Okay. From my side as well, a warm welcome, it's really good to see you all here, that you've taken your time and come and visit us here at Ghent for this Capital Market Day. The theme for today is closing the gap. What we'll try to do today is, of course, to talk to you, show you what we are doing, and where we stand in closing the gap. When we talk about closing the gap, it is, of course, closing the gap to reach our target. The way we plan to do that is actually to let you have the time for once, compared to a quarterly report or something, to drill down in one or two more distinct areas.
The first area you're going to experience today is within the Group Trucks Operations, where Mikael will come in and talk about the overall plans and the overall program that he is running on a global scale. Olivier Vidal will come up and will talk about what we're doing more in detail on the European scale. Finally, really pedagogic, you will then see Kamel coming up, who is the plant manager here in Ghent, talk about the Ghent. Then you can walk out yourself in a plant tour to see that we are actually walking the talk and what we describe is also in reality. After lunch, we will then come back and talk about Group Trucks Sales. Joachim Rosenberg will present Group Trucks Sales.
The reason we have chosen Group Trucks Sales is because that's the organization in the group this year that is facing the largest changes with the creation, as you remember, from 1st of January, with the Group Trucks Sales. Martin Weissburg will come and discuss with you about Volvo CE, showing both, of course, the operational issues that we are facing, but also a little bit more strategic and long-term issues that we have and activities we have within the Volvo CE. Then Krista has been kind enough to let me come up at the end and do a little bit of a wrap-up as well, where I will talk about some messages as well.
If we look at not only the focus of today, but also the target, really what we would like as a team to convey to you and transmit to you is actually our confidence in all the activities that we're doing, and that those activities are leading towards the target that we have set up. We will do that by addressing the fundamentals, and that is the asset that we have. It is, of course, the right sizing project and the right sizing program we are going through. But it's also all the activities and achievements, and not to the least, I will come back to you also talk about something I believe is extremely important in a transformation like this, and that is the culture, the culture of the company. I will come back to that as well.
We will also talk about the life after 2015, that is what will our focus be after the SEK 10 billion program, have a discussion around that. If you look at the SEK 10 billion program and you put yourself in a little bit of a helicopter view and looking at what is really and what impact does the SEK 10 billion program have on the company, you will find that this is a rather general cost reduction program. It means that we lowered the cost base in the whole company on a general and overall basis. We are going through IS/IT cost across the company. We're going through R&D across the company. We're going through administration cost across the company.
That means, of course, that we're creating a competitive cost base, but it also means the impact on the different BAs, brands, and regions are proportionally improving based on the SEK 10 billion program. This is something that has had a major impact on this company. This program is touching every one of the 110,000 employees we have in the group. We are coming to an end of it in 2015. We need, of course, to look at how should we then focus going forward to continue our profitability journey after the SEK 10 billion program, because that will give us a competitive cost base, but of course, the journey doesn't end that. How do we do that? Well, we do that by gradually shifting our focus from a general cost reduction program into a much more targeted and selective activities to address specific improvement performance priorities.
On this slide, you can see now our review on how we perform in the different BAs, in the different regions, in different brands. This map will be then the guiding star going forward for us to allocate resources, activities, of course, then action and measures in order to make sure that we increase and thereby also focus on the areas where we need to have the right profitability, because this will be then the focus going forward. How do we do that? Well, we will step-by-step now aligning our strategies, both when it comes to the commercial strategies, when it comes to industrial, when it comes to the product strategies. We will, of course, also now step-by-step aligning our governance.
Because if you look at what we did over the last three years, it was very much going from a decentralized matrix organization, we actually broke that in part in a very hefty move into a centralized functional organization. What we're trying to do now, and that resulted in the SEK 10 billion program, we try to move the pendulum now to get into and focus on those areas. We definitely see this as the next step in our profitability journey. Internally we call it a greenification journey. That means that step by step we're going to address the issues, and step by step we're going to allocate resource and activities to create a more green map than what we have today. This is the starting point, then the full year 2014. Now, I will not go into detail on this.
Mikael will come back to it, Joachim will come back to it, and also Martin will come back to it. If that's not enough, I'm going to come back to it as well at the back end when I do the summary. Much for introduction. I think it's time now to start to have a couple of hours Group Trucks Operations journey, and I think the best way of starting that is to welcome Mikael on board or on stage. He is on board, but on stage to present it. Mikael?
