World's Demand for Construction Equipment Rising Fast

Volvo Group's April 4 annual meeting follows the best year in the Swedish company's 85-year history.

Next week's annual meeting of Volvo Group shouldn't be too challenging for Olof Persson, the Swedish company's president and CEO: Volvo Group had its best year ever in 2011, with the highest net sales, best operating income, and highest operating margin in its history, according to the company's annual report.

It provides snapshots of truck and bus markets around the world and examines the challenges affecting them, notably population growth, traffic safety in megacities, climate change, growing use of alternative energy sources, and high demand among manufacturers for skilled labor.

The company delivered 238,000 trucks during 2011, which was 32 percent more than the year before, and Volvo Construction Equipment's deliveries rose by 30 percent to a new record of 84,000 machines. The company has declared a new vision: to become the world leader in sustainable transport solutions.

Volvo ranks third worldwide in construction equipment, according to the report. It says Volvo Construction Equipment will build a new plant in Kaluga, Russia, about 120 miles south of Moscow, to manufacture excavators for the Russian market; the company opened a truck assembly plant there in 2009 and now employs 1,644 people there.

Volvo CE also plans to spend $100 million in its Shippensburg, Pa., manufacturing plant and will begin making wheel loaders, excavators, and articulated haulers there. The U.S. market for heavy-duty trucks was weak in 2007-2010, which has resulted in a truck fleet that is older than it had been in many years, the report states. As a result, many haulers will be replacing old trucks with new ones this year, it predicts.

The company had 12 percent share of the 2011 market for wheel loaders and excavators in China, which is the world's largest market for construction equipment with a volume of 405,000 vehicles, according to the report, which says by 2015, its bus manufacturing company in India will be a billion-dollar company with 5,000 employees.

Caterpillar Inc. is expanding similarly. It recently announced an expansion project at its manufacturing facility in Xuzhou, China, that will increase hydraulic excavator production at Caterpillar Xuzhou Limited by 80 percent when completed in 2016. Production of wheeled excavators at the same plant begins in early 2014.

Rising global demand fueled record sales and revenues for Caterpillar in 2011. Its sales of $60.138 billion for the year represented a 41 percent from $42.588 billion in 2010, and its 2011 profit of $4.928 billion was 83 percent higher than the $2.7 billion reported for 2010.

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