So, ladies and gentlemen, a warm welcome to this Press and Analyst Meeting covering the Third Quarter 2019. We will be listening to a presentation by Volvo Group President and CEO, Martin Lundstedt; followed by our CFO, Jan Ytterberg. After the presentation, there will be a Q&A session. We will be taking questions both from the room and also from the teleconference. We would appreciate if you could limit the questions to two at the time, because we want more to have the chance to come through. So a warm welcome. Martin, the floor is yours.

Thank you, Claes. So also from my side most welcome to this Q3 reporting for 2019. Maybe before coming into the slides here and to frame it a little bit, I would like to start by saying that, of course it is interesting times now. We see the anticipated correction coming in our main markets. We have been discussing that we were already, last year, guiding for a little bit weaker market when it comes to Europe, but we see that this correction will come. We are well prepared. We are being working with this obviously for a while now, both when it comes to Europe and North America. And what we see for this market is that they’re coming down to more of the replacement needs basically. But I'll come back to that later in the presentation. And now the part that is very important for us also is that we are maneuvering from a position of strength, now the Volvo Group. And we will continue as you see also a part of the news that we’re presenting investing in further innovation when it comes to business models provided by electromobility automation and connectivity, because here is an acceleration needed. And what I think is important to pronounce when people are talking about this is that this is giving immediate and big business opportunities for our customers when it comes to sustainability and productivity and safety, and thereby it will accelerate. So this is really based on business cases. So that is a starting point for us. If we look a little bit to the figures and highlights then, I mean we are continuing to grow, not a big growth this quarter 2%, if you are excluding currency. But we also have a strong level of profitability, a margin of 11% and an operating income of almost SEK11 billion. Also when it comes to the operating cash flow, we are actually rather pleased with the situation. It is seasonally weak quarter as you know well. Now when we are flatting our production, when we are having the payables effect, I think we have been managing that but Jan will go through that in more detail later on here. In the volume development, for deliveries on in the truck group, we have the flat situation. We have increases that in North America given the strong order book that we've had and we are delivering out there. And we have also increases in South America, whereas we have a drop of approximately 10% for Europe and that is also following the plan that we are gradually adjusting now. When it comes to the machine deliveries, it is also a small drop as you can see of 2%. It is the Volvo brand that is dropping mainly proposed by stock corrections and SSD increasing to 7%. On the service side, here we can also see a little bit that its coming to a more of a sideway development now. A fleet activity when we look at the big truck markets or having a sideway development. A part of it is the fleet activity as such, but part of it is also that we know that our dealer partners, retailers and also customers that are sitting on our spare parts stocks are actually more cautious now. They know that we can deliver. They would also like to adjust to not have and to carry too much stock. So there you have more of a one-time effect. But still we see the potential in the service market. I mean, we have delivered a big fleet out now the last years and maybe you can note also buses here positive. One of the main explanations on that side is that we have been continuing to build out our network in North America for buses, mainly that will flavor our brand there. Another great milestone this quarter that has also been actually supported for the service growth is that we’ve been celebrating 1 million connected units, buses, construction equipment and trucks. And why is this important? First and foremost, I mean when we have these type of population, of course we can generate enormous amount of data and create patterns and with our increased stability of utilizing AI machine learning. We can utilize that to big extend in our product development process. But most importantly, obviously is that, we have been the leader in this when it comes to applying this for services and we will continue to be so. This is as you know, the base for a better execution on all our service contracts that are gradually increasing also not only the blue maintenance contracts, but also gold, including repair. It is the base for more granular and better execution on our financial services contracts insurance. We are now also implementing what we call the truck monitoring services where we are actually anticipating and following uptime measures together with our customers. We have soon [ph] management, for example, also to apply safety measures, but maybe the most important this is the base for future automation and electromobility, since electromobility also requires a lot of connected flows in order to make that optimum. So big milestone continuing to reinforce our leadership in this very important area. Connected to that is also the announcement today that we are creating a new separate business area for autonomous solutions, Volvo Autonomous Solutions. And as I said, the reason is that -- or the potential value to capture through autonomous solutions Level 4 when you actually are taking operators or drivers out of machines in the full or in different parts of the flow is enormous. We have already as you know demonstrated that in a couple of times now. We have now signed the first commercial agreements. We would like to focus on this in a separate organization because we have seen how that is working well also for other parts of the organization when we are decentralizing and putting focus on it. And therefore we have now decided to join the forces when it comes to development, when it comes to commercialization and when it comes to scaling up all autonomous solutions. We will already this year as you know started operation, that you can see up right here in Bronnoy, in Norway with a number of units that will be Level 4 application and I will come back to another contract signed. So full focus on this scaling up and of course in close cooperation with