Thank you, Olof. Let me also welcome you here to Ghent. This is one of the major sites within Group Trucks Operations. We host both cab and vehicle and logistic services here. I hope you will enjoy the day. Last time I met you in this format, it was in 2013, and I spent a lot of time talking about the opportunities we saw within Group Trucks Operations and a lot of ideas that we were launching at the time. Today, my focus will be to tell you what we have done, but also give you a little bit of a glimpse on what we believe the opportunities are also beyond 2015, and coming back to Olof's chart here, how we can be more surgical in our approach going forward.
I will give you the overview, the global activity level, and then as you heard, we will then dive into the details with Olivier and Kamel. Before I go there, let me just give you a little bit of a framing of what is Group Trucks Operations and what we are doing here. We have a global, modern, and well invested footprint. We are around 34,000 people in 43 plants and 54 logistical centers around the globe. This is a footprint that is a legacy footprint coming down from the eight different organizations that came into Group Trucks Operations in the organization. It's the BAs, the brand oriented BAs, and also the support business unit functions. This is the footprint we have been working with, and we see great opportunities to improve this footprint. We have a responsibility that stretches throughout the group.
We of course have the cabin vehicle manufacturing for the Group Trucks, but we're also supporting the other business areas when it comes to captive engines and transmissions, aftermarket and logistics, Reman. We also now, since 1st of January, have the purchasing organization with us within Group Trucks Operations. We're hosting two group functions, Volvo Production System, our lean concept, and then we also have health and safety with us here. I would say that Group Trucks Operations is designed here now to really capture the synergies throughout the industrial footprint and within the logistical area as well. Where are we heading then as industrial division? As I said, we started with the situation where we had eight different organizations coming in that was brand oriented. I would say also the total setup was very European-centric. We had also very uneven performance.
I think I've shown you the slide where we have a big gap between the best performing site and the worst performing sites. We were very, I would say, hardware driven in order to solve our productivity issues. We are now moving away from that and releasing, I would say, the synergies that has been unlocked with this new organization. We are going for a common setup where we really can leverage on the best practice in a completely different way. I will come back to how we actually are doing that later on in my presentation. Really, I would say, having the worst performing sites catching up significantly to the best practice levels we have here. We are on our way to create now a global industrial system in order to optimize quality, lead time, and our cost efficiency.
Our main focus is on fixed and variable cost. A large part of my presentation today is really focused around the cost efficiency. To get a truly efficient machinery in place here, we need of course also to secure quality and lead time in our total supply chain. It's a complete package, but focus is truly on the cost efficiency side because that's where we are lagging behind. When we started this journey, we addressed it through the fixed and variable, where the fixed cost is about 40% our total cost, and we have the variable on 60%. Three building blocks, manufacturing cost, meaning our conversion cost, then our logistics cost , and then also the purchase inside. Purchased material is around 70% our total cost base for our products. It's a significant contributor in this equation as well.
That you see also is on the variable cost side here. The structural issues are addressed through a number of, I would say, major projects around our globe, and I will come into that later on in my presentation in describing some of them. Some of them you will see in great detail here later on today, because it's of course both on the total footprint, but also inside the different sites where we're talking plant layouts, et cetera. With that program that we have been running now since 2003, we are really starting to see good results coming out of this.
I will also say that flexibility is a critical point for us, as we move forward here, to really make sure that we can utilize our resources in a much more efficient way, coping with the swings in the market, but also coping with the mix of our products in a good way. Here we have had situations where we have had excess capacity in one end of our supply chain, and we have had under capacity in other areas and not been able to move that around, and that we are seeing now that we are getting closer to get solved. I will also say that a very important part in our transformation is to create a continuous improvement culture. As I said, we come from a situation where we were very much hardware driven in solving our productivity issues.
With continuous improvement culture, we can do much more with much less, I will come back to that as well. As I already said, the cost reduction activities that we are driving across the different function are tracking and are showing results, We are delivering on it. I will say that no stone has been untouched in this journey, and we have used all the different tools in the toolbox. Everything from plant closures, renegotiations, canceling suppliers, canceling other type of arrangement that we've had in the past, securing that all options are evaluated, and we have no holy cows in the total structure here. Everything has been reviewed and assessed from the start to the end here. On the manufacturing side, you can see here that we have closed eight different plants. Two has also been outsourced.
