1.Annual Report 2012 2245144/EN/Kreab Gavin Anderson/Trosa Tryckeri, 2013 Scania AB (publ), SE-151 87 Sdertlje, SwedenTelephone: +46 8 55 38 10 00. Fax: +46 8 55 38 10 37 www. scania .com

2. Scanias objective is to provide the best profitability for its customers throughout the product life cycle by delivering optimised heavy trucks and buses, engines and services thereby becoming the leading company in its industry. Scanias operations are based on the companys core values, its focus on working methods and dedicated employees.2 March. Scania switched to fossil-free fuel in its internal transportservices. Using renewable bioethanol as a fuel instead of fossil-baseddiesel will reduce the climate impact of carbon dioxide emissions fromScanias internal goods transport services in Sdertlje, Sweden, byabout 70 percent. Annual Report and financial information WebsiteScania shareholders are the main target group for the On Scanias website, www.scania.com, it is easy toAnnual Report, which is sent to those who have orderedfollow events at the company during the year, monitorit. All new shareholders receive a letter welcoming themScanias share price and compare its performanceto Scanias shareholder services, where they may orderwith that of competitors, as well as see the latest 17 April. The Swedish Transport Academy in Erbil, northern Iraq wasthe information they want, in the format and quantity transactions, share price history, dividend history and inaugurated by Swedens Minister for Trade, Ewa Bjrling, and other officials. they wish. They may subscribe to the Interim Reports, other share data. Shareholders can also calculate the The training is targeted at young unemployed Iraqis with a secondary schoolthe Annual Reports, the shareholder magazine Scania return on their own holdings. The website also provides background and offers occupational skills demanded in the transport sector.Value, invitations to the Annual General Meeting and presshistorical financial data, truck registration statistics, key The establishment of the school is a result of close collaboration between releases via e-mail, order printed Annual Reports, Interimfinancial ratios and much more. Scania, local government, the Swedish business community, internationalReports and Scania Value. organisations and development agencies.In addition, other stakeholders have the opportunity tosubscribe to financial information via Scanias website,where it is also possible to order printed information in24 April. Scania introduced the powerfulsingle copies and have them sent.1,000 hp V8 marine engine with a testand ride in the Stockholm archipelago forFinancial information is available in Swedish andselected customers and media. In late 2012, English and may be ordered from Scania AB,the engine was also launched in the North Investor Relations, SE-151 87 Sdertlje, Sweden,American market at the International Work telephone +46 8 553 810 00, or atwww.scania.com/shareholderBoat Show in New Orleans, USA.www.scania.com/subscribewww.scania.com/printedmaterial16 November. Scania signed an agreement to deliver up to3,000 Tier 4i emission-compliant engines for aircraft dispatchtowing and pushback vehicles.This English version of Scanias Annual Report is a translation of the Swedish-language original, the binding version that shall prevail in case of discrepancies.Translation: David Murphy, Word of Mouth and Victor Kayfetz, Scan Edit. The Financial Reports encompass pages 72133 and were prepared in compliance withInternational Financial Reporting Standards (IFRSs). The Report of the Directors encompasses pages 2670 and 134135. The Report of the Directors and accompanyingPhotos: Carl-Erik Andersson, Peggy Bergman, Dan Boman, Javier Campos, Vinayak Das, Conny Hetting, Lucas Holm, Petter Magnusson, Jonas Nordin,Financial Reports also fulfil the requirements of the Swedish Annual Accounts Act and have been audited by Scanias auditors. Scanias Swedish corporate identity number: Kjell Olausson, Silvio Serber, Tedd Soost, Lennart Strm, Jeremy Tennant, Gran Wink, Glamour Photographics and Hung Chung Chih / Shutterstock.Scania AB (publ) 556184-8564. Unless otherwise stated, all comparisons in this Annual Report refer to the same period of the preceding year. 3. CONTENTSOPERATIONS225Scania in brief 2Statement of the President and cEO6Scania Executive Board8Scanias strategy 12Scanias strategic platform 121 September. Martin Lundstedt took over as President andDriving forces for demand 14CEO. On the same date, changes were also implemented inProfitable business through customised solutions16Scanias Executive Board.Scanias modular system 18Services support the customers business20Methods for profitability 24REPORT OF THE DIRECTORS2670, 134135Market trends, 2012 26Production32Research and development36Scanias sustainability work40Ecolution by Scania a comprehensive solution40People and collaboration drive sustainability efforts 42Moving goods and people while influencing attitudes 448 September. Gabriel Warde from Ireland won Collaboration throughout the value chain46the Young European Truck Driver (YETD) 2012 Risks and risk management 50competition, part of a global initiative promotingScania share data 54responsible and safe driving started by Scaniaarticles of association 56in 2003. More than 17,000 young truck drivers corporate Governance Report 57under the age of 35 from 24 European countriesBoard of Directors, Executive Board and corporate Units 63participated. Group financial review68FINANCIAL REPORTS71 133, 136143consolidated income statements72consolidated balance sheets 74consolidated statements of changes in equity76consolidated cash flow statements 77notes to the consolidated financial statements78Parent company financial statements, Scania aB 130notes to the Parent company financial statements 132Proposed guidelines for salary and other remuneration134Dr Melinda Crane, Deutsche Welle-TV; Siim Kallas, EU Commissioner Proposed distribution of earnings135for Transport; and Martin Lundstedt with Gabriel Warde.12 November. Scania organised a conference in Brusselsaudit report 136on sustainable transport development. This regularlyQuarterly data 138recurrent meeting brings together the transport industryKey financial ratios and figures 140with representatives of public authorities and the European Definitions141Union to discuss what can be done and what is required to Multi-year statistical review142reduce the environmental impact of the transport sector.annual General Meeting and financial information 144Scania 2012 1 4. SCANIA IN BRIEFScania in figures Operating income fell to SEK 8,300 m. (12,398) and earnings per share fell to SEK 8.31 (11.78). Net sales decreased by 9 percent to SEK 79,603 m. (87,686). Cash flow amounted to SEK 3,025 m (6,970) in Vehicles and Services. The Board of Directors proposes a dividend of SEK 4.75 (5.00) per share.Vehicles and ServicesOperating income in Vehicles and Services totalled SEK 7,694 m. (11,881) during the full year2012. Lower vehicle deliveries and lower capacity utilisation pulled down earnings, as didhigher costs for future-related projects. Pressure on truck prices, mainly in the European andBrazilian markets, also adversely impacted margins.Financial ServicesOperating income in Financial Services rose to SEK 606 m. (517) during the full year 2012,compared to the corresponding period in 2011. The improved earnings were due to a largerportfolio. Bad debt expenses decreased to SEK 290 m. (298) during the year.Nettoomsttning per produktomrde ENG Avkastning p sysselsatt kapital (ROCE) ENGKassaflde ENGNET SALES RETURN ON CAPITAL CASH FLOW BY PRODUCT AREA EMPLOYED (ROCE)Miscellaneous 2%Trucks 61%%SEK m.Used vehicles 6%50 12,00040 10,000Services 21%8,000306,000Engines 2%204,000Buses 9%102,000 0 0 08 09 10 11 12 0809 10 11 122 O per atiO ns sca nia 2012 5. SCANIA IN BRIEFKEY FIGURES2012 20112010Deliveries, number of vehicles67,401 80,108 63,712Net sales, SEK m.Vehicles and Services 79,603 87,686 78,168Operating income, SEK m.8,30012,398 12,746Operating margin, percent10.414,116,3Income before taxes, SEK m. 8,28112,612 12,533Net income for the year, SEK m. 6,6409,4229,103Earnings per share, SEK8.3111.7811.38Cash flow, SEK m.Vehicles and Services 3,0256,97011,880Return, percent on equity 19.229.534.7 on capital employed, Vehicles and Services22.838.139.5Net debt/equity ratio*Vehicles and Services 0.31 0.35 0.30Equity/assets ratio, percent 30.931.630.5Net capital expenditures, excluding acquisitions, SEK m.Vehicles and Services 4,4803,7762,753Research and development expenditures, SEK m. 5,3124,6583,688Number of employees, 31 December38,597 37,496 35,514Employee turnover, percent 119 8Healthy attendance, percent96.796.896.7Energy consumption, GWh 616649 652CO2 emissions, ktonnes from production 75.3 79.1 81.4 from goods transport services**191.6232.5164.7* Net debt (+), net surplus ().** The changes from year to year follow production volume and country of delivery. The scope of data gathered has also expanded.Medarbetare frisknrvaro globalt ENG milj energi ENGAntal producerade fordon per anstlld keyfigures ENGkoldioxid produktion keyfigures ENGENERGY CARBON DIOXIDEVEHICLES PRODUCED HEALTHY ATTENDANCE PER EMPLOYEEMWh per vehicle Total, GWh Tonnes per vehicle Total, ktonnes Vehicles produced per employee%30 800 596.2 96.6 96.7 96.8 96.7 100 8100256004 80 67520 3 6015400450 2 4010200225 5 1 20 000 0 0 0 0809 10 1112 080910 111290 950005101208091011 12 O per atiO ns sca nia 2012 3 6. SCANIA IN BRIEFScania, 2012Scania is one of the worlds leading manufacturers of trucksand buses for heavy transport applications, and of industrialand marine engines, with a sales and service organisation inmore than 100 countries. In addition to sales and services,Scania offers financial services in many markets. Scaniasproduction units are located in Europe and Latin America.Scania has approximately 38,600 employees. Of these,some 17,400 work with sales and services as well asFinancial Services in Scanias own subsidiaries worldwide.about 12,600 people work at production units in six coun-tries and regional product centres in six emerging markets.BUSES Scanias Head Office is located in Sdertlje, Swe-TRUCKS ANDden, where a total of 5,200 people work with sales asCOACHESwell as administrative and other tasks. also in Sdertljeare Scanias research and development operations, with AxLES GEARBOxESabout 3,400 employees. Scanias central purchasing department in Sdertljeis supplemented by local procurement offices in Poland,ENGINESCABSthe United States, china and Russia. Scania has a global production network into which allunits around the world are integrated. This provides highGEARBOxSO PaUlOflexibility and cost-effective production. Working methods, COMPONENTS TUcUMnquality standards and environmental standards are thesame at all production units. To strengthen its positionin key emerging markets, Scania is establishing regionalproduct centres for assembling, bodyworking and fittingout locally adapted vehicles.SALES AND DELIVERIES BY REGION, 2012AmericaEuropeAfrica and OceaniaTrucks* 15,391unitsTrucks27,720 unitsTrucks 3,053 unitsBuses and Coaches* 2,738unitsBuses and Coaches1,312 unitsBuses and Coaches 798 unitsEngines2,582unitsEngines3,664 unitsEngines 194 unitsServices SEK 2,475m. ServicesSEK 11,601 m. ServicesSEK 1,168 m.