Economic Eye-Opener

Volvo’s Top Brass Takes a Global Perspective of the Construction Industry

When I anchored down into an auditorium chair at Volvo’s International Trade Press Days, I was descending into zombification. We had just arrived in Sweden the day before and jetlag was deteriorating any sort of productive consciousness. I glanced around the room at the rest of the press corps and it was beginning to look like an extras audition to the “Night of the Living Dead.”

Lucky for us, Volvo president and CEO Tony Helsham brought his usual magnetism to the stage. I was one of 100 journalists in the world (only 11 from North America) invited to travel to Volvo’s home base in Sweden to see the company’s latest products and projects. At the company’s Eskilstuna Demo Center (a couple of hours from Stockholm), the opportunity to watch Volvo’s top brass speak and take questions was quite a wake-up call. While we’re all used to talking heads back home discussing the deceleration of the U.S. construction economy, Helsham talked about understanding a bigger, more positive picture.

“Although growth has slowed in North America and Europe, we still see over two thirds of the global construction equipment industry continuing to expand,” he explained. “Because of this, I believe the industry has a much more positive outlook than it would have had at a similar point in previous business cycles.”

Citing figures showing the massive infrastructure investments in India, China and Russia alone, Helsham focused on new opportunities. He discussed the addition of Volvo’s new road machinery range (purchased from Ingersoll Rand) and the introduction of its low-cost range of Chinese-made SDLG wheel loaders into these emerging economies. “These product additions to our offering open up a new customer base and are destined to be transformational for Volvo CE’s business as a whole,” noted Helsham.

Today, Volvo CE is the third largest manufacturer in the construction industry, proving it is adept at growing consistently through down cycles. Helsham predicted oil would reach $200 a barrel in the next two years, its availability threatened by geo-political instabilities and demand in the emerging Asian markets. The raw materials for steel production are facing similar hurdles. But the company’s annalists also saw the North American market starting to come out of its slowdown hopefully by the middle of next year. While nonresidential construction spending rose in the first part of 2008, the housing market still dragged total spending down.

“There are dangers out there,” Helsham warned. “Oil and steel cost increases are putting pressure on us to increase prices on our products.” Consequently, Volvo Construction Equipment recently announced it would raise the price of its machines and components by 5 percent globally.

The ability to understand and adapt to the evolutions of the market is an enormous key to Volvo’s success (not unlike our contractors in the field). Volvo talked about the importance of business cycle management, consistently executing a long-term strategy to help survive the lows of the cycle and hopefully gain market share. These are ideas we will continue to convey to our readers, realizing that the advantage of seeing the entire global picture is truly an eye-opener.

Keith Gribbins
Managing Editor
kgribbins@benjaminmedia.com

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