We have also new setup to support our growing markets in Asia. Two new plants has been installed in the growth markets during this time period. Continuous improvements, of course. We have, on the logistical side, seen a similar pattern where a lot of footprint changes has been made, Also there, driving continuous improvement in a completely different way than what we have seen in the past. On the purchasing side, I have to admit that we were late out of the starting blocks there. We started to gear up traction during 2013, Then in 2014, it has really taken off. Also here, we have installed a complete new toolbox, We are, I would say, going into 2015 with a high speed in terms of capturing synergies also within the purchasing area.
Very clear evidence of progress, I would say, when we look through the different areas. We addressed it with structural changes to capture opportunities within the fixed cost area, That is what I'm going to show here, where we are restructuring our total footprint. Everything on this slide here is in progress of being implemented and will be implemented by the end of the year. As I said, all the tools in the toolbox have been used, We have closed a number of sites. We have, for example, closed a powertrain site in Spain. We have closed our CKD activities in the U.S., then moved that back into the mother plants of, in this case, the Mack, Macungie. It was finished during the autumn here.
We have, on the distribution side, rearranged our both European and U.S. footprint, where we have closed three distribution centers in the U.S., We are closing the distribution center in Gothenburg. We have also closed and changed the scope of the Reman footprint and consolidated into the remaining site. Big changes in Japan, I will come back to that because I will give you a more detailed view on what is happening in Japan. Within the major part of our sites, we have made a lot of changes. As I said, you will see some examples here in Ghent, but also in other sites. For example, within the powertrain production, we have done complete changed internal footprint. I would dare to say that no site has been untouched either.
We have, for example, both in Skövde and Hagerstown, implemented a new straight flow when it comes to final assembly. We see great productivity gains in that. In Skövde, for example, we are doing the same amount of assembly activities with close to 200 people less, and that is implemented. We also have had the opportunity then, for example, in Hagerstown to do the similar exercise. We have then also insourced some activities there. By that also gained further productivity by doing that. Major, major changes inside the respective plants, and you will see physical evidence of what have happened here in Ghent, for example, later on here. We have also outsourced some activities, I would say especially within the logistical area, where we have outsourced the cross docks and packaging, both in Ghent, Gothenburg, Wroclaw, and also in Lyon.
Two of them is concluded, and two of them is in the progress of being finalized now during next coming months. We have also outsourced some of our activities in Japan. I will also cover that later on. We are looking into Venezuela and Uruguay, see how we can optimize that setup. We have not come to a conclusion there yet. We are working with some scenarios here that will pan out during the rest of the year. Then we have, as I mentioned, two new plants supporting our value segment in growth markets. We also have a new concentrated central warehouse in the U.S. where we have co-located a number of activities. When you go through our global footprint, you can see here that no site has been untouched. It's either closures, outsourcing, or rearranged scope with footprint changes.
A massive change for all our colleagues in the total Group Trucks Operations here. I would say especially in Japan, where we have now been changing the Japan setup for the last two years. It's about to come to a closure during this year. We are concentrating our different activities into two main sites. It's, of course, Ageo, where we have our cabin vehicle assembly. It's Gunma, where we have our distribution center. You see here on the slide that I'm mentioning 10 sites consolidating into these two. If we count all, even the smaller ones, it's actually 22 locations across Japan that we have exited. Some of them, of course, very small, but still it has been a building and a few people working there. That has been also an opportunity for us to exit lease contracts, divesting real estate, et cetera.
A huge reduction of location across the total Japan. We have also divested one of our major sites, Konosu, our foundry, where we managed to get out of that site by actually divesting it to a third party that is now taking over that operation and filling that with other needs from that particular company. One is about to be closed here. All in all, with the changes and also the closure and divestment of some of our smaller non-core activities, we have reduced the staff within Group Trucks Operations with 50%, meaning 1,500 people, both blue and white collar, throughout this journey. By the end of this year, it's a closed case in Japan here. We are now set for the needed volumes in Japan going forward. A true right-sizing activity.
