Volvo proposes buy-back of shares

VOLVO PROPOSES BUY-BACK OF SHARES Volvo's Board of Directors announced today that it intends to recommend that the shareholders at a General Meeting during the coming year approve a buy- back of shares if this is possible, or alternatively a redemption of shares in the amount of approximately SEK 10 billion. The proposal is subject to implementation of the sale of Volvo Car Corporation. The matter of a sale of Volvo Car Corporation was preceded by an in-depth analysis and discussions of various alternatives. The Board of Directors concluded that the solution proposed is the one that best serves the interests of Volvo, Volvo's shareholders and Volvo Car Corporation and is therefore recommending that the shareholders approve the sale of Volvo Car Corporation to Ford Motor Company. Volvo has ambitious plans for its future growth, growth that will also contain elements of acquisitions. It is not possible, for many reasons, to describe the scope of these plans and the rate at which expansion will occur. Accordingly, we would like to take up some key issues that are becoming pertinent as a result of the proposed sale. The Board's recommendation does not merely signify strong and unanimous support for the sale of Volvo Car Corporation. It also signifies strong confidence in Volvo's ability to grow in the field of Commercial Products. The strategy we are now choosing is not going to be implemented overnight, and it is important that the process can be carried out in an orderly manner and with a strong focus on business growth. It is our impression that the shareholders have the willingness and patience to allow Volvo the time and freedom of action necessary to carry out its strategy. Following a sale of Volvo Car Corporation, AB Volvo's financial condition will be very strong. An excessively large net cash position is not an end in itself for Volvo and cannot be justified from a shareholder perspective, especially since today's low interest rates mean a relatively low return. It is the Board's view that such surplus funds should accrue to the shareholders. The Board believes that the best way to handle surplus liquidity is to buy back shares. This would serve several purposes. Since the total number of Volvo shares outstanding would be reduced in connection with a repurchase, income per share would be affected positively, which would lead to a more favorable valuation of the Group. The higher price for the remaining Volvo shares outstanding would benefit the shareholders. The repurchased shares would, in a manner of speaking, "lie fallow." They would be owned by Volvo but would not carry voting rights; they could, however, be "reactivated" as needed and used as payment for an acquisition, for example. Unfortunately, this possibility is not yet available to us, but the Swedish government is studying a proposal whereby companies would be allowed to repurchase their shares. We believe that it will follow the principles just described, which are being applied in most industrialized countries. Volvo, like Swedish industry and commerce in general, looks forward to favorable and prompt action on the matter by the government. Volvo's Board of Directors intends to recommend that the shareholders at a General Meeting during the coming year approve a buy-back of shares if this is possible, or alternatively a redemption of shares in the amount of approximately SEK 10 billion. AB Volvo The Board of Directors March 8, 1999 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/03/08/19990308BIT00080/bit0001.pdf http://www.bit.se/bitonline/1999/03/08/19990308BIT00080/bit0002.doc