Core Central Compute that we will not do in the future. So that means also we need to reduce to come down to affordable levels here on the corporate overhead. On variable cost, I think there is further possibilities to bring down the bomb cost of our car by utilizing Geely synergies. We can use more common hardware components in our car with our Chinese colleagues. So that will also help us as part of the program, the 5 billion. And we also need to concentrate our production. We have had seven plants globally. I think that's too much for us. So we really need five plants, two in Europe, one in the US, two in China, which will be 100% Volvo dedicated. And then we have the plant in where we're looking into solutions where we could use those plants together with Geely and other brands. And this means a reduction of two and a half thousand people. As I said, we will take out temporary jobs as what we call consultants. We really need to use natural attrition and not backfill those positions as we might normally do. really be creative, look into job rotations and really get a reduction from the natural attrition.

And we will also have direct exit packages to some people. We believe we can reach these two and a half thousand around mid next year. But we can today also not exclude that we might need to take additional actions here in February if this does not work according to the plan we are now saying. I'm relatively hopeful that it should work with these measures that I just said. And of course, we will also have to adapt our blue-collar workforce to the current volumes, and that's, of course, maybe basically more in China than in Europe. But of course, we always do that. And all of this to lower our break-even volumes and to improve cash flows. And in this situation, I think it's also important believe there will be no short-term tailwind from the market. We don't believe that. So the improvement of the company in the mid-term, near-term has to come from this cost package and improvements internally. But of course the company will never be successful in the long term only with cost-cutting. So we need also a future-oriented strategy which is really how we will make the company successful. for the long term, and that was something that we presented some months ago, and I think we now all see that it's really good that we have this now, so that we not only have to talk about cost-cutting, now it is to wait for the strategy really