Continuous improvement, I mentioned it a few times already. It will be growing in importance for us as we move forward. We have been working with continuous improvements and the Volvo Production System, meaning our lean concept in the Volvo Group, for some time. We have some areas that are really well advanced this, but we have also sites, I would say quite a few sites within Group Trucks Operations that has not really taken on this way of working. That is what we are changing right now. You see on this graph 3 targets, you could say, where we are setting ourselves the challenge to have a certain number of implemented ideas per year. For this year, we have 300,000. Of course, it's not the number in itself that is important, it is what it consists of, the ideas that are implemented.
It is really to drive the organization to get into this new way of working. A world-class organization or around 20 implemented ideas per blue collar and around 8 to 10, I would say, on the white collar side. That's what we're reaching for. This is the journey that we are on right now. So far we have seen a significant increase compared to 2012, but still some way to go. The new way of working here is really that it's not up to each plant or each area to discover how to work with this by themselves. We have now, I would say, a structured approach to make sure that we capitalize on the combined knowledge we have in the company. As I said, we have some sites and some areas that are really strong in this area.
We are now taking some of these competencies and applying them into areas where it's more needed. Last year we started by assessing some of our main sites. Out of the 54 distribution centers and the 43 factories I mentioned, the top 20 sites stands for around 98% of our conversion costs. We know really well where we should focus our efforts to get a good leverage here. We assess them to see in which maturity level they were at. Depending on the outcome, we have then put on additional resources then to support them to quickly catch up on this journey here. We have a central expert team then supporting our local sites, and we're also combining that with experienced people from the different line organization.
With one production system now, we are really catching up big time here, I would say, for the total Group Trucks Operations here. We know how to do it. We are seeing results of our efforts, both from the structural changes we are making, but also from the continuous improvements. This slide, I would say, is example of evidence of that, where we see that trucks per white collar have significantly improved just between 2012 and 2014. As you can see here, if we count it per white collar, we're talking about 30%, and on the blue collar side, 15%. For this year, when all our different programs are being ticked off, more to come also here, of course.
At the end of this year, we should sum up that we have a 52% improvement on the white collar side and 36% improvement on the blue collar side. What I've been describing so far is very much around the period up to 2015, where a big chunk of our efforts has been around the structural changes. Slowly gearing up then on the continuous improvement side, but also driving process harmonization. We believe that beyond 2015, there will of course be further opportunities that are of structural nature, but the portion that needs to come from continuous improvements and process harmonization needs to increase in order also to support what Olof talked about, the need for a more surgical approach addressing different markets and different brands. This approach will do that.
We see that we will have opportunities to harvest around 5% in productivity per year as we move beyond 2015 with this. We are driving then, an approach where we want to really leverage on the best practice and then gaining efficiency across our different operations. Some areas are further ahead than others, but the journey has also started earlier for some. If you take powertrain production, for example, there has been a global powertrain production unit for some years now. They have a setup that really supports what we are looking out for in the total Group Trucks Operations. We have then, of course, with insourcing and off the market, seen some opportunities, but where we are, the latest into driving synergies across the total setup is within the truck production area.
That's what we're now trying to catch up by also applying the ways of working we have seen within Powertrain, for example, but we also seeing that we have further opportunities within the ones that are ahead. Even though powertrain serves as an industrial model for us a little bit, we definitely see much more to be done also in powertrain, and I will come to that. Process and IT is also an area where we are seeing opportunities now also to consolidate the total footprint. Here the connection to the process improvements is quite big. I think within the operations area, we probably have the biggest legacy challenge to really harmonize this setup. If we come to powertrain, as an example of how far we have come in certain areas.
We, of course, started in 2001, when we had the three different brand powertrain organizations coming into one organization. Slowly but surely, we combined this into one industrial setup. It was not until 2005, 2006, it came together as a truly, in this case then, a global production setup. From 2005, 2006 then up until 2011, we saw then the global footprint being developed and a global approach. From 2012 in the new organization to 2015, truly focusing on the operational side, we have taken further steps. Just in this time period, we have seen a 12% cost reduction in the total cost base coming through with the efforts we have been driving through the structure changes and the continuous improvement area, and more to come as well.