* Refers to Latin America4 O per atiO ns sca nia 2012 7. SCANIA IN BRIEFSDERTljE lUlEFRAMESTRUCKS BUSES ANDREAR AxLESCOACHES REAR AxLE HOUSINGS AxLES GEARBOxESENGINESOSKaRSHaMn CABS ST. PETERSBURG SUPSKMEPPEl anGERSzWOllE BUSanTRUCK TRUCK COMPONENT BUS ASSEMBLYASSEMBLYPAINTINGBODYWORKTaiPEi DUBaiKUala lUMPUR SalES anD SERVicES jOHannESBURG REGiOnal PRODUcT cEnTRE PRODUcTiOn RESEaRcH anD DEVElOPMEnT Eurasia Asia Trucks6,798 units Trucks8,089units Buses and Coaches 198 units Buses and Coaches 1,304units Engines96 units Engines 527units ServicesSEK 597 m.ServicesSEK 1,251m. O per atiO ns sca nia 20125 8. STATEMENT OF THE PRESIDENT AND CEOGood opportunities in uncertain market conditions In the uncertain economic situation facing us, it is important that we concentrate our resources and set the right priorities. Meanwhile, we know that demand for vehicles and services will increase once economic activity recovers. We will strengthen our presence in emerging markets and continue to develop new high quality products that boost customer profitability this is our focus for 2013. Economic growth is the main force driving the This will enable us to strengthen our competitiveness. demand for Scanias products and services. last in the coming years, a large proportion of Scanias year, 2012, was dominated by low economic activitygrowth potential will be outside Europe. in addition to in many regions. in a number of markets, customersprioritised development projects, we will continue to were hesitant about placing orders for new vehicles.devote major resources to strengthening our presence This was particularly true in our largest regionin emerging markets. Europe. During the first half, deliveries in latin These efforts have been very successful in recent america were affected by an economic slowdown years, with rising sales in many markets, including and by the transition to engines with higher environ- latin america and Southeast asia. nowadays Brazil is mental standards, while political unrest dominatednot only our largest market for vehicles and engines, many markets in the Middle East. The number of unitsbut also one of our largest markets in terms of service sold is the single most importantrevenue. Scania has enjoyed a factor for Scanias earnings trend.strong position in the Russian truck During 2012, deliveries declinedWe are convinced thatmarket for many years, and service by 16 percent, and operating carefully conceived sales are also growing strongly income fell by 33 percent to SEK there.sustainability work is 8,3 billion.This growth does not comeOur service sales were stable, essential for generating without challenges, but we have with growth in many regions out- profitability and achieving worked purposefully over the years. side Europe. This stable trend is long-term success.We have built six regional product a direct result of the growth of centres for assembly, bodyworking our vehicle populations, due toand fitting out of locally-adapted increased sales in emerging markets in recent years.vehicles, thereby enabling us to cut lead times forThe lower demand for new vehicles resulted invehicles and parts. More facilities of this type are in the price pressure which also affected Scania. Scania pipeline. We are collaborating with partners to increase is good at adapting to demand, which is illustrated the number of service points, and we have established by our high profitability compared to the rest of our some 20 modularised field workshops in order to get industry. The stronger Swedish krona contributed to closer to our customers operations. Scania assis- pressure on profitability, especially during the second tance mobile service units represent another oppor- half of 2012. Scania has a large proportion of its cost tunity to boost our local presence with a competitive base in Sweden. level of service.This year has started in the same way that 2012 Developments in asia and in other parts of the ended, with great uncertainty about the economicworld are moving quickly, implying great opportuni- situation, a continued strong Swedish krona and ties for Scania. in china, large investments have continued price pressure on vehicles. This is why webeen made in various types of production equip- will continue to adjust the cost level in all parts of thement, while logistics systems have not kept pace with company. But we will not compromise on our firstdevelopments. There will also be greater focus on the core value: customer first. We will prioritise develop- environmental impact of logistics systems. Overall, ment projects that lead to new products and servicesthese trends point towards increasing demand for the that give our customers the potential to boost theirsolutions that Scania sells. revenue and reduce costs. We are continuing to in our home market, Europe, fuel consumption is a strengthen the quality of our products and services.central issue for our customers, more than ever. about6 O per atiO ns sca nia 2012 9. STATEMENT OF THE PRESIDENT AND CEOone third of a hauliers operating cost consists of fuel.able corporations in the World. We are convinced thata large proportion of our Research and Development carefully conceived sustainability work is essential forresources are concentrated in this field. There is alsogenerating profitability and achieving long-term suc-a strong connection between fuel consumption and cess.sustainable transport services. We must decoupleDespite economic uncertainty, there is no doubt thatincreased transport volume from increased emissionswe have many opportunities. Our modular product sys-if we are to meet the future demands imposed on us bytem, a strong focus on service business and flexibility atcustomers, legislators and society in general. production units are some of our success factors. Our it is important to emphasise that there is no conflictdedicated employees, who continually find new ways tobetween our business model and reduced emissions.improve the companys operations, constitute our mostin fact, the pursuit of sustainability and reduced emis- important resource.sions gives us the potential to expand our presence inMy predecessor, leif stling, who led Scania forEuropean markets, both in vehicle and service sales. 23 years with volume growth from 30,000 to 80,000Today we see the positive effects that our Ecolution vehicles, introduced a leadership philosophy of con-by Scania concept generates for our customers: fueltinuous improvements. Today that philosophy per-savings of 1015 percent, sometimes even more. meates Scanias corporate culture. This means thatcarbon dioxide emissions are correspondingly the competency of the individual employee is utilisedreduced. Ecolution by Scania involves a systematic and developed, so that each person can assumeapproach to optimising vehicles and services, basedmajor responsibility for raising productivity. initially,on a good understanding of the customers operations this philosophy was about continuous improvements,and industry. Ecolution by Scania brings us closer tofirst and foremost in the production network. Today itthe customer, enabling us to work with continuousapplies to the entire company. This corporate cultureimprovements based on a holistic perspective. Theseprovides the basis for Scania to grow profitably.services include maintenance programmes as well asWhen i took over as President and cEO in Septem-driver coaching and training. Using the on-board digital ber 2012, Scania renewed its Executive Board, whichScania communicator, which is fitted in many vehicles, is continuing to develop Scanias unique strengthswe can measure and follow up fuel consumption in based on new perspectives. last year was dominatedeach individual rig. by some headwinds. Thanks to the dedication of our Besides contributing to our customers sustain- employees and their fine efforts during 2012, Scaniaability efforts, we raised our own profile in the sustain- will be well-positioned when demand recovers. i wouldability field in 2012. During the year, Scania embracedlike to express my deep gratitude to everyone who hasthe United nations Global compact, an initiative for contributed to this.companies committed to sustainability and responsiblebusiness practices, based on ten principles concern-ing human rights, labour standards, environment andcorruption. We also climbed nine places to no. 27 in Martin lundstedtcorporate Knights list of Global 100 Most Sustain- President and CEO O per atiO ns sca nia 2012 7 10. SCANIA ExECUTIVE BOARD Scania Executive Board Market demands and customer expectations are constantly evolving. For Scania, it is a matter of continually reviewing its strategies and developing a business model based on a global perspective. The quality of Scania products and services is crucial to the companys leading position. The task of the Executive Board is to promote further collaboration between departments and a holistic view of our operations. Since September 2012 the Executive Board has consisted of eight members. Martin Lundstedt Our brand evolves in response to new cus- tomer demands. Scania should stand for more than just a good vehicle. Scania should deliver the best profitability by offering transport solutions that sup- port customers in their day-to-day business. One of Scanias strengths is that at all levels, we work to maintain a high level of transparency between differ- Henrik Henriksson, Executive Vice President,Head of Franchise and Factory Sales. ent parts of the company. On the Executive Board, we have monthly meetings where all members participate and weekly pulse meetings to follow up. We enjoy aHenrik Henriksson good dynamic and all angles are explored, for example when it comes to market strategies, capacity expan- The most important aspect of my job as sion, leadership issues and development projects. ThisHead of Franchise and Factory Sales is to listen to is further strengthened by the fact that the Executivecustomers and ensure that their needs determine Board sits together in an open-plan office in order how we set our priorities. to ensure a process-oriented approach and cross- functional collaboration. Scania shall always be quicker than the competition inScania will continue to act as an efficient smalloffering customers the combinations of products and company that works close to the customer and that services that improve their operating economy. Our has quick internal decision-making processes. Withunique modular product system makes this possible, our new Executive Board, we have strengthened our since we can add new components featuring improved potential to make further progress along this path. performance without needing to change the surround- ing components.Markets outside Europe represent a great potential for Scania and we prioritise investments so we can follow our customers into new markets and seg- ments. We work more and more with comprehensive solutions, and we have strengthened the organisation to handle more complex business transactions, for instance in the mining