other business areas that are sitting with the customer context, that are sitting on the way to the market. But this is a business unit with full P&L responsibility. So we -- as we go along can showcase the big value creation opportunities that we see in autonomous solutions. On the truck side, one of the highlights I know that you look forward to is also obviously what do we say about the market for next year. Before coming into that some small corrections that we are doing now, normally it should not be too many corrections. I think as we already quoted three here. But for 2019 we are actually for North America revising a little bit upwards. The last quarter, we said 325. We see now more a level of 340,000 for the full-year. And for 2020 for North America, we are forecasting our level of 240,000. So more coming back to the trend line, you can say on the replacement need in North America. For Europe, we are not changing the forecast for 2019. And we are also in that case forecasting a correction down to the midpoint of the long-term trend. You can say about 300 -- on 275,000. I would like to say, I think that is pretty healthy actually. We’ve had strong markets now and the more that will continue the big, so to speak, the drop would be later on. So for me I think that is good to see that we are forecasting that. Brazil, a small revision upwards for 2019 from 70,000 to 75,000. And we are keeping that level also for 2020. If anything I feel that there is an upward opportunity in Brazil actually we have a strong momentum. I was coming home from Brazil actually in mid -- in the mid of this week. And we see that is a good activity level, I will come back to that. China, we are revising a little bit upwards or a little bit. It is always big changes, as you know, there from 1,150,000 to 1,270,000 for this year. And then a level that is a little bit lower for next year. What we think is positive is that we see the gradual shift from medium duty into heavy duty also in China, given the more sophisticated logistics solutions there. And obviously I mean that is important for Dongfeng, but when it comes to the shift for heavy duty that is also a good trend for Volvo going forward and the more sophisticated segments there. Japan, flat guidance. India, we're taking down a little bit now and we are keeping that level, given the economic situation in India basically. But we are well prepared that and we’ve done a number of major corrections. On the order intake and deliveries, maybe spend some time then on North America here because it's always very dramatic when you see minus 81%. And I think the main message here is that, I mean okay we can say, okay, shoot it be 42,000 or 43,000 in orders? And how much are you talking about 35,000, 36,000 and then its minus 20%. But minus 20% in reality, I think it's more important to think about where do we stand on the total market in North America, 240,000, where do we stand on the total market in Europe, 275,000. For North America, specific, just really little bit on that. If we have to assume for one minute that we went in to 2017 with more or less a normal order book and more or less normal inventory level, '17, '18, '19, if you just combine up to year-to-date, we have now still positive delta between orders and deliveries on 6,000, 7,000 units. Then you can say, okay, but how relevant is that given the fact that these two involved here? It is relevant because we have gradually as you know, been cleaning out orders that have not been relevant, we’ve been reshaping the order book etcetera. So I will say that during this very high peak periods, two peaks and then the lost cleaning out now of the order book. I think we still can say that we have this 6,000, 7000 in delta. Having said that, part of that is now part in the inventory also, because that is happening when you’ve had the big pressure of delivering, so what we see now is that the order book and the order board for us is on normal levels Q4 and in the beginning of Q1. But now it's time to really see that we get the balance. Going in and adjusting the activity level down to the 240,000 anticipated level and continue to work with the right inventory level. So I think that is the message. The fleet season is here now. October has actually started good for us and it has started according to what we actually expect for North America. The same goes for Europe. It looks like minus 20% for the quarter. I think it's more relevant to look at Volvo trucks in this case because they’re covering the full European market, there we are at minus 15. And that is as you can see also I think it's -- I’m rather proud about the lines here in Europe that we have a very good, so to speak, following between orders and deliveries. And we took the decision both for North America and Europe to adjust production already and recorded for Q2 and we did during Q3. So we are well balanced as we speak now. As a matter of fact, we are actually doing some plus days now in Europe because we took it down, but I think that is a good sign that we are adjusting. For South America, orders very strong in Q2, so that's the reason why it's a little bit -- I mean, this is South America, but it was a very strong second quarter and maybe the most important explanation, now we have Fenatran in October. And what is Fenatran? That is the biggest truck exhibition in South America. And it's not only a truck exhibition, it's a sales fair. So I can just tell you that it has been some orders put in the drawer in order to have the opportunity to celebrate together at Fenatran. I was there and selling some -- I should not say that, I was selling, but I was at least part of the deals during Monday and portal -- Sunday and Monday, but the optimism activity level was good. So I think we should see that -- you should be cool on South America here. And when it comes to Asia, you can say that it's continuing to roll on the low levels, but a little bit weaker for us has been offset by some strong developments in Middle East here. On the market share, first and foremost, Volvo in North America. We have been losing a little bit of market share during the course of the year. We have discussed that before. We have stabilized that situation now. We are not dropping. We have put priority on price realization. During the course of the year, we have good products. We need to set the price level correctly and that has been the main prioritization. But now we see that there is time to gradually step-by-step with quality in the business to regain market share here. When it comes to Mack, we have actually been gaining market