We are now in the second wave, we are moving into the third wave here to take it even to the next level. A lot of experienced people in driving this is now reallocated to other areas also in the total GTO setup to support in this journey. We know how to do it. Looking at the logistic area, we see a scattered picture, I would say here, because we have both here the off the market logistics, but we also have the manufacturing logistics area here. In the off the market, we have come a little bit further, where we have consolidated the total global needs and put it into the same warehouses and the same logistical flows. We have quite a good synergy in that area already today.
On the manufacturing side, we have had a situation where we had, yes, we had a large customer base, if we call it that, within logistics, but we had many small customers. Even each plant had their own requirement on the logistical setup that was performed by the old Volvo Logistics. When we have all the plants, all the distribution centers, and the execution of the outbound, inbound logistics in this one and the same management team, we see great opportunity to really synchronize the whole logistical setup. Now also with, I would say, purchasing here is further enlarged. Between 2012 and 2015, we have once again been focusing on the footprint challenges. We have introduced the continuous improvements and the way of working there, which was, I would say to a large extent, not existent in this part of our setup.
We are seeing it being applied with full force, they have taken it on in a great way. We are seeing good progress there. New ways of working in this area. On the purchasing side, when it comes to the logistic buyers has been changed. I think we worked in the past with more, I would say, static routes. We're moving into more dynamic purchasing where we are having shorter contracts. We are, I would say, more opportunistic in the way of actually transporting our goods. If you take the outbound side, for example, we can switch with short notice between jockey deliveries to trailer deliveries, et cetera. Different means of getting the vehicles out to the marketplace where we are going for more of, I would say, a spot transaction rather than to have long contracts. Great opportunities.
I would say we're also managing the way we are operating logistics in a different way. We are not into always the details on how the transport needs to be performed. We are buying more capacity from A to B, we let the transporter optimize it within their flow, by that also bringing down the cost significantly. With the outsourced activities and also together with the reduction of external business, we should remember that also that when we came into this in 2012, we had some external businesses in these areas that we now have exited also. We're going from the ambitions in the past of being more of a logistic company to be now more a buyer of logistical needs. Quite a big change in the total way of operating here.
That is what we now are pushing forward with to make sure that we capitalize on the combined strength of the new functional organization here. Where we can take into account, of course, costs, but we can also looking at the capital tied up and the risk in the total supply chain in an optimized way. Great opportunities here, going forward for sure. To summarize the overall picture of Group Trucks Operations here, we are now set up to enable the total optimization of the total supply chain end to end, together with purchasing, manufacturing, and logistics. We see great opportunities, also for the future. We are seeing traction on our program. We are confirming our committed targets to the overall Volvo Group's ambitions. We know what to do, and we are doing it, and we are setting quite high ambitious targets also for the future.
I'm quite excited on what's beyond 2015 also. Great opportunities within operations. I hope you will see that now when we continue, to drill down in our different activities. We will now zoom in on European optimization within cab and vehicle, and, I would hand over to Olivier, that will take us through that. Please, Olivier. There you go.
Thanks. Thanks, Mikael. My name is Olivier Vidal, and I'm in charge of the cab and vehicle plants in Europe, Middle East, and Africa. We are very proud to welcome you this morning. I can tell you that, we will be more proud this afternoon during the plant tour because we are really in the middle of this transformation journey. We will be able to show you where we are leading when it's about efficiency of operations. One of my key messages of this morning is we would be in the Gothenburg plant or in the Bourg-en-Bresse plant, Blainville plant, and you would see the same type of optimized setup, optimized flows, optimized assembly operations. Mikael described what has been the overall transformation journey inside GTO, both implementing structural changes and, strengthening continuous improvements.
Now I'm going to describe what we are doing in the European industrial setup. Let's say that the diagnostic of our weaknesses was the same in Europe compared to the overall GTO. Means also the opportunities. Uneven efficiency between the plants, different level of maturity in lean manufacturing. Not the same type of industrial setup between, for example, two main plants, the Gothenburg plant and the Ghent plant, cab trimmed in Ghent, but the cabs for the same type of product trimmed in Umeå, which is located in the northern part of Sweden, and not in the Gothenburg plant. Also, overcapacity, especially in medium duty. We got the green light from the top management to start this European optimization, and we call it EOP, European Optimization Program. What we have already done, we have dismantled one assembly line in the Gothenburg plant.
