Business

Volvo struggles to meet surging truck demand

Production worker fits a fan on a truck engine at the Volvo plant in Dublin, Virginia, US
Image caption Volvo said it had suffered component shortages as demand for trucks rose 63% in the fourth quarter

Vehicle manufacturer Volvo has upped its 2011 truck sale forecast for the US and Europe by 10% to 220,000 lorries.

Surging demand caused production problems in the fourth quarter, the Swedish firm said, with component shortages and costlier raw materials.

The company reported a 5.5bn-crown ($855m, £530m) profit for 2010, up from a 2.32bn-crown loss the year before.

This was below the 6bn crowns expected by markets because of higher production costs and the strong Swedish currency.

New orders

According to Volvo, the rising cost of raw materials such as metals and plastics cost it 600m crowns, while the rising value of the crown - which has reached a 10-year high against the euro - sapped profits a further 700m in 2010.

Despite the disappointing profit figure, the company could point in its full-year financial results to a 63% increase in its order book during the last three months of 2010 compared with a year earlier.

"We ended 2010 strongly," said chief executive Leif Johansson.

"The gradual improvement in Europe continues and North America is now definitely recovering, at the same time as the emerging economies in countries such as Brazil, China and India continue their strong growth. However, the trend in Japan remains weak."

He added that the profit turnaround was not just due to better sales, but also "a result of a conscious effort to maintain our costs on a low level".

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