shares in all segments. But the mix makes it because they have a much lower market share and long haulage and therefore it looks like it's pretty stable. But I think also with next year's decrease of the market, the Meeks would be favorable for Mack and there will be presence in vocational trucks, for example. Europe, also there started with a drop for Volvo trucks, more or less the same story. We have stabilized that situation now. Prices in focus for us that has been a good market, we’ve had the supply chain constraints and we’ve made priority on the right type of DCR, but there is room for improvement step-by-step. And Renault trucks continue to be stable. As you can see the rest is positive. There we have had -- there we have established good execution of prices and now gradually we're taking back market shares. On the truck side and product news, very quickly the new introduction of fully electric trucks in North America, that is the VNR, the regional haulage truck. Very strong message obviously that we are also now moving in together with Mack when it comes to refuse executions and we will start limited, so to speak, production and to test the market in 2020. We are also introducing Volvo dynamic steering that is a big invention -- innovation we have had for a number of years in Europe and also introducing that now in North America. Construction equipment and when it comes to the market situation here for very much seamless situation as for trucks when it comes to the major patterns, but maybe not as pronounced in some of the markets depending on the specific climate. But North America to start with, we are guiding for 2020 midpoint contraction of minus 5% from high levels. In Europe, minus 10% midpoint provision from high levels as well. In South America, we are increasing a little bit the provisions of this year already, rather small volumes, but -- and keeping it flat next year. I think also here we have an upward opportunity. China maybe the most difficult as always to read here. We are surprised about how well it's holding up. And even into September we had a 5 -- plus 5%, 6% actually, an increase in GP sales, the heavy machinery. So we are guiding now that it's time for some sort of correction. We are saying 15%. That is very difficult always to say exactly what will be the stimulus activity levels etcetera. I think the main message for all of you to carry with you is that we are well prepared and we are on our toes here. And Asia then rather stable as more contraction and that is mainly related down to India and Indonesia. Order intake wise, it looks more dramatic than related what I said about the total market. But remember that we have big dealer groups here that need now to come into 2020 with the right stock levels. And what you see here is the orders and deliveries into already the group's. So the main explanation or the delta that you see here both on orders and deliveries in relation to our guidance is that we have pushed for inventory correction, which is in the long run is the right way to go. We also see that in North America. For example, we are doing some corrections on our ramp and fleets that is also the correct way of going, because you don't see the same type of -- but still, good activity level. Also for Europe we are doing the same thing and that is what you see in the order intake. So we already started now in Q2, but mainly in Q3 to really also adjust our production and activity levels for construction equipment. So we are doing the same thing that we are doing on the trucks side. Then when it comes to innovations, we are now signing the first commercial contract with Harsco in [indiscernible] where they’re then transporting between steel mill and landfill and different type of recycling activities 4 units, fully L4 automated. This is the next one -- next to Bronnoy then in Norway. And again showing the strength of now creating Volvo autonomous solutions, full P&L responsibility, new business model, utilizing the modular cost system of the group and benefiting from the enormous value potential both for customers and for ourselves. Very proud of that. Buses, the general story is that we -- if anything see also a little bit of correction in the total demand. We are down 19% year-to-date. It has been a little bit difficult, because India that is a big market and also U.K with Brexit uncertainty, also pronounced that in Q3. Having said that, deliveries increased. We have the strong order book -- board when we went into 2019 and it is also like that they’re all a little bit long lead times. Let's see now what will happen. We have the Brussels Fair coming up during this week. We have a number of big tenders and you cannot read it quarter-by-quarter. Same story, well prepared. And also our transformation program when it comes to buses is working accordingly. Breakthrough in Mexico. I’m happy to announce that because we've seen the importance of the bigger Latin American cities like Bogota, like Santiago, like Curitiba, but we are making more and more breakthrough also in Mexico for the higher type of buses Euro VI, for example. Volvo Penta, very much affected by the prebuy as you know and also coming to that, that we continue to invest in innovation here. We’ve seen such good returns and rather short-term returns when it comes to R&D investments in Penta. So we will continue to keep that on high level, so we are making benefit of all the opportunities both in Industrial and Marine segments. And one example of that is the cooperation with the Fountaine-Pajot. It comes to fully electric powered sailboat, when you’re not sailing, obviously because that is one of the deal with sales, but when you’re not sailing, then its electric. And finally on financial services. As you know, high quality business, good profitability levers, but we have said that the priority now given that quality in the business is also to increase the penetration. Penetration gives us loyalty, retention, good contacts with the customers and we have now gradually seen that we are doing so, but with of course keeping the quality in the business. Also that we are more and more now financing and giving a full lease offering for also the electric vehicles. Here you see the Renault MASTER. The reason for that is obviously that they want to have this type of peace of mind and a strong start of our Korean operations also. We are -- we started in August. We are already now up to 38% penetration on trucks. And we will, in beginning October, start also financing for this either. So I think that is the business report. Jan, if you give the figures.