We have decreased the number of assembly lines from six to five to assemble heavy-duty trucks in our three plants. Just before vacations, we have stopped to assemble the medium-duty trucks in Ghent. Now we are assembling all our Renault and Volvo medium-duty trucks in one facility located in Normandy, France. During the second quarter, and it will start in a couple of weeks, we are going to start to trim the cabs in Gothenburg for the trucks that we are assembling in Gothenburg. We will stop to trim the cabs in Umeå plant. The Umeå plant will be a fully focused cab plant dedicated on the three core processes, stamping, body-in-white, and painting. By the way, as the Blainville plant in Normandy, which is a sister plant.
We have saved the surfaces both in the Ghent plant and in the Ghent plant. It has created a fantastic opportunity to deploy our Volvo Operations Concept. What is this Volvo Operations Concept? The Volvo Operations Concept describe the guidelines to engineer a lean assembly and lean logistics processes, starting from the station of the operators, pulling out diversity from the line, we call it the board-of-line or the line façade, pulling out to some logistic areas we call the kitting zones, and you will see this zone this afternoon. The operators are assembling parts or modules, physical modules designed by our product engineers. These physical modules are assembled just in front of the stations where is located the operator.
I told you that we are pulling out the parts diversity so that our operators are really focused on the quality and on the efficiency of the assembly activity. Starting from the line, then you have the sub-stations where we are assembling the physical modules just in front. We have just to cross the aisle to move the module. Then we have the kitting zones where we are, in fact, preparing the different parts needed for the operators and several receiving areas. We call this optimized flows as a fishbone factory. What we are really moving is from, in fact, an engineered design facility to a logistics-focused facility. We decided to have two main drivers to support the European Optimization Program. The first one was really to be focused on the best practices.
Let identify the best practice, for example, how to prepare an axle. We have some components to assemble on an axle. Let go to Japan. Let go to our Ageo plant. Let go to Curitiba. Let have a working group traveling these different factories, traveling in Bourg-en-Bresse, Ghent, Blainville, and Tuve. Let this group of experts, this group of operational people supported by manufacturing engineers, identifying the best practice. Let call this best practice our standard and let apply it. We have this high focus on best-practice sharing, but it's something that you have to organize, and we have done that, and we are continuing to do it. As mentioned by Mikael, we have this high focus on increasing our efficiency and increasing our cost-efficiency.
We know that at the same time, it's at stake to improve also the ergonomy for our operators to reduce the variability as a consequence to increase the efficiency. If we have this type of approach, then really we can engage our operators and continuously improve the workstations. We do it through our Volvo Production System, as described by Mikael. If I can summarize what is a Volvo Production System, it's really this way to daily manage our operations and to daily continuous improve our operations. All these structural changes has supporting us by reducing a lot our blue-collar manning, a little more than 600 fixed positions. At the end of 2015, we will have decreased our cost by, or we will have made a 20% cost savings in the scope described on this slide.
Let come on the two main structural changes. The first one is medium duty. We had enablers, which was a common truck platform, the same suppliers, also common assembly process, a common IS/IT platform. Really the challenge was to move the assembly of the trucks built in Ghent to the Blainville plant on the same line and do it in a very short timeframe. We have done that in six months, and the Blainville plant was challenged to reduce the total fixed cost by 21%. They will do it. The second structural change is between Tuve and Ghent. We really challenge this. The starting point was two plants, Tuve and Ghent, producing the same products, sharing the same main equipments. If you are visiting Tuve and Ghent, you didn't have the feeling that they were really producing the same type of trucks.
We didn't have, for example, in place the same internal logistics. We didn't have, in fact, the same line facades. We decided to go for 90% commonalities, 10% difference due to the fact that we have existing building in the Ghent plant and also to allow our operators to come with suggestions. We are now in the process to fully apply the Volvo Operations Concept that I described to you, and we are getting the full involvement of our operators in this type of continuous improvement activity we call Kaizen events. We have clear work distribution and specialization between the two plants. The Gothenburg plant is a medium volume plant with producing high variability of our products.