and forest product industries.another trend, of course, is the increasing focus on fuel prices, not only in Europe as earlier but all over the world. One of our ways of setting a new fuel-efficiency standard is Ecolution by Scania. Together with the customer, Scania sets fuel consumption targets, specifies vehicles and services to suit a given transport task, trains drivers and continually follows up their driving style. To date, the results have been gratifying. This also represents a great opportunity to strengthenMartin Lundstedt, President and CEO. Scanias sales of service-related products.8 O per atiO ns sca nia 2012 11. SCANIA ExECUTIVE BOARD Andrea Fuder, Executive Vice President, Head of Purchasing.Andrea Fuder Kent Conradson A premium brand requires the bestOnly with the best employees can Scaniasuppliers. Scanias promise to customers deliver the best solutions. This requires Scania tomeans we need partners that can maintain be an attractive employer.the highest quality, delivery precision,flexibility and competitiveness. The primary task of Scanias HR organisation is to supply our operations with the competencies andToday Scania has a strong supplier base, and weexpertise they need. Today two thirds of our 38,600ensure delivery precision and cost-effectiveness byemployees work outside of Sweden, and this propor-working as far as possible with at least two suppliers tion will increase. attracting new competencies in newfor each component.markets is one of our main challenges. We are constantly working to improve ourselves andour suppliers. The highest quality is a must if Scania isto meet the demands of its customers for reliability anduptime. close collaboration with our suppliers enables us todevelop new solutions together. as a global company,we must also find solutions to various legal require-ments, for example local content requirements for ourproducts. in emerging markets, principles related tohuman rights and corruption are also important, andScania supports the United nations Global compactinitiative on these issues. Scanias own production network and those ofour suppliers must be highly flexible. Our suppliersneed to respond rapidly to upturns and downturnsin demand, while maintaining quality and delivery pre-cision. Quality and flexibility lead to higher productivity,which safeguards our long-term competitiveness.Kent Conradson, Executive Vice President, Head of Human Resources. O per atiO ns sca nia 20129 12. SCANIA ExECUTIVE BOARDOur core values and leadership philosophy, combinedwith the large responsibility assumed by individualemployees in pursuing improvement efforts, are avery strong base on which to build further. Health andenvironment, along with safety, are of highest priority.We also use these strengths when we market andposition Scania as the best employer.To strengthen follow-up and ensure that we are meas-uring the right things, we are imposing stricter demandson our reporting of sustainability-based key figures.Our employees should feel that Scania is a safeworkplace, and here we should work preventively andstrengthen training programmes for younger managers.Harald Ludanek The ambition of Scanias research Per Hallberg, Executive Vice President, Head of Production and Logistics.and development operations is to developproducts and services that meet customershigh expectations for productivity and profit-ability. This includes low fuel consumption, Our companys development engineers work increas-high uptime and low service costs combined ingly in the field, in close contact with the customer, towith high performance.further increase our knowledge of operations. Scania is pursuing several projects in which a wirelessDelivering quality is more than just a promise to ourconnection to the internet is opening the way to newcustomer. it is something that is embodied in thesolutions. These projects include remote diagnosticsday-to-day work of Scanias engineers. Quality is also and convoy driving with extremely short distancesthe key to safeguarding Scanias leading position. between vehicles in order to save fuel. Future as-Scania constantly strives to increase its knowledgesistance systems and new technology are beingof its customers operating conditions and working developed in cooperation with universities, researchmethods in order to offer the right products and institutions and suppliers.services for each customer and each application. Per Hallberg When demand fluctuates in response to changes in the economic cycle, we must be able to swiftly adjust our vehicle production rate. Flexibility is crucial in order to ensure Scanias long-term competitiveness. Scanias production flexibility consists of a number of elements: a high proportion of purchased compo- nents, flexible forms of employment, a common global production system and not least, continuous improve- ment efforts that have enabled us to boost production volume without increasing the number of employees to the same extent.The latter imposes strict demands on both manag- ers and employees. Employees who possess the right competency and the right tools, and who are involved in improvement efforts, enable Scania to achieve theHarald Ludanek, Executive Vice President, necessary increase in productivity. Questions relatedHead of Research and Development.to well-being, work environment, health and safety are10 O per atiO ns sca nia 2012 13. SCANIA ExECUTIVE BOARDthus high priorities. Regardless of what work they do,or in what part of the world Scania products are made,our goal is that employees feel job satisfaction and asense of well-being, involvement and motivation.We are continuing to invest in our existing productionunits in Europe and in latin america. in emerging mar-kets, including asia, we are building Regional Productcentres in order to get closer to customers and beable to make local product adaptations. During 2012,construction of such a new industrial facility begannear Bengaluru (Bangalore), india.Christian LevinIn Scanias dealership network we deliverScanias products and services to customers.We have to keep each customers vehicle fleetrolling. Services are becoming increasingly Christian Levin, Executive Vice President,important for our brand, since customers need Head of Sales and Services.fast access to parts and repairs as well assupport services to lower fuel consumption.functions and other administration, we can providequicker support to customers.customers vehicles need service where they areThis may include making it easier for our custom-located and not just where Scania happens to have a ers to take advantage of subsidised financing in latinservice workshop. This is why an expansion of mobileamerican markets. an effective customer credit checkworkshops is currently under way in a number of is facilitated by the fact that we have a local presencemarkets, so that Scania can perform repairs and main- and that at Group level we also have quick decision-tenance on site where the customer is. Everything thatmaking processes and the right back-up for our localcan help the customer to increase uptime increasesfinance companies. We are also introducing a moreScanias competitiveness, too.structured, systematic model for evaluating our cus- increased vehicle uptime is also a vital element tomers from a credit risk standpoint.of our internal improvement effort, which we call theOur stakeholders expect high quality in our report-Scania Retail System. We have seen how a systematic ing. it is not just a question of providing the tradition-approach can shorten lead times in service and main-al financial key figures. it is also important that wetenance, and we know that every hour that customers systematically follow up our policies when it comes tocan boost their productivity makes a big difference.human rights and corruption. This is important for future growth as well, sincewe will serve a substantially larger Scania vehiclepopulation as well as an increased proportion of body-work in the future.Jan YtterbergTo secure the confidence of all our targetgroups, it is important for us to be transparentabout the results of our work, not only finances.The market situation is very uncertain and demand isat a low level in many regions, which means that wehave to prioritise the right things and adjust our level ofambition in the short term. Meanwhile, customer firstJan Ytterberg, Executive Vice President,applies. By streamlining processes in central supportChief Financial Officer (CFO). O per atiO ns sca nia 2012 11 14. SCANIAS STRATEGY12 O per atiO ns sca nia 2012 15. SCANIAS STRATEGYScanias strategic platformScanias objective is to provide the best profitability for its customers throughout the product life cycle by deliveringoptimised heavy trucks and buses, engines and services thereby becoming the leading company in its industry.Scanias operations are based on the companys core values, its focus on working methods and dedicated employees.Core valuesScanias core values permeate its entire corporate culture and influence its day-to-day work. Customer first, respectfor the individual and quality are closely linked and are applied as a unified concept. These core values are the pointof departure for all business development.Customer first Respect for the individualQualityThrough good knowledge of its custom-Respect for the individual means recognis-High profitability for the customer through-ers business operations and conditions, ing and utilising each employees knowl-out the product life cycle depends onScania delivers solutions that contributeedge, experience and ambition in order to delivery of high-quality solutions fromto customer profitability by means of high continuously improve and develop workingScania. Through good knowledge ofearning capacity and low operating costs,methods. inspiration and new ideas arecustomers needs, Scania can continuouslywhile promoting a sustainable environ- born out of day-to-day operations. This improve the quality of its products andment. The customers operations are at helps ensure higher quality, efficiency and services. Elimination of all forms of wastethe centre of the entire value chain: from job satisfaction. is the way Scania can ensure that allresearch and development via procure-deliveries meet the expectations ofment and production, to sales of vehicles, demanding customers. Deviations fromengines, services and financing. targets and standards are used as a valuable source of continuous improve- ment in Scanias processes.O per atiO ns sca nia 201213 16. SCANIAS STRATEGY14 O per atiO ns sca nia 2012 17. SCANIAS STRATEGYDriving forces for demandWhat drives the demand for Scanias products and services is economic growth. Meanwhile, there is mountingpressure to reduce emissions and achieve more efficient use of energy. Demand is also increasing for solutions,based on a holistic perspective, that can streamline logistics systems and thereby reduce transport costs.Economic growth is the main driver of demand for in the future, the transport sector will use alternative,transport services. Greater trade between countriesrenewable fuels to an ever greater extent to reduceand regions, demographic changes