Thank you, Martin. I think we can summarize the third quarter with the words happy for the past prepared and humble for the future. The third quarter was yet another quarter with improved operating income compared to the corresponding period a year before. 19 quarters in a row now with improved operating income compared to the corresponding quarter the year before. This time the tailwind came from prices, offset then by higher R&D expenses and selling expenses and FX continued as it has done in first and second quarter to impact positively also here in the third quarter. Weaker volume in this quarter was lower than in the third quarter last year. That is a new phenomena for us. We have not seen that for a while, but that is also a headwind. We will have to get used to going forward here in the coming quarters. Moving over to net sales. In the third quarter affected by the vacation period in Europe. Net sales increased by 7% compared to last year and up then to SEK99 billion if we take out currency, we're up 2% for the Group. The currency effect is related to the appreciated dollar and also to the Japanese yen in this quarter. Weaker net sales increased by 2% in local currencies, reflecting the decreased truck deliveries somewhat and machine deliveries as well, which was more than offset then by the higher bus deliveries and the improved pricing. The decrease of vehicles was related to Europe mainly then, almost compensated by another strong delivery quarter in South America. And service revenues as Martin was into, more or less flat. If we move over to the Group operating income, we have an increase here on adjusted operating income of SEK0.6 billion in the quarter, up to SEK10.9 billion, 11% of margin. As I mentioned, the last quarter's volume has been the main contributor behind the improvement, not this time. As I said, volume was a little lower than last year. Besides FX, we have the main contributors here now coming from good price realization both on vehicles and services and more or less across all truck divisions and business areas. A good sign of continuous improvement is in manufacturing and purchasing is when you actually have a lower cost per unit with the same production volume. And that was the case in this third quarter compared to the third quarter last year. A strong achievement, not at least taking into consideration that we are moving down production from higher levels, which means that costs and activities measures around that is not yet fully implemented and have the full effect in this quarter. And on the negative side, we have region, brand and product mix in construction equipment. I will come back to that later on. And this together than with the positive FX effect made the gross income increase by SEK1.8 billion. If we move over to the indirect expenses and start with R&D, we see that we have high activities both related to well known and new technologies. So the expenses, the cash R&D is up SEK750 million, SEK100 million that is related to currency. And the delicate task is, of course, now to balance ambitions and resources with the legislative demand that we have on us and that will of course will be a challenge as we move into more over sluggish demand situation going forward. Capitalization of R&D expenses and amortization are gradually coming into balance, but we still have a quarter with some positive effects, but last year those effects were even bigger actually. So, all in all, that meant that R&D costs in our P&L increased by some SEK900 million compared to last year. And for your guidance and for the full-year, net capitalization will be slightly under SEK1 billion for the full-year. If we move over to selling expenses and increase there, we can say part of that is related to currency, part of that is related to higher activities and resources employed in earlier quarters. The focus is now to decrease ambition activity level and thereby costs, where selling expenses of course one of the focus areas for us right now. The improvement of order was mainly related to some nonrecurring positive effects this year whereas last year we had some nonrecurring negative effects impacting us. All in all, currency SEK1.3 billion impacting an operating income positively, mainly related to dollar and a general weak Swedish krona. And as regard, the full-year we don't give guidance on the full FX effect, but only do with on the transaction effect and that is expected to be somewhat over SEK2 billion for the full-year. Martin mentioned cash flow. The third quarter, so we just said the thing is seasonally a weak quarter where working capital is negatively affected by the vacation period in Europe and we are paying down our accounts payables due to the lower production level in Q3 coming in from the second quarter we have around one quarter of payment terms on accounts payables. In the third quarter this year, this effect was more pronounced than it normally is, because we are reducing supply of new vehicles to the demand situation, but also to provide for a reduction of inventory. Even though the cash flow was small, in the quarter SEK1.8 billion, in industrial operation we should also recognize that we were able to bring down accounts payable to new level by paying them down with SEK13 billion, which is quite good to being the positive cash flow territory in a limited third-quarter. Besides then, the negative effect on payables, cash flow was impacted by the strong earnings. Higher earnings in the industrial operation and also lower receivables where we had high deliveries towards the end of second quarter this year, which are now being brought in as payments and also we had a small reduction of inventory in the quarter. Capital expenditure in the third quarter were some SEK3 billion affected by higher capital expenditure for property plant and equipment and high capitalization of R&D expenses. The trend of higher capital expenditures, which we have seen year-on-year, we will prevail coming quarters as well. This meant that net cash were pretty stable between the quarters. It's only affected by the limited cash flow then. And if you move over to our segments and start with trucks, we can say that despite than the lower deliveries with 1% more or less the positive momentum from earlier quarters for trucks continued here in the third quarter were currency adjusted net sales increased by 1% to some SEK64 billion mainly related then to the price realization both on vehicles and services. The lower deliveries were mainly related to Europe and to some extent Asia and once again a strong quarter in South America i.e. Brazil and it's more increase in North America i.e. U.S. Adjusted operating income increased from SEK700 million to SEK7.5 billion giving an operating margin of 11.6% and main effects coming back to prices again as well as the positive effect over lower per-unit costs, were the flexibility measures that we have performed have been well-balanced with the demand situation and the material cost has been reduced in local currencies compared to last year then. We also have in the Truck segment a gain of real estate of some SEK200 million. And this was partly offset by higher R&D and selling expenses and here we have opened SEK5 billion of positive currency effects. Martin mentioned the situation in construction equipment. This, of course, means that we have also as regard -- since we’re on deliveries minus 2%, we also have a deterioration of currency adjusted net sales of 4% where we also have an effect of that the decrease is happening on more of heavier equipment, Volvo branded equipment, North America, Asia and where we have the increased and related to more of compact machines SDLG in China. Currency adjusted service sales then up 2% and operating income deteriorated with some SEK400 million to close to SEK2.2 billion and deterioration was mainly related then to the negative product brand and regional mix as well as higher R&D and selling expenses somewhat. And this was partly offset by the service volume that impacted positively. We should also remember that last year in this segment we had a sale over real estate, a gain on real estate of SEK225 million that impacted positively last year when we make the comparison. FX, SEK0.6 billion positively affecting the segment. Buses, here we can see that the financial performance for buses continue to improve. Also in the third quarter deliveries of buses were up 400 units. We have the Bogotá order that we are delivering off, but we also had as you saw in Martin's slide, Mexico and Scandinavia impacting positively, which meant that we had a pretty big increase over vehicles net sales currency adjusted 33%. And also a strong service sales quarter here with 9% up. Improvement of adjusted operating income of SEK90 million is of course related to the volume partly offset then by the selling expenses being a little higher than last year. FX is quite limited in buses SEK25 million plus and Penta then, Martin went through the prebuy effect. We are still sort of handling decrease of deliveries then, 12% mainly related to the MG and all the industrial side and whereas we see diesel marine engines holding up after. Service revenues more or less flat and that is also a consequence that our customers are adjusting their inventory levels for tougher times. So compared to a strong third-quarter last year where we have the prebuy effects. Adjusted operating income decreased some SEK240 million to around SEK400 million mainly related and to the lower deliveries, but also to the high year R&D expenses. Part of that is related to the fact that we are now starting to amortize on the Euro Stage V applications and part of that is the more forward-looking things we are doing on electromobility and digitalization as well as somewhat higher selling expenses. And here we’ve more of a positive FX effect, close to SEK100 million. And last but not least, our moral financial services segment where we had the high deliveries of vehicles down in South America i.e. Brazil and U.S. Continued to affect the new retail financing positively, increased to SEK19.3 billion in the third quarter portfolio continued to perform well. But we have gradually seen deterioration of payments, more of write-offs, more of rescheduling and more of returns as well. Still though at historical low levels. The credit portfolio increased to SEK171 billion, that is 12% up. Currency adjusted compared to the third quarter and the third quarter last year and the portfolio was also impacted then by high wholesale volumes in U.S. Adjusted operating income for Volvo Financial Services improved some SEK150 million to SEK774 million and that is a new quarterly record level for Volvo Financial Services. Of course, impacted by the strong and growing portfolio that we have, also FX had a positive effect here in the third quarter with SEK50 million on operating income and profitability measured then as return on equity, sequentially increased slightly to 15%. So then Martin summarize the quarter.