The Gothenburg plant is also our intro plant on one hand, then the Ghent plant is really the high volume plant focused on full efficiency. Let's come back to commonality, what now we are sharing inside my organization is commonality is not something that is going top-down from regional or global engineering organization, but it's really an enabler to improve the performance. We were used to a restricted commonality focus on the toolings and equipment, and for sure on the packaging coming from our suppliers. Now we are really in the process to convince the teams that commonality could be really an enabler to continue to improve efficiency. Let go from a restricted commonality to a result-oriented commonality. We had to invest, as an example, lines to dress the axles and to dress the engines.
You will see these two lines this afternoon, both in the Gothenburg plant and in the Ghent plant. We selected the same suppliers, the same concepts. We have now the same board-of-line for these two sub-lines. We have defined the same way of working. The next step that we will start in 2016 is to have the same shop floor organization. We have now networking in place through this best sharing approach between manufacturing engineers, between logistics engineers. Next step, we will also do it between production engineers. What is about, as a production manager, for example, for the base module, I have an issue, I have problems to solve. I'm in Ghent, I'm calling my counterpart in the Gothenburg plant. How did you fix it? Did you encounter this issue, on one hand.
On the other hand, my operators gave me brilliant ideas to improve the process. I'm sending a mail, I'm sending pictures to my counterpart. When you have this real twin commonalities, twin factory approach, then it's by far easier to have this sharing of experience. At the end of 2015, we will have a lean assembly in all four European truck plants. We'll have this Volvo Operations Concept describing again the best way to assemble cabs, to assemble trucks, to organize internal logistics in our four plants. We will have the best practice put in place in assembly and logistics. Continuous improvement is now really in place in all our plants. We have standardized improved production leveling for all the plants. We have the same way to do productivity, balancing the different stations.
We have fixed cost reduction in place because we moved out two lines. We decreased the number of the white collars. For the future, for what we will have to do during the next years, we have been able to strengthen our common manufacturing culture. Just as a summary to share with you, again, before you got Kamel's presentation, before you go on the shop floor and to see how we have improved, how we are improving our processes. We are confident that at the end of the year, we will reach our targets. Definitely, we do believe that we are defining a new standard to assemble cabs and trucks. It's really at stake. We are building on our people skills, on the engagement of our people. We are building a common industrial culture.
Now it's time to go in more details and have a focus on the changes that Kamel and his managers have implemented in Ghent. Welcome, Kamel.
Thank you, Olivier. Hi, everyone. I'm Kamel Sid. I am leading the cabin vehicle factory in Ghent, and I have the pleasure to be your host today. I think I can talk on behalf of all the Ghent employee when I say that we are very excited to get this unique opportunity to share with you the transformation we are going through on the Ghent side. I'm sure you all know Ghent has been the first CO2 neutral factory in the automotive industry. Let's have a look on the operation we are performing here. Mainly two operation. You have the cabin vehicle assembly, cab trimming, final assembly for heavy duty trucks, but till June last year, also for medium trucks.
We have the fitting center where we fit together the tires and the rims, not only for us, but also for Tuve in Sweden and for the Volvo Buses plant in Poland. We have also logistic services present on the site with the manufacturing logistic services, inbound and outbound management flow, and also the distribution center. You can see here the significant number regarding the activity. Let's have a look to what happened the last three years on the Ghent site. First of all, 2012 and 2013 till early 2014, were the years of the largest product renewal ever in Ghent.
It was an extremely challenging period, having in mind that we built on the same line, the old and the new models in a year of high volume, if I refer to 2013, putting a huge stress on the logistic supply chain, but we did manage. We secured a high level of quality and delivered the truck as promised to our customer. In 2014, we launched two optimization program. One was mentioned by Olivier. It's the European Optimization Program for the cabin vehicle assembly activity, but also the European Efficiency Program for the logistic services. In the meantime, Mikael mentioned that we initiated continuous improvement reinforcement because we know that in the continuous improvement, that most of the potential lies.
In 2015, we are heading full steam at completing the optimization programs, both in logistic services, but also on the cabin vehicle assembly, and we are strengthening the continuous improvement. Let's have a look on the impact of the European Optimization Program on the cabin vehicle assembly. First was the closing of the medium duty line. This was effective in June last year, and we removed 200 fixed position. We increased the base volume on the heavy duty side from 128 to 160, while preparing the capacity of 200 a day in two shift. You see where we are coming from. These are a significant increase in terms of base volume, but also in a capacity. While doing that, always having in mind the optimization of our manufacturing logistics, also quality, lead time, and cost efficiency as the drivers.