and urbanisa- carbon dioxide emissions.tion are leading to improved living standards, creating Transport companies, transport service buyers,a greater need for infrastructure, construction andlegislators and society as a whole are driving this trend.consumption, thereby also boosting the demand forVarious rules and regulations related to the environ-transport services. in rapidly growing cities in develop-ment and emissions have recently become moreing countries and in emerging economies around the important in determining what type of vehicles andworld, there is a considerable need for well-developed services are in demand. Emission standards, noisepassenger transport systems within and between restrictions, motorway charges and driver trainingcities. as societies evolve, they also increasinglyrequirements are influencing the need for investmentsdepend on reliable goods transport and on more to replace vehicles and the demand for various kindsefficient distribution of goods and waste management.of services.new, innovative and sustainable transport systems Driving forces behind demandmust be developed in order to solve problems relatedto congestion, emissions and noise. DRIVING FORCES OF DEMANDGreater demand for improved efficiency Standards for Economic growth reduced emissionsGrowing societies are increasing the pressure on, andIMPROVED(C0 2 ,nitrogen oxides, Increased trade LOGISTICS particulates)boosting the prices of, already limited resources. Even Urbanisation Need for improvingtoday in many markets, fuel costs represent a signifi- energy efficiencycant proportion of the total operating cost for a haulier.Holistic perspective creates opportunities of players, which to varying degrees influence howDifferent conditions prevail in various industries thatefficiently goods and passengers are transported.utilise transport services. However, one common fea-Vehicle manufacturers have traditionally concen-ture is that lower transport costs can have a significanttrated on delivering vehicles to a transport company.impact on profitability. Examples of such industries are The potential to optimise the vehicle to its transportmining, forestry and retailing. logistics systems also task increases through a systematic working methodvary in complexity but usually encompass a numberthat includes close collaboration with and greater understanding of transport companies and buyers of transport services. The vehicle manufacturer can alsoBUYERS OF TRANSPORTinfluence transport costs through various services, for SERVICESexample maintenance that is tailored to the transport task and driving conditions. a holistic view of theUnderstanding Focus on solutions logistics flow thus yields major advantages. The vehicle manufacturer can support the customer on the basisLOGISTICSSOLUTIONSof its knowledge about the transport task and boost its TRANSPORT SCANIA COMPANIES contribution to the value chain, enabling the vehicle to be utilised optimally to increase profitability and reduce Focus on solutions environmental impact.O per atiO ns sca nia 2012 15 18. SCANIAS STRATEGY Profitable business through customised solutionsAs a leading player in its industry, Scania plays an important role by delivering profitable, sustainable solutionsto the challenges and changes facing the transport industry. Scania aims to build long-term relationships withits customers and is dedicated to the customers business all the way from specifying the best adaptedvehicles to providing service and support in day-to-day transport work.Scanias long-term competitiveness is entirely depend-product system, customers vehicles can be swiftlyent on its ability to deliver solutions to new conditions and effectively optimised as desired in order to suit theand customer needs that enable the transport industry transport task and live up to new environmental stand-to grow without increasing its carbon dioxide emis- ards. This lowers Scanias research, development,sions and that make transport services cleaner, safer production and service costs. it leads to high qualityand more flexible. competition is tough and will con- and longer production runs, which is cost-effectivetinue to be so. Quality will be a key factor in Scaniasboth for customers and for Scania.competitiveness. Quality is also one of Scanias corevalues and is crucial to product reliability and customer Service offering more importantprofitability.Demands for lower transport costs and the need forhigh delivery precision by transport companies meanOptimised transport solutions are profitablethat Scanias service offering will become an increas-Scanias overall strategy is to strengthen customer ingly important competitive advantage.profitability by delivering optimised transport solutions.Having a long-term relationship with a customerScania works in close proximity to its customers so creates the conditions to work together on continu-that they can perform their transport tasks optimally,ous improvements. Examples of this are developmentboth in economic and environmental terms. of new performance steps in the modular system Scania becomes an active partner, thereby helpingand coaching of drivers so that they can continuallyeliminate waste in the value chain. improve their driving style.Modular system ensures the right productDefining exactly the right product, combined with theright services for the customers transport task, isfundamental to Scanias operations and essential tocustomer profitability. By means of Scanias modularkundens kostnader ENG CUSTOMER COSTSAdministration 7 %Tyre 3 % Higher revenue Reduced costsRepair and Right vehicle for Drivers 35 % Low fuel consumptionmaintenance 9 % the right task Driver training High uptimeVehicles 11 % Effective financing Fast repairs Long service life and Driver appealhigh resale valueFuel 35 % For a European haulier, about 70 percent of costs are related to drivers salaries and fuel. A companys profitability thus largely depends on the driver, whose driving style affects fuel consumption.16 O per atiO ns sca nia 2012 19. SCANIAS STRATEGYDemands for high uptime and reliability make Scania engines well suited in con- Mining transport services often involve moving large volumes of heavy materialstruction machinery such as stone crushers, wheel loaders and dumpers. Custom-under demanding conditions at the lowest possible cost. This requires strong,ers that use both trucks and construction machinery containing Scania engines can robust, reliable vehicles with high uptime and high payload capacity.improve the efficiency of their maintenance and repairs significantly.Low fuel consumption, high reliability and minimal maintenance requirements are In timber haulage, a holistic view is important in order to obtain the best overallcrucial to the profitability of bus and coach operators. Scania offers comprehen- economy throughout the transport chain. Vehicle utilisation, operating costssive solutions with customised service and repair agreements, including financing and access to servicing are important for the profitability of the haulier as wellsolutions in many cases.as the timber company.Uptime and fuel consumption are the most important factors for long-haul trans- In the case of fire engines, reliability and performance are absolutely crucial.port services. Scanias extensive workshop network ensures high uptime. Drivers These vehicles should always be ready for a quick response when needed.are very important to operating economy, road safety and environmental impact.Scanias crash-tested crew cab accommodates up to 68 people.Aside from driver training and personal coaching, Scania offers a number of on-board vehicle systems that help drivers do a good job.O per atiO ns sca nia 201217 20. SCANIAS STRATEGYLow-entry Crew cabLong crew cab Trucks Scanias modular system P-SerieS Scanias modular product system has been built up Scanias P-series featuring aShort cabs Day cabs Sleeper cabs low-mounted cab is mainly over several decades. It enables Scania to provideused for distribution andShort cabs Day cabs Low Sleeper cabsNormal Highline ToplineShort cabsday cabs Sleeper cabsShort cabs Day cabs Sleeper cabs individual specifications for each customer with aconstruction haulage. The LowNormal HighlineTopline P-series is also the base forLowNormalHighline Topline limited number of components in its product range.Scanias low-entry and crewP The modular product system means that new cus-cabs.P tomer needs can quickly be met without expanding P the total number of parts used to build its vehiclesg-SerieS Scanias G-series is a versatile proportionately.G model featuring a spacious cab G for long-haulage and construction Standardisation of interfaces G haulage and with more power ful engines than the P-series. Modularisation is based on standardisation of theLow Normal Highline Topline interfaces connection points between compo- r-SerieSR When equipped with a V8 engine, nent series to ensure that they fit together in different R combinations. R the R-series provides the highest performance in long-haulage and other transport segments.These interfaces are designed in such a way that they do not change over time. This makes it possible to install new components that improve product per- formance without any need to change the surround- ing components. Buses and Coaches SCaNia CiTywide LF Same need, identical solution All Scania Citywide models are based on the same range of Customer needs may be the same as regards specific body modules. The low-floor components despite different applications, in which LF version is available with two axles or articulated. case Scania uses the principle same need, identical solution. A large percentage of the chassis compo- nents in a bus are shared with a truck. The shortest SCaNia CiTywide Le truck cab variant may be needed in order to maximiseThe low-entry LE version has cargo capacity both in light distribution service and ina low floor in the front section and can be specified in several a heavy tipper truck operating in a mine. A powerful, lengths with two or three axles high-torque engine may satisfy the need for maximum or articulated. tractive power in a demanding operation or for main- taining a uniform speed during long highway journeys. SCaNia OmNiexPreSS A highly flexible modular design offered with two or three axles Components based on performance needs and lengths in 10 cm steps from 11 to 15 metres, as well as in three Together with the customer, the Scania sales person optional heights. specifies components with the well-balanced per- formance steps. Examples of performance steps are different cab sizes, engine output steps, frame SCaNia TOuriNg strengths and number of axles. The truck and busThe modularised Scania Touring high-decker coach is available variants built are continuously evaluated, enabling with two or three axles. Scania to have the smallest possible number of parts and the largest possible selection of variants in its product portfolio. Scania Engines Scanias industrial and marine engines are based entirely on the corresponding vehicle engines. All business areas benefit from common development work, which also includes auxiliary equipment such as engine management, cooling 9-litre13-litre16-litre systems, fuel injection and exhaust aftertreatment. 5 cylinders 6 cylinders V818 O per atiO ns sca nia 2012 21. SCANIAS STRATEGYComponent modularisationThe wide range of choices available to customers is achieved through the design of the interfaces between different components.Each interface is very precisely defined to allow the greatest possible flexibility when components are combined into the correctperformance steps in the vehicle. Cabsdoors and sidewalls Scanias cabs are strongly modularised, with a common frame and Between the front and rear wall, which are the same in all cab series, common outer panels. Cabs are fitted at different heights to suit is the same door structure (different heights) and modularised side different applications. panels (different heights and lengths). The windscreen is the same on all cabs. A few door and sidewall variants cover the entire cab With three roof heights for the P- and G-series and four for the R- range. series, customers have ample opportunities to optimise space and comfort in the cab. P-series G-series R-seriesP-series g-seriesr-series axles gearboxes Driven, steered and live axles are part of Scanias modularised With two main gearboxes in combination with range and splitter range, which is used in various combinations in 2- and 3-axle trucksunits, Scania covers the need for haulage ranging from 16 tonnes and buses, as well as in 4- and 5-axle trucks, tandem bogies etc. to 200 tonnes gross train weight. Gearboxes are available with Some driven axles are available with hub reduction and can also bemanual or automated gearchanging (Scania Opticruise) and can utilised as driven front axles. be ordered with an integrated Scania Retarder. Single-reduction axleaxle with hub reduction Frames Frames are manufactured in several strength classes, the Scania Scania most rugged with an inner frame to handle extra heavy loads. Opticruise retarder engines Scanias engine range is based on three engine series featuring five, six or eight cylinders, with the cylinder and related components sharing a common design. This means that engine development work can focus on optimising the combustion in one cylinder, which is used in all engines. The basic design of these engines is very similar and they9-litre13-litre16-litre5 cylinders 6 cylinders V8 share many parts and components, radically reducing the number of unique parts that are included. many engine components are common to the entire engine range, regardless of the number of cylinders. o per atio ns sca nia 2012 19 22. SCANIAS STRATEGYServices support the customers businessThrough its extensive workshop network and cus- located along transport routes and near logisticstomised service-related products, Scania can providecentres with the aim of ensuring high uptime. Throughsupport to the customer and perform servicing at thecontinual advice as well as regular and professionalright time and in the right place. Service operations service from Scania, customers can optimise vehiclealso contribute to the stability of Scanias profitability, uptime. Maintenance and repairs are offered round-since service sales are much less sensitive to economic the-clock in many places around the world.cycles than vehicle sales. Scania also offers mobile workshops to meetser vicing needs at the customer site and also fielduptime most important to the customer workshops which are integrated in the customersEvery minute of unplanned vehicle downtime meansoperations, for instance at mines or bus depots.lower productivity for the customer. High uptime is also Scania Assistance offers maintenance and repairsimportant for industrial and marine engines. Shorter24 hours a day, every day of the year, throughoutrepair times and a greater ability to quickly service the Europe and in many other markets.customers entire rig, not just the parts of the truckmanufactured by Scania, has great importance in Focus on quality and continuousallowing the customer to achieve maximum operatingimprovementstime and low costs. The strengths of Scania workshops include their highly Scanias service workshops are one of the most trained service technicians and immediate access toimportant points of contact with customers. Proximity parts. To ensure that all customers receive the sameto customers is vital. Scanias service network consistshigh degree of service, Scania certifies the quality of itsof more than 1,600 service workshops, of which some service network by means of the Scania Dealer Operat-1,000 are in Europe. One third of the network is owneding Standard. This is based on a number of customerby Scania. The service workshops are strategicallypledges that must be met in order for a service point20 O per atiO ns sca nia 2012 23. SCANIAS STRATEGYto be authorised by Scania. A vehicle that has been Financing and insurance a key elementcontinuously serviced by a Scania workshop also has a One important element of Scanias comprehensivehigher resale value. A fixed-price service contract fromcustomer solutions is the possibility to finance vehi-the day a vehicle goes into operation makes it easier for cles effectively on good terms. Scania conducts itscustomers to set the prices of transport assignments. own financing operations in 50 countries.Working methods and ways of thinking borrowedScania Insurance offers the customer a pack-from the well-known Scania Production System areage price that includes comprehensive insuranceapplied in the sales and service operations in ordercoverage, an efficient claims management serviceto add customer value and boost efficiency. Through and rapid repairs, with access to Scanias servicecontinuous improvements in the service organisation,network.servicing and repairs are carried out more efficiently. Connected vehicles provide high uptime Many Scania vehicles have an on-board communicator. This facilitates, among other things, follow-up in fuel consumption. The data can be used as input in driver coaching and to further optimise the specification of the vehicle. It also facilitates identification of preventive actions and performance of quick repairs.Scania driver trainingScania has an extensive workshop network and cantherefore provide support to the customer and perform and driver coachingservicing at the right time and in the right place. Service Scania Fleet Managementworkshops are strategically located along transport routesand near logistics centres with the aim of ensuring highScaniauptime. Connected vehicles enable more flexible, efficientplanning of servicing. CommunicatorScania Assistance offers roadside maintenance andrepair service 24 hours a day, every day of the year all overEurope and in many other markets. Scania Assistanceallows customers in some 50 countries to maintain con-tinuous contact with Scania in their own language via17 assistance centres, summon help to start or repair avehicle on the road, contact a workshop or have a vehicletowed.o per atio ns sca nia 201221 24. SCANIAS STRATEGYThe worlds tallestconcrete pumpZoomlion, a Chinese-based constructionmachinery manufacturer, has been a Scaniacustomer since 2008. Zoomlions concretepumps are mainly used in construction ofhigh-rise buildings and bridges. Scania chassisare customised to facilitate and streamline themounting of Zoomlions superstructures.Chassis from Sdertlje, SwedenIn recent years, the giants of the world concretepump industry have outdone each other timeand time again, by building taller and tallerpumps. Scania was commissioned by Zoom-lion to provide a truck for a pump that wouldbe the first to exceed 100 metres in height.The solution was a 7-axle chassis from Scaniain Sdertlje, Sweden, supplemented by theSwedish company Lax Special Vehicles. Theengine is a 620 hp Scania V8. The complicatedsuperstructure was developed by Zoomlion andits Italian subsidiary Cifa.New world recordThis very special vehicle has beenrecognised by the Guinness Book of Records.The mounted pump is the worlds tallestconcrete pump, with a reach of 101 metres.The 15.5-metre chassis is probably the longestever built by Scania. The total length of thevehicle is 18.5 metres. Scania was chosen due to its modularproduct system, which can customise standardThe vehicle complies with the maximum and much cheaper for the customer to usecomponents in order to build a chassis that isdimensions and weight requirementsScania than to produce a specially builtnot part of the regular product range.for road transport. Thus it was quicker chassis.New city buses to Santiago, ChileLaunched in 2007, the Transantiago inte-Comprehensive package of servicesgrated public transport system connects To ensure high uptime for the customer,the entire city bus fleet of the ChileanScania will deliver a comprehensive packagecapital and more than 100 kilometres of of services including driver training, repairsthe metro network.and maintenance. The vehicles were financed The system has now been supple-by Scanias Chilean customer financing com-mented with 231 city buses from Scania. pany. Scanias two-axle buses are equippedThe buses went into service during thewith 230 hp engines that meet the EUs Euroautumn of 2012 and are operated by5 emission standard and the even stricterAlsacia Express, which has extensiveEEV standard. The bodywork was suppliedexperience from similar transport systems by Brazilian bus bodybuilder Marcopolo.in several Latin American countries.22 O per atiO ns sca nia 2012 25. SCANIAS STRATEGYEthanol projectreduces emissionsin ParisCarrefour is Europes largest retailer andhas more than 10,000 stores, supermar-kets and hypermarkets worldwide. Carrefour sees a clear trend in its storestowards customers demanding productswith a lower environmental footprint.Using sustainable transport servicesis thus an important factor in the com-panys environmental work. Carrefour inFrance, in collaboration with the haulierSTAF, is consequently participating in anethanol truck project initiated by Scania.This collaboration illustrates the benefitsof having customers customers, in this Scania trucks with 9-litre ethanol enginesethanol from winemaking wastecase Carrefour, involved in development for deliveries to Carrefour stores. An important link in the sustainability chainprojects.The tests have shown very positive is the availability of ethanol. Among otherresults so far. The transition to ethanol has fuels, STAF uses ethanol from RaisinorPositive resultsreduced net carbon dioxide emissions by France, a company that specialises in pro-The project, which began in 2011, focuses at least 70 percent. Another advantageducing ethanol from the waste products ofon transport services in the Paris region,has been a reduction in particulate emis- winemaking. This method means that thesewhere the rules on emissions from truck sions.products are now being put to use and doengines are strict. STAF is using three not have to be thrown away.Near-halving of fuel cost with new engineJSW Australia specialises in drilling for Higher performance at less powerall kinds of minerals and water-wells. TheScania Australia helped JSW ensure it wascompany serves customers in the mining, getting an engine with the right specifica-oil and gas industries, especially in the tions. The previous engine was 820 hp, butWestern Australian wilderness.according to Scanias calculations, 700 hp The engines that power JSWs drill would be enough.rigs must meet high standards in terms The new engine enabled JSW to cut fuelof weight, power output, and reliability as consumption from 900 litres to about 500the drills are worked hard for up to twelve per day. Aside from substantial cost savings,hours a day, seven days a week. Theythis also means less emissions and shortermust also be environmentally acceptable.downtime for refuelling. When it was time to replace the engineThe engine controls the hydraulics thatin one of its mineral-sampling rigs, JSWmove the rig from one place to another andopted for a new 700 hp Scania V8 engine manoeuvres it via a remote control system.in the rig. Because the engine operates uniformly andgently, it also lengthens the service life of theother equipment. O per atiO ns sca nia 2012 23 26. SCANIAS STRATEGY24 O per atiO ns sca nia 2012 27. SCANIAS STRATEGYMethods for profitabilityOne core element of Scanias strategy is dedicated employees, who take responsibility for boosting efficiency and formaking improvements. Scania encourages a holistic perspective through cross-functional (interdepartmental) groupsand other methods that provide the basis for high productivity, the best possible quality and healthier employees.Scania has systematically involved its employees atthe production units in continuous improvement effortssince the early 1990s. Good experience of these effortsat production units, including higher quality, less wasteof resources, higher healthy attendance and loweremployee turnover, has led to the application of similarprinciples in administration and the sales and serviceorganisation, as well as in research and development. Improvement activities are driven by Scanias employ-ees, with the support of managers and Group execu-tives. There is a strong emphasis on working methodsinstead of traditional earnings targets. The focus is oncutting lead times and boosting flexibility by eliminatingwaste of time and resources.Cross-functional working methodAn important part of efficiency improvement workfrom running optimally. Deviations must not be sent on-occurs in cross-functional (interdepartmental) groups.ward, either internally or to the customer. By finding de-Representatives from research and development,viations, it is possible to test and evaluate new solutions,production, purchasing, sales and services cooperatewhich later lead to a new standard. When a new solutionin these groups. All employees are aware of the value ofhas been introduced at a unit, it is spread methodicallytheir delivery to the next stage in the work flow, reducing to other units in the global Scania organisation.the risk of waste, ensuring quality at an early stage andshortening lead times to customers for both new prod- Steady productivity and qualityucts and services.improvements While ensuring that the need for specialised expertise Continuous efforts to identify deviations and improveis met, Scania encourages its employees to change methods and processes occur according to variouswork duties within different areas of the company inconcepts adapted to the different branches of opera-order to gain a holistic perspective on its operations. tions. These are the Scania Production System (SPS)at production units, the Scania Retail System (SRS) ineveryone is responsible for improvementsthe sales and service organisation and R&D Factory atInvolving all employees is at the core of efforts to im-research and development units.prove efficiency. Time to work with continuous improve-Continuous improvements are crucial in order forments is part of normal operations. This has led to a way Scania to grow in a capital-efficient manner. With limitedof thinking that is very important for the development of investments, it is possible to sell more products andScanias employees and organisation. A large propor-services, build more vehicles, serve a larger number oftion of improvement efforts has shifted from staff andcustomers more quickly and develop more products,management levels to the individual employee. without equally large growth in the workforce, resourcesor need for premises.identifying and eliminating deviations Scanias way of working with continuous improve-Scanias working methods are described in standards.ments is of crucial importance to its ability to improveEmployees are encouraged to find deviations from theproductivity and quality and thereby grow within itsstandard described which disrupt or prevent operationsexisting structure. O per atiO ns sca nia 2012 25 28. MARKET TRENDS26 report of the directors scania 2012 29. MARKET TRENDSMarket trends, 2012The global economy was characterised by great uncertainty in 2012. The euro zone crisis and US economic policyissues restrained global economic growth. Activity was lower in the transport sector as a consequence. For Scania,this meant that vehicle deliveries fell by 16 percent, mainly driven by declining demand in Europe and the Middle East.Demand for service-related products remained stable in most markets.GDP growth was low in many regions during 2012. pany delivered a total of some 1,100 Euro 6 trucks toConcerns about a recession similar to that of 2008 customers.2009 caused job recruitment, capital spending andIn September, Scania broadened its range ofconsumption to decelerate in Europe, the US and muchEuro 6 engines and now offers variants with outputsof the rest of the world. ranging from 250 hp to 480 hp. The Euro 6 range also Low activity in industrial production and construc-includes high performance gas-powered engines andtion, among other sectors, had a negative impact on two engine alternatives that only use Scania selectivethe transport sector during the year. In a situation of catalytic reduction (SCR) aftertreatment technology,stable or reduced cargo volume, there is no interest in in order to meet the Euro 6 standard.expanding vehicle fleets. Because of high Europeantruck deliveries during 20052008, followed by a lowdeceleration in some emerging marketslevel in recent years, the average age of the truck popu- As a niche player in some emerging Asian markets,lation is increasing. Despite the replacement needs ofScania is normally affected to a lesser extent by eco-an ageing vehicle population, many transport compa- nomic fluctuations. After a major order in China duringnies were hesitant to place orders for new trucks.the first half of 2012, demand decelerated somewhatduring the second half. However, the underlying trendVehicles and Services in many Asian markets is that demand is increasing forthe type of transport solutions that Scania offers. MajorScanias deliveries decreased during 2012 comparedAsian markets are still dominated by local makes andto 2011. Truck deliveries fell by 15 percent to a total ofmost hauliers specialise in the local market and focus61,051 units and bus and coach deliveries decreased mainly on vehicle price and payload capacity. Resaleby 21 percent to 6,350 units. Engine deliveries was value, fuel economy, environmental performance andessentially unchanged at 7,063 units and service salesuptime play a smaller role than in Europe. However,was stable at SEK 17,092 m. these factors will become increasingly important, sincethe Chinese economy and others are experiencingContinued caution in europe rapid growth. As part of this trend, logistics systemsThe low economic growth in the euro zone was notice-will become more and more efficient, which willable for Scania. Southern European countries had an require higher standards of vehicle reliability and leadespecially low level of demand. to greater demand for the vehicles and services that The total market for heavy trucks in 25 of the Euro- Scania sells.pean Union member countries (all EU countries exceptBulgaria and Malta) plus Norway and Switzerlanddecreased by 9 percent to about 220,300 units during2012. Scania truck registrations amounted to some29,000 units, equivalent to a market share of about13.2 (13.3) percent. The next stage of European Union emission stand-ards, Euro 6, will take effect at the end of 2013. Euro 6involves significantly more complex technology invehicles than Euro 5. Early in 2012, Scania deliveredits first Euro 6 trucks and during the year the com-RepoRt of the diRectoRs scania 2012 27 30. MARKET TRENDS 16 January. Scania received an order of 3757 February. Leading British hauliers trucks to Zoomlion Heavy Industry ScienceEddie Stobart and A. W. Jenkinson and Technology Co., Ltd, a leading Chinese Forest Products ordered 1,000 trucks machinery producer. The trucks will be usedfrom Scania. as platforms for mobile concrete pumps. 31 January. Scania announced plans to invest in an industrial facility near Bengaluru (Bangalore) during the coming year. Scania is strengthening its presence in India by con-Deliveries in Eurasia dropped somewhat during 2012 structing a regional product centre near Bengaluru.but remain on a high level, driven by Russia, which Industrial operations there will consist of final as-is the dominant market in the region. Scania see sembly of truck and bus chassis as well as bodyworkoppor tunities in the other countries in the region as and fitting out of complete vehicles. This will allowhigher productivity standards are imposed in logistics manufacturing on a local basis and will cut lead times.systems. This in turn, means stricter demands on The construction of a central parts warehouse in the vehicle quality and uptime. country will also mean improved service to customers. Deliveries in Africa and Oceania increased some- The facility will become the centre of Scanias commer-what during the year, mainly due to higher sales in cial operations in India. Production is expected to startsouthern Africa. during the first half of 2013.Deliveries in Asia decreased by 35 percent. This was mainly due to lower deliveries to the Middle East, where demand was low because of political turmoil.TRUCKS, NETNettoomsttning_lastbil ENG SALESMARKETSHARES Marknadsandelar, EU ENGTrucks above 16 tonnes in 25 EU countries (all EU countries exceptSEK bn. Bulgaria and Malta) plus Norway and Switzerland.80 %25 57.660 55.647.649.620 Mercedes MAN40 32.8 15 Volvo DAF20 Scania10 Renault Iveco 0 5 08 09 10 1112 03 0405 06 07 08 09 10 11 12 Scanias main competitors are other Western manufacturers. In the truck seg- ment, Scania competes with DAF, Iveco, MAN, Mercedes, Renault and Volvo.28 report of the directors scania 2012 31. MARKET TRENDS25 February. Scania plans to invest in more efficient partsdistribution. The company will extend its central warehouse inEurope and build an entirely new parts centre in South America.A total of SEK 400 million will be invested in these facilities,which will go into service during the first quarter of 2013. 11 April. Scania and South Korean-based Doosan Infracore will expand their cooperation. From 2014, Scania will supply engines for a larger proportion of Doosans product range than today. At present, the agreement covers articulated dump trucks and large wheel loaders.Latin america at a somewhat lower levelDue to the transition to Euro 5 emission standards anda weaker economy, deliveries in Brazil were lower thanduring the strong years 2010 and 2011. The govern-ment introduced large-scale subsidies for investmentsin new vehicles late in 2012. This had a significant effecton demand. The government also gave the green lightfor the investment programme in preparation for theFIFA football World Cup in 2014. Argentina, too,provided subsidies for investments in new vehicles,and this was noticeable in sales late in the year.The bus and coach marketWeak GDP growth and government budget problemsin Europe, adversely affected demand since invest-ments in buses and coaches, especially city buses, areoften publicly financed. Demand was weak for buses BUSES AND COACHES, Nettoomsttning_bussar ENG NET SALESintended for use as tourist coaches and in scheduledintercity and urban traffic. Scanias deliveries fell during SEK bn. 10the year in Europe, Latin America and Asia while they8.88.2 7.7 8.2increased in Eurasia, as well as Africa and Oceania.87.2During the year, Scania introduced new bus and coach6engines that meet the Euro 6 emission standard andbegan production of its new Scania Citywide urban and 4suburban bus range.2 In the bus and coach segment, Scanias main com-petitors are Irisbus, MAN, Mercedes, Neoplan, Setra 008 09 101112and Volvo.RepoRt of the diRectoRs scania 2012 29 32. MARKET TRENDS 7 November. Scania will supply 22 August. PostNord chose Scania as its supplier V8 engines for the Finnish of all the heavy trucks in a large procurement of Navys new, high-speed landing vehicles for distribution of letters and packages in craft. The company received a Sweden, Denmark and Norway. Before year-end, prestigious order to supply 24 Scania will deliver a total of 136 trucks, including diesel engines which will be 122 for PostNords operations in Sweden. delivered during 20142016.The market for industrial and marine engines Stable service demandEngine deliveries rose by 1 percent during 2012. Demand for servicing and repairs is driven by theDemand weakened during the second half, and asize and the capacity utilisation of the vehicle popula-deceleration was noted as a consequence of weaktion, which in turn depends on transport volume. TheGDP growth. Demand from machinery manufactures average age of vehicles is another important factor.decreased, as did demand for marine engines andA higher average age increases the demand for work-power generation engines (gensets).shop hours and parts. Demand for services and repairs During the second quarter, 20 months before the is more stable throughout the economic cycles thannew standard goes into effect in 2014, Scania intro- demand for new vehicles, since a haulier can chooseduced industrial engines that meet the Tier 4 final emis-to defer new investments but cannot avoid repairs andsion stage and EU Stage IV standards at the Intermat service to the same extent. Lower economic activityexhibition in Paris. This means that Scanias industrial adversely affected service demand in Southern Europe.engine range will meet the next upgrade in emission Service demand was good during the year in manystandards without forcing customers to make extensivemarkets outside Europe. This growth was due to thechanges in the machinery installation. fact that in recent years, Scania has increased its In its engine operations, Scania competes withvehicle deliveries in many emerging markets in Asia andCaterpillar, Cummins, Deutz, Fiat Powertrain Techno- Latin America. Scania has also expanded its servicelogies, MAN, MTU and Volvo Penta in the industrial capacity in these markets.segment. SERVICES, NET SALES ENGINES, NET SALES Nettoomsttning_tjanster ENG Nettoomsttning_motorer ENG SEK bn. SEK bn. 201.4 1.24516.393 15.904 16.455 17.048 17.092 1.21.151 1.148 1.179 151.00.821 0.8 10 0.650.4 0.200 0809 101112 080910 111230 report of the directors scania 2012 33. MARKET TRENDS29 August. Scania signed a SEK 1.5 billion contract withPeab, a long-term agreement that will ensure safe roadtransportation of iron ore concentrate until the end of 2021from the ore-mining operation at Pajala in far northernSweden. Scania will deliver a total of about 400 completetruck and trailer combinations and service-related productstailored to the mining industrys very strict demands inrespect of load capacity, uptime and delivery precision.25 April. Scania will deliver 231 city buses tothe Chilean capital, Santiago. This means thatScania buses will now be part of the Transantiagointegrated public transport system, which connectsthe citys bus lines and the metro network.Financial ServicesThe customer financing portfolio increased by SEK 2.8 either through the manufacturer or via banks and otherbillion to SEK 45.0 billion during the year, and Scanias financial institutions. Scanias strategy of building long-share of financed vehicles rose. Most of the portfolioterm relationships with its customers leads to businessconsists of customers in European markets. The financ-opportunities during times of economic uncertainty,ing portfolio is well-diversified in terms of geography when banks adopt a more restrictive attitude towardsand types of customers as well as their size, economicvehicle financing. A good knowledge of customerssector and vehicle applications. Scania lowers its risk industries enables Financial Services to make betterby means of a conser vative credit policy and a refinanc- assessments than banks of a customers economicing profile that matches borrowing to lending.position and earning capacity, opening the way toClose collaboration between Financial Services andhigher financing volume. Scanias market penetrationScanias sales organisation is one important reason rate thus increases when access to credit from banksbehind the expansion of Scanias financing portfolio. and other financial institutions decreases. In the caseThis collaboration allows both operations to utilise each of investments in buses and coaches, which often useothers knowledge about customers and their busi- public procurement, demand is affected by the scopenesses. Experience shows that brand loyalty is higher for economic stimulus measures in a given market.among customers that have financing, insurance andTight public finances increase the demand for anmaintenance contracts with Scania.external financing solution. During 2012 bus and coachAccess to credit is important to demand, sincemanufacturers were asked to provide financing solu-customers normally finance their vehicle investment tions for major bus and coach procurements. portfljstorlek ENG PORTFOLIO SIZERrelseresultat ENG OPERATING INCOME DIVERSIFIED FINANCING PORTFOLIO % of total Europe Europe Number portfolio SEK m.Rest of worldSEK m.Rest of world Customer category of customers value 50,000 600Exposure below SEK 15 m. 25,277 69.5 40,000400 Exposure SEK 1550 m. 306 14.1 30,000 Exposure above SEK 50 m. 78 16.4200 20,000 Total25,6611000 10,000 There are 306 customers with a credit exposure between SEK 15 to 0 -20050 m., and 78 customers have a credit exposure exceeding SEK 50 m.08 0910 11 1208 09 101112RepoRt of the diRectoRs scania 2012 31 34. PRODUCTION32 report of the directors scania 2012 35. productionFocus on increased flexibilityBecause of the unstable global economic situation, there was hesitancy among customers about investing invehicles, especially in Europe. As a result, Scanias production volume was 20 percent lower during 2012 than in2011. Meanwhile Scania is carrying out investments in order to increase long-term production capacity so it canboost volume when demand rebounds.An adjustment to lower demand was implementedvehicles annually during the coming years. Capitalduring the final months of 2011. Demand trends duringspending to achieve this will be some SEK 1.5 billion.2012 varied in different regions. Demand in Europe By the next peak in demand, Scania will have enoughand the Middle East weakened late in 2012, while Latin production capacity to deliver 150,000 vehicles annu-America ended the year very strongly.ally. This increase in capacity can be achieved through Large-scale public subsidies were introduced in limited investments at existing production units.Brazil and Argentina in September in order to stimulate In several emerging markets, Scania is also investingdemand for trucks. in regional product centres for assembling, body- Through its common global production network, working and fitting out locally adapted vehicles.Scania can allocate production to achieve optimalcapacity utilisation at its production units in Europe The development of SPS is continuingand in Latin America. For example, orders from The Scania Production System (SPS) engages themarkets in Africa and the Middle East can be allocated employees in implementing continuous improvementseither to the European or to the Latin American pro- and eliminating waste at all Scania production unitsduction units, in order to balance capacity utilisationaround the world.levels. Besides a common production network, Scania During 2012, efforts to develop SPS remained ahas additional flexibility because of its high proportionhigh priority. Further steps were taken towards moreof flexible costs. About 70 percent of a chassis pro- efficient production, with zero deviations and accidents.duction cost consists of direct materials from suppliers.To achieve this, Scania is introducing a 5+1 organi- Scania also has good flexibility to rapidly adjustsation, in which employees work in small teams andits operations to changes in demand. In European the number of assembly points or positions is limitedproduction operations, flexibility is maintained by usingin order to create the right conditions to work in evenpersonnel from staffing companies, for example. Late more standardised ways.in 2012, Scania decided to adjust its European produc-The new organisation creates greater potential fortion in response to lower demand. This adjustmentexamining work in depth, genuinely determining thewas handled within the framework of existing flexibility root causes of deviations and thereby minimising theagreements.risk that they will be repeated. This makes improvement efforts very efficient, thus further increasing quality.Increase in capacityFlexibility needs to be further strengthened in thefuture when Scania expands its capacity. Among otherthings, the proportion of personnel employed throughstaffing companies may be increased. During theyear, the company initiated an investment programmethat will increase production capacity by 20 percent.Technical production capacity will be increased fromabout 100,000 vehicles annually at present to 120,000RepoRt of the diRectoRs scania 2012 33 36. productionFocusing on employeesEnsuring that all employees, regardless of their form ofof staffing companies are first to be offered perma-employment, feel dedicated and interested in their work nent employment.is an important task for managers at all levels of the Scania changed its management philosophy inorganisation. Questions relating to well-being, work- the early 1990s, taking steps to increase the dedica-ing