Yes. No, I think we almost started with that, but just to do that in two minutes now. I mean strong quarter. Already started the adjustments for the anticipated corrections that we have in the main markets in a good way. Not only that we are planning for it, we are doing it as we speak. And I think that is an important message both for construction equipment and for trucks, and that we are continuing to invest in the future also. Great opportunities when it comes to value creation for our customers and for ourselves. Volvo Autonomous Solutions, I think it's a big news that we’re taking that seriously. So I think that is the quarter. And by that, Claes, let's open up for questions. A - Claes Eliasson: We will open-up the meeting for some questions. And please try to limit yourself to two questions.

Thank you. Erik Golrang from SEB. Two questions then. The first one is on the market share trend there, particularly Volvo North America and Europe which have been declining for some time. You said it had stabilized now. And you also said that you expected and also the right timing to start to regain a bit of share at least in North America. How will you be able to -- I mean, we’re in a very weak market even its still a declining market, very low order volumes, is it possible to do that without giving up some of those price gains that you were so focused on getting in there for good margin previously? Same question on Europe. And then the second question would be on the new business area, autonomous solutions. Could you say anything about what we should expect in terms of investment needs there, CapEx, R&D and put that in relation to your total budget up or down?

Thank you, Erik. First of all, mostly on the market share thing, it's always easy to say, okay, we should regain market share etcetera and we are taking that very seriously. We will not do that to expanse of quality in the business. We’ve been working hard to put, so to speak, price realization and equality at the right levels, so we will not compromise on that. Having said that, I think also we have to see that we have been in a situation with certain constraints also, not at least then in Europe. So don’t expect any quick fix. We will take it step-by-step. We will make sure that we are protecting, so to speak, the -- yes, the quality of the business that we will build up. I think the most important, we’ve stabilized, we have seen that for a couple of months and in the quarter now. And the main priority is to keep that balance, so to speak, and gradually regain. We should remember also that in Europe, even if we are talking about 15.3, 15.4 that is historically a rather okay level for Volvo. So it's no drama in the situation, also given the supply chain constraints. When it comes to Volvo Autonomous Solutions, of course now we are in the process of forming that, maybe to give some flavor of what we're thinking about. When it comes to the development side, obviously we will continue to deliver the redundant-based vehicle or the redundant-based machining from the different business areas. And then it is primarily, so to speak, the autonomous level IV stack for more advanced applications that will be developed into this business area. It is the control tower functionality, so that you remotely can operate the different solutions and used cases. It is the commercialization in terms of application engineering, specific customer design, it is the rollout of scaling up and it is the operational portal with if so customer chooses us to operate to get that act together. It will then obviously be incorporation with the business areas that are sitting with the resources when it comes to field people etcetera. We will not double that to start with. So that is, so to speak, the setup. What we will do with on is that we move the chunk of investments in R&D that we are already doing and pointing at and we really would like to see now the full P&L, so we can start really to judge and to get skin into the game that we need to scale up etcetera. So far it is not a super big part of our R&D, but it is clearly possible to measure, if I would like that. And -- but we’re looking to the 2, 3-year coming period. It will gradually increase because we will have this type of shift between the well-known technologies partly and also the new technology. So let us comes back to that. But think the visibility for us, for the whole organization and gradually for you, we will continue to increase it.