We can say that in the European footprint, Ghent is clearly now the high volume, heavy duty truck plant for the Volvo brand. What does that mean concretely? Let's have a look on the physical changes. We are here at the cab trim, and here the final assembly. You have here the perfect translation of the Volvo Operations Concept mentioned by Olivier, and especially here, the fishbone concept. We have pulled the diversity and complexity out of the line, managed that on a subassembly area really close to the point of use, and we have stretched the distance between, basically, to make it very simple, the entry point to the point of use. Very lean flow, minimum transport, this is an enabler for a 20% productivity target. The same here goes for final assembly.
It's history repeating when it's about the concept, pulling the diversity out of the line, subassembly close to point of use, and having not any longer a central warehouse, but more entry point for the goods receiving, having really a full fishbone concept on the logistic side as well. Of course, you could have a look on all the changes when it's about the equipment. I must say that the last 12 years it has been intensive construction work in the factory while still producing. You will have a look by yourself on all the changes. Some KPIs. We see that we are moving in the right direction. Quality, we're talking about the first time through. I've been measuring the number of trucks going through the process without any intervention, good at the first time.
If we look to the new FH, introduced 2 years ago, we are now at 75%, we are heading to 80%, having 90%, which is a world-class target in mind for 2016. I must say that the quality of the truck is very fantastic. We are even higher than the level of quality we had on the previous range. Lead time as well, moving from 81% to 93%. Just for the record, we had yesterday 100% delivery precision, high time ever. We are heading to 95%. Part availability at point of use, this is our capacity to bring the parts at the point of use at the right moment, from 97 to 94%, heading to 98%. On the cost efficiency side, looking to the hours per unit, you see that it's going down, which is a good trend.
We are heading here to 54 for the trucks, both logistic and production, and 18 for cabs. Of course, it's not about structural changes. Mikael mentioned that clearly. It's also about continuous improvement, and I want to highlight here some initiatives that we started in the continuous improvement field. Andon and production, there it's really making the problem visual at the station where it occurs. The operator can basically stop the line if the problem is not solved. It creates a lot of stress, and we pay a lot of attention to solve those problems. Prioritization and daily problem-solving on the shop floor, cross-functional team, standing in front of the board on the shop floor and dealing with the issues, making sure that all the root causes are identified and eliminated. Standardized work as a foundation for our training and also a foundation for continuous improvement.
We have standard work being established, and this is the best practice we know so far. It's something that can evolve if we find a better way to do it. You see here the achievement when it's about quality, 8% on the FTT, 40% on the fault frequency, quite significant. Here on the lead time side, production leveling, it has been mentioned by Olivier, and Mikael mentioned the stability in the process. This is a huge enabler to bring stability into the process. What you have here is in fact the daily sequence of the different model on our rigid line, and the red one being what we call the heavy variant, eight by four, for instance.
It's a very difficult situation to cope with, not only for the operator on the line because he has to face some peaks, overload, but also for the supply chain. Imagine this picture applied to our supplier. What we did by introducing the production leveling, we spread out the variant. We have put then more stability into the process, working with average number in a week window, which is an enabler for us to better distribute the workload, bringing more efficiency, stability into our internal logistics flow, but also to our suppliers. The achievement here is the delivery precision. We are actually now above 93%. Continuous improvement, high focus. I must say that once the product introduction were behind us, we could highly focus on the continuous improvement.
You see here the trend, 600 Kaizen event in 2014, which pulled close to 10,000 improvement proposal from the operators. We are going to 1,000 Kaizen events identified and planned in 2015. With a target of SEK 320 million analyzed accumulated savings towards end of this year, SEK 150 million being already achieved compared with comparison cost of 2012. What is the trigger towards the continuous improvement activities? Cost deployment, something we introduced last year. We have a very detailed breakdown of our cost structure, and here we're talking about the hours per unit. Being an assembly factory, it's a man-intensive activity. Most of the cost lies on the manual operