INTERVIEW-UPDATE 1-Volvo CEO sticks by truck market outlook


* Stands by outlook for 10 pct growth in European heavy

truck market, flat in North America

* Recent financial turmoil having big effect on European


* Many European customers finding getting credit tougher,

environment more uncertain

(Adds background, detail, further CEO comment)

By Niklas Pollard and Victoria Klesty

GOTHENBURG, Sept 23 (Reuters) - The head of world number two truck maker Volvo AB stood by group forecasts for heavy-duty truck markets this year, but said recent financial turmoil was having a major economic impact on its biggest market, Europe.

Volvo has previously said it expects the heavy-duty truck market to grow by about 10 percent in Europe and to remain largely flat in North America compared with a weak 2007.

Volvo Chief Executive Leif Johansson said expectations of a sharp economic slowdown in Europe had proven correct in recent months as the deepening financial crisis has battered consumer sentiment.

"There is a significant impact on the real economy from the financial turmoil," Johansson said, adding that many customers had more difficulty in securing credit and that general uncertainty had increased.

Despite the growing gloom, Johansson said the group stood by its outlook for the heavy-duty truck market to expand about 10 percent in Europe and remain largely flat in North America.

While the North American truck market has been weak since early last year as a combination of the economic slowdown and soaring fuel prices weigh on demand, the European market has only begun to feel the pinch in recent quarters.

Johansson said delivery times at Volvo, which makes trucks under the Renault, Nissan Diesel, Mack and Eicher brands as well as its own name, were now down at "normal" levels, which the company has previously put at around three to four months, compared with around six months at the end of the second quarter.

"What is happening is that the order backlog is shrinking," Johansson said.


Production of the group's heavy trucks is being adjusted on a case by case basis Johansson said, adding that output at the group's Volvo Trucks arm would be disrupted for about 10 weeks by the switch to a new model during the third quarter.

Volvo's Renault brand has already scaled back production over the past few months.

While the European market is heading for a weaker second half of 2008, the United States is looking slightly better, Johansson said.

"The order intake is increasing a little, volumes are increasing, but not as much as one would expect given how the replacement cycle looks, and the reason for that is the very great uncertainty in the market."

So far demand in Asia has held up well, despite the financial turmoil, but Johansson said markets there were unlikely to remain unaffected by the slowdown.

"Conventional wisdom says that when the U.S. and Europe slow down as much as they have, this will spread east and end up in Asia as well. We are going through a very classic downturn," Johansson said.

But he added that the cycle was being intensified by the unpredictable nature of the financial crisis. "It creates uncertainty when traditional measures such as lower interest rates don't help," he said.

Looking into 2009, Johansson said the North American market would benefit from several factors -- including some recovery from the prolonged downturn in the United States, a growing need to replace old vehicles and advance purchases ahead of new environmental rules for trucks due in 2010.

"But I don't think the pre-buy effect will be as big as it was in 2006 ahead of (new rules in) 2007."

Johansson added that the growing transport capacity needed to connect up western Europe with the economies of eastern Europe meant he was also optimistic regarding market development there over time. (Reporting by Niklas Pollard and Victoria Klesty; Editing by David Holmes)



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