And, Martin, maybe we should comment on the CapEx. I mean we are ramping up from low levels, so that is not having a major effect going forward. When it become material, we will come back with that. But right now we are [multiple speakers] low levels.

But having said that also the nature of these type of solutions is really to utilize the cost system in a smart way, get back together. And when it comes to hardware it's very limited. This is the stack development. It is the control tower functionality, it is about applying the different type of capabilities we have from the different parts of the group and put it into place. And we’ve always said that. When we are always getting back together in certain segments, combining the strength that we have, we will be dangerous for you.

Hampus Engellau, Handelsbanken. Two questions for me. Starting off on Europe, the production adjustments and run rate that you currently are running, is that the level that you want to be moving into the next year on the forecast you provided? On North America, you’re guiding for 214 retail sales and I would guess that the production should be at 220. And the question is then related to your run rate. All you needing to adjust more run rate in fourth quarter to handle that. And also, are dealers asking for incentives to move the inventory?

Thanks. If we start with Europe, our current judgment is that, I mean, we are in the right level. The reason why I say the current judgment is that you have to remember that Europe is not only for Europe production. It's Europe for also other parts, but when we take Europe production for Europe, then we are on the right level. And even so that as I said had a pretty good start also with Tuve. So we have actually been positively obliged to run some process also at this level, which I think is a good sign that we are breathing the system. But more importantly, not only production, we are working hard also of adjusting all activity levels in the company to current demand because in a company like us now, production is important but it's important that the whole company is doing the job. When it comes to U.S., I think your analysis is right. That is partly also why we see -- what we see in order intake that we are pushing very much our dealers and say, guys, come in with the right inventory levels etcetera because to have quality in the order board the production levels etcetera, we’ve done a number of steps already. If that will be enough, let us see. We are discussing for further operations if necessary. And I can be 100% clear with you that we will not to any extend continue to produce, if we don't see that we have the right balance between inventory and market demand and production. We did it well in 2017. And '16, '17 there and we have no reason to change the strategy in North America. It's just to adjust to, but it's to execute on the same way of doing it.

All right. Let's see who is on the line.

Let's see if the lines are working.

Lines working?

Line of Klas Bergelind at Citi. Please go ahead. Your line is open.

Yes. Hi, Martin and Jan. It's Klas from Citi. So the first one is on North America. Last quarter you outperformed the market for the first time in a while and it seems like we were bucking the trend there finally. Your have cleaned up the backlog early. Now orders are falling more than in market again. Can we talk about the pricing a little bit and mix between fleet and retail, Martin? And are you still cautious on taking on orders, I mean, I hear you on the retail comment, but just to get a feel for how you look at the new activity and between fleet and retail?

Yes. If we start with, Klas, first and foremost I think the fleet season is really right. We are in the middle of the fleet season as we speak now. I go to U.S actually, not next week, rather we go after to meet with many of the bigger fleets in Atlanta on the big truck show there. We will have a good feeling on that. The indication we can give so far is that the start of October has been according to our plans related to these both when it comes to retail and fleet activity. I think fleet activity is not only important for the fleet segment this time, but yes to have the feeling of how they are anticipating their planning since they have a better normally view than the smaller customers. So it will be interesting to follow this. I think, again, Klas, to what we said, so far and that is what also I’ve tried to explain during the presentation is that it is following our anticipated pattern, so to speak, and that is what we see right now. Do you want to add something there? Sorry, Klas.

My second one is on construction equipment and the mix. We’ve more compact and large SDLG is growing faster than the Volvo brand. How should we think about the margin going forward? Will this mix negative continue or it was just one quarter? And the reason for asking is that if production comes down with the volumes, then the money will fall from this 12% level. So if that the new base from here maybe to 9%, 10% and just to understand we think about mix plus production going forward?

Would you like to start?

Well, I -- we’ve seen this trend with China and the compact machines for a while now. I mean, now we have more of decrease of heavy machines in Volvo brand, North America not at least we were discussing how we -- our dealers are handling rented fleet and also their stock. So this becomes a little elevated in this quarter, but the underlying trend has been there for a while now.

What we can say is also that should also think about that construction equipment now is into little bit of some transition quarters because they have been running by high levels. As I said also in my presentation, when you look at the order intake and deliveries for the time being, a little bit over pronounced in relation to what we’re guiding for in total market. And that is good in a way, because let's make sure that we’re taking down inventory levels among our dealer groups, that we are coming into 2020 in a good way. So we are well prepared because we feel that we have capacity in the system now and not dramatically overcapacity, but we have capacity in the system. Let's make sure that we are sitting with the right type of stock levels and inventory levels across the markets.

Thank you.

So we take another telephone caller.

Yes. We will move to the line of Sebastian Ubert at Societe Generale. Please go ahead. Your line is open.

Yes. Good morning, gentlemen. One quick question from my side. It's also with regards to the U.S. Can you give some update here on the situation at Mack trucks, about the strikes and the potential impact on your revenues and earnings this year? And the second question would be also related to the construction equipment, pretty weak picture on the Chinese market in 2020. How do you see your capacity is developing in this area? Thank you.

If we start then with the situation in U.S and the ongoing strike in our Mack facilities, the background of this is that we had, so to speak, a contract with United Autoworkers Union that expired here recently and we have had negotiations ongoing for a while. We didn’t reach an agreement and then the decision was from the unions to start this strike. I think it's very important dimension for us to sort with that, of course, we’ve been working hard to reach an agreement. We have also been working hard, the whole organization as we know to reach a reasonable and today a healthy profitability level, we’ve big investment needs in U.S. We have been struggling for long period of time in U.S when it comes to the profitability. We are there now. We are not ready to compromise a sustainable, so to speak, agreement so that can guarantee the right type of development for the company as well as for our colleagues because that goes obviously hand-in-hand. I can also say that we are apart from, I mean, we unique in that sense that we have 100% of our production for North America in U.S. We are proud of that. But we also know that our competitors have the majority of their production in Mexico. So, I mean, here it is important that we understand that a reasonable agreement is a must for us here. How long will it continue? We will not speculating that. We hope that we can reach an agreement as soon as possible. We will have continuous dialogues obviously about that, but again super important for us is to have a sustainable level in order to be competitive in the future and also to protect our employees. On the second part, when it comes to volume development for construction equipment in China, as I said, it has been surprising on the upside during this year, there is still a good activity level. We had positive registrations in September for GP for the heavy equipment. So let's see. We are guiding now for a correction of 15% in the total market. And again, I think the main message here because that is always difficult to read depending on measures etcetera is that we have a high level of flexibility and we are prepared for different swings here. Yes, we have low little breakeven also.

Thank you.

Thank you.

Right. Let's take the room.

Christer Magnergard from DNB. To start with the question R&D, given that you're spending more on autonomous vehicles, electromobility, digitalization, you’ve new emission requirements, we saw a big bump in Q3. At the same time you talked about this downturn and how you handle that in 2020. So my question is basically what should we think about 2020 progression when it comes to R&D, cash and also amortization?

First of all, a big part of our R&D portfolio is well known technologies and legislative demands. So that we will continue. And of course part of that is also electromobility to be able to solve that. So a big chunk of our R&D is, I won't say untouchable, but there we have to continue and of course do it in the most cost-efficient way. And then, of course, it's more of how much can we put into things that are a little longer out in time without hurting ourselves. And that is a job that we are going through. So as I said, a delicate task in this situation. But of course we will try to protect the future since we are coming from a platform of strength. But of course, we have to be very cautious here of what we do and as you’ve seen the ramp up is there. And of course even if we sort of start to decrease somewhat on our trend [ph] increasing, then it will still be higher costs going forward because this is sort of a year-over-year you are referring to and that will mean that it is more.

But I think also what is important to remember here, that is that we are little stuck in our way looking at the P&L. We just take a little bit of reflection on this. I mean, the beauty with business areas is that you can actually look through that they are not one-size-fits-all because we need to have -- take Penta as a good example. We have been above what should be normal if we should have it -- the group average, you can see that. And the reason for that is that we see that as very good returns in our -- on our R&D investments. I think this is why it's important to store to separate and decentralize and clarify because the thing is what will be R&D and what will be selling and what will be other type of activity, what will be production in the future with these type solutions. I think the main point is that we have said to you guys that we should be able to deliver 10% through cycle. And we should also continue, so to speak, to have a smart allocation of capital. And I think one smart allocation of capital in this transformation shift is actually to invest in innovation, in R&D where a lot of these investments will have a relative short type of return as we’ve seen in Penta, as we see now when we are deploying actually the autonomous solution is one example. So I think, again, yes, we will see a little bit because we need to come through the peak year. But in relation to the core industry, for example, where a lot of these investments are not giving an added value in reality, part of the society which is great, I mean when it comes to Co2 for example, but in reality for the mobility solution as such, our things are bringing really customer value to the customer, customers customers and the value potential is so big, so probably it will be a little bit less for us as well.

Then a question on cash flow to start with. Q4 is normally a seasonally strong quarter for you. You will have destocking, but at the same time with lower production in North America, which turns to be negative payables, if I don’t remember wrong. So how should we see working capital affecting Q4? And coupled with that, the balance sheet going into 2020 will be extremely strong, at the same time as you cut production. So can that -- the lower production levels in Laos affect the decision on the dividend going into 2020?

It is not really cash flow. We -- there will be a strong cash flow quarter in the fourth quarter as well with the effects you’re describing. So I won't comment more about the specific effects on accounts payable etcetera. Maybe we should say something or not say something on dividend because it's not actually up to us. But of course we will read the cash flow and end the year with an even better net financial position as it looks right now. And then the decision about around that this of course that we have a look into the past, we have a benchmark of increasing our ordinary dividend that we’ve done. And in case of possibilities we make extra dividends and let's see if we have that possibility without speculating about anything right now.

And I think the message is also clear. I mean, important now maneuver from a position of strength right now. Make sure that we will to maneuver from a position of strength, I mean given the correction etcetera. And at the same time having said that, we have no intention to become a back.