environment, safety and health have high priority.tion and sense of participation among employees.Regardless of what work they do, or where they are in Since then, healthy attendance among productionthe world, people who work at Scania need to feel job employees has improved and employee turnover hassatisfaction and a sense of well-being. decreased from the very high levels of the past. This Production employees with an employer otheris an important reason why Scania has been able tothan Scania, have the same training opportunities assubstantially increase its productivity in terms of theScanias own employees. When gaps arise, employeesnumber of vehicles produced per employee. NUMBER OF EMPLOYEES* Medarbetare frisknrvaro produktion ENGHEALTHY ATTENDANCENUMBER producerade fordon per anstlld ENG Antal OF VEHICLES PRODUCED 2012 PRODUCTION UNITS PER EMPLOYEEProduction units Vehicles EmployeesSdertlje10,595 % Vehicles produced96.1 96.596.3 96.3 96.2per employeeSo paulo3,45310067,70066,900oskarshamn 1,55959,360Zwolle 1,776 75 55,6006.65.6 5.946,400Supsk 5694.8 50Angers 550 31,8003.5tucumn5443.0 25Lule506 12,000 13,10011,60010,68510,30011,6000 08 09 10 11 12 90 9500051012* refers to the total number of employeesGlobal healthy attendance amongproductivity remained at a good level, with 5.9 unitsat Scanias production units.employees at Scanias production produced per employee in 2012. Scanias day-to-day units remained at the same level asefforts to achieve continuous improvements partly offset in 2011. the negative impact of a significantly lower productionvolume.34 report of the directors scania 2012 37. productionRepoRt of the diRectoRs scania 2012 35 38. rESEArcH And dEVELopMEnt36 report of the directors scania 2012 39. rESEArcH And dEVELopMEntFuture technologies and developmentwith a focus on customer benefitThe aim of Scanias research and development is to improve productivity and profitability in customer operationsbased on low fuel consumption, high uptime and low service costs combined with good performance. At the ScaniaTechnical Centre in Sdertlje, Sweden, engineers are working on developing new technologies and creating newconcepts for future sustainable transport systems that take account of the environment and use of resources.Scania is constantly increasing its knowledge of Leading engine technology low fuelcustomers situations and working methods in order consumptionto offer products with exactly the right propertiesIn the European Union, the new Euro 6 emission stand-and performance for each customer and applica- ard goes into effect at the end of 2013. As early astion. Research and development is concentrated in2011, Scania was one of the first suppliers in the marketSdertlje, Sweden, where co-location of resources for to introduce engines satisfying this standard, whichall Scania products and services generates synergies drastically reduces emission levels. For instance, thethat encompass the entire product development chain. permitted nitrogen oxide and particulate emissions are To further improve their knowledge of customerabout one fifth those of Euro 5, the previous emissionoperations, Scanias development engineers increas-standard. Particulates are also counted, which meansingly work out in the field, in close proximity to custom- that in practice, emissions are about one sixth those ofers and products. By working closely with customersEuro 5. During 2012, Scania launched a number of newin their day-to-day operations, Scania can develop engine variants and now offers the broadest range ofproducts that meet the needs of the various marketsEuro 6 solutions in the market.as well as individual customers logistics. This involves There is demand for Euro 6 trucks even today, drivengathering geographical information, for instance how by factors such as various subsidies and reduced roadclimate and topography affect customer working tolls, as well as by an ambition among some hauliersmethods, but also information on applications whereto be at the forefront in environmental technology. ByScanias products and services face new demandscombining exhaust gas recirculation (EGR) and selec-in terms of functionality, stress, driving distances and tive catalytic reduction (SCR) technologies, Scaniascapacity utilisation.engines can meet the Euro 6 standard while maintain- ing fuel consumption at the same low level as equiva-Increased knowledge leads to new serviceslent Euro 5 vehicles. Scania has also launched enginesScanias own haulage company, Scania Transportlabo-that use only SCR technology, which meet the Euro 6ratorium AB (the Transport Lab), carries out commer- emission standard. By offering Euro 6 vehicles at ancial road haulage. Meanwhile it works to verify vehicleearly stage, Scania already has extensive experience,properties and performance in trucks and buses duringproviding the basis for developing new performanceactual operation, but also to test various driver sup- steps and for introducing the second generation ofport systems. The Transport Lab provides Scania with Euro 6 engines.experience from all aspects of a transport companys Scanias strategy involves offering customers power-operations, thereby gathering valuable knowledge for ful vehicles with lower fuel consumption and lowerfuture customers and markets. These findings result in carbon dioxide emissions, here and now. For manynew services that support drivers in their day-to-dayyears the company has offered the markets broadestwork when it comes to safety, profitability, efficiencyrange of engines that run on alternative fuels such asand environment. compressed natural gas (CNG), biogas, ethanol and This ensures that only well-tested components reach biodiesel, providing an immediate reduction in green-the customer and helps Scania to always remain at thehouse gas emissions. Scania is also developing Euro 6cutting edge in applying new technologies. Deliveringsolutions for these fuels, including Euro 6 engines thatquality is more that just a promise to the customer; it is can be run on fuel with a high biodiesel content.something that is embodied in the day-to-day workOutside Europe, Scanias customers are demandingof Scania engineers. Euro 3, Euro 4 and Euro 5 engines, due to disparities in RepoRt of the diRectoRs scania 2012 37 40. rESEArcH And dEVELopMEnt environmental legislation. There are also special emis-More uptime through connected vehicles sion standards for industrial and marine engines thatTodays trucks are increasingly connected to the Scania supplies to original equipment manufacturerscustomers office systems via the Internet, opening up (OEMs).possibilities for a host of new services that supportthe customers operations. The Scania Fleet Manage- Reducing fuel consumption always in focusment system gives the customer access to data about Reducing fuel consumption, and thereby lowering cus- how the vehicle is being driven. This interface allows tomer fuel costs, goes hand in hand with lower carbonvehicles to communicate the status of the engine, dioxide emissions. Thus reduced fuel consumption isgearbox, brakes and other important systems to the the focus of Scanias continuous improvement efforts.customer and to the Scania organisation. The customer Besides optimising engine technology, vehicle perfor-and workshop can thus plan maintenance and service mance is a key factor for customers when deciding to much more flexibly and according to need, instead of buy a Scania vehicle. Examples of optimisations: using traditional standardised service intervals. Thanks to the connection, remote diagnostics can Reduced air resistance and better aerodynamicsalso be performed on a vehicle before a workshop visit Lower friction and losses in the powertrainor if something happens when driving. This technology Reduced thermodynamic lossesevaluates oil quality and other parameters based on Driver support systemshow the vehicle has been actually used, for example In addition, Scania has developed Scania Activefacilitating preventive maintenance. Components that Prediction, an advanced support system that uses are starting to wear out can consequently be serviced topographical data about a stretch of road to optimise or replaced in order to minimise unplanned downtime. vehicle cruising speed, thus achieving the best possible fuel consumption. Scania Driver Support, which was Lowering carbon dioxide emissions introduced in 2009, provides real-time feedback on Besides the internal combustion engine, the demand driving style and also helps the driver maintain goodfor vehicles with hybrid technology, start-stop systems vehicle operating techniques. Good driving skills canetc. will grow initially in applications such as distribu- reduce overall fuel consumption by up to 10 percent. tion trucks and city buses. This technology combines CONTINUOUS IMPROVEMENTS2007 20072008 200920092010A new generation of engines was introduced aheadLaunch of new G- and r-series trucks. the cab A new series of V8 trucks was launched.of the transition to Euro 5. thanks to Scania Xpi, an range was improved, among other things by thus all the technology was in place forextremely high pressure fuel-injection system, Scanias adapting cooling capacity to meet the Euro 6the transition to Euro 6. the top-of-the-lineEGr technology could be employed and manufactured standard ahead of time. the launch also included730 hp, 3,500 nm version set a newto meet the Euro 5 standard without exhaust gas after-numerous improvements in driver comfort, whilestandard in the heaviest and mosttreatment. Scania Xpi was developed in collaborationthe pioneering Scania driver Support system was demanding segment.with cummins. the new engine generation that wasintroduced.subsequently developed provided the foundation forScanias Euro 6 engines.38 report of the directors scania 2012 41. rESEArcH And dEVELopMEntOut where the action isan internal combustion engine with an electric motorA good understanding of customer op-and a system for recycling and storing energy.erations is a guiding principle of ScaniasInteresting research related to electrified roads isresearch and development work. Thusunder way in Sweden. One example is Scanias coop-employees are increasingly leaving theireration with Swerock, which will evaluate the potential offices at the Scania Technical Centrefor electrically powered trucks in far northern Sweden. in Sdertlje to work out in the field.These trucks will haul iron ore round-the-clock fromScania has two main goals in relocatingPajala to Svappavaara for reloading on to a railway thatdevelopment personnel first, to ensurewill carry it to a port on the Atlantic coast of Norway.that development work concentratesScania is examining solutions where vehicleson products requested by the marketobtain their power supply from the roadway throughand second, to strengthen employeeinduction or some other technique. Such a solution is competency. Jrgen Andersson, development engineer.more flexible than power supplied by overhead cables,since all types of vehicles can utilise the system andConcentrating on new marketsneeds, we must first understand thethus share the large investment cost to rebuild the Half of Sca