All right.

It's Bjorn Enarson, Danske Bank. You talked a lot about the production cost and you’re quite good at explaining on the direct production cost and how flexible you are. Are there any measures and can you give some more details on the indirect cost development?

No. I think, Bjorn, it's good point. I mean as we always say, I mean that are a little bit slower in following, but obviously as I try to say at least during the presentation that it is not only about, so to speak, the direct and the value chain related -- directly value chain related activities, but we’re looking through obviously with activity level as a whole, so we get the right balance. But in that context, I think it's important also to say that we are trying to be clear what we really would like to protect and pronounce because in this type of situation I think close companies can actually accelerate also activities that will be important in mid-term. So we are absolutely -- we are doing that across the company.

Thank you. And the second question is on the payable impact in Q3. Was that mainly for the truck business European impact or was that also in North America?

Mainly European impact. Since you have that normal situation in Europe, we are paying down payables.

So let's try the phone again.

Thank you. We are now off the line of [indiscernible] at Goldman Sachs. Please go ahead. Your line is open.

Hi. Thanks for taking my question. I had two questions. I will just go one-by-one. My first question is, are you seeing any signs for price war in the trucks business, given you have strong pricing this quarter?

No.

No offense. And just following up on -- actually going back to a question someone else asked on margins. If -- at the group level, given you’re cutting your capacity and adjusting inventory levels, do you think that margins will be temporarily affected by that? And if they’re, what level do you think they can trough at, like are we looking at trough levels of 10% and is -- do you think they will normalize at this level? How do you see margins going forward on account of your capacity cuts?

Maybe I can start on the production side then. Of course, we have as we are saying, we have -- and quite proud of it, we have a lower product cost than we had in Q3 last year. Of course, if you remember we had some extra costs for bringing up the production as well at that time. But of course we are using our flexibility and we are taking out costs, but the further down we go, it will be more and more difficult because we have a certain fixed element that is pretty difficult to touch. So over the time if this become worse, it will be more and more difficult of course.

Having said that, I think we are not obviously not guiding for trough levels, etcetera. But having said that, I think the story goes. I mean, we have said that we should be a company that can be about 10% through cycle. And then obviously when you look into different type of points in the cycle, we need to see a considerable improvement over we have seen historically, but it's up to you little bit to do your work as well.

Thanks.

Anyone else on the phone?

Yes. We now go to the line of Olof Cederholm at ABG Sundal Collier. Please go ahead, sir. Your line is open.

Hi. Thanks. It's Olof from ABG. Thanks for squeezing me in. I will limit myself to one maybe since we are running out of time. The service business, can you talk a little bit about the growth path from here? How long can this sort of caution to take on inventory at the customer side, have a negative effect on growth? And do you expect to bounce back in one quarter or two quarters? How long should we wait? How should we see this play out? Thanks.

Oh I think, yes, let's see a little bit here. You can take maybe a couple of quarters more, and then it's more related to how with the activity level continue to develop. Now we see there, as I just said, sideway development on fleet normally. And given also that we are increasing our penetration on contract etcetera then the total sum should be somewhat positive. But that I think is offset now a little bit with inventory corrections. So just to give, we talked a little bit about this yesterday, remind everyone about the resilience of the service business in 9, 10 there are in nine row when we have his being fall with -- of what was it, Jan, 16% to 17% of hardware shipments services dropped to 10%. So I mean -- and that was really as you remember a big hit. So the resilience is there. And I think also 1 million connected units we are doing a lot focus activities. Obviously, we will continue to have a very, very high focus on the opportunities that the service business is offering -- all offering.

Perfect. Thank you.

Thanks. Okay. You’re done. Let me ask the [indiscernible] here and here we go.

Hi. Mats Liss, Kepler Cheuvreux. Just coming back to the European market share there, you mentioned 15.2% very well, all right. But I guess some of your competitors have sort of renewed their offering now, and do you feel the need here to do the same thing or is it more -- could you give some more flavor there?

First and foremost, I think that, of course, we’ve continuously renewed a number of things because what is renewable in our business is obviously not only related to the obvious thing. I think we’ve introduced a number of very, very competitive features over the last couple of years here, not at least when it comes to accelerated configurations, the vocational offerings, Volvo Dynamic Steering in more places, etcetera. So we have strong offering. Basically we are well spread across different type of segments. We see that we are underperforming in some but more on specific markets, etcetera. We have had high priority on the price realization. There is room for growing, but we will do that steady and with quality in the business.

Okay, great. And just final one on guidance. There you estimate while 2020 is coming down in trucks and should we expect that to be the trough year or I mean given your -- the historical pattern and so on, could you give some indications?

Let's see a little bit. I think that is early bird and we are not forecasting beyond that. What we see is that I mean it has been good years now for the company, but it has not been a super big over swing. And I think that is good. So we don’t expect the volatility be as high as it was when we have this big over swing in 6, 7, 8 etcetera. So let's see. But I still think the main message is 275 is strong. With 275, should we be able to have a good and healthy operation in Europe and that is what we’re concentrating on right now.

All right then, this concludes this press and analyst meeting covering the third quarter. See you all in three months. Thank you very much for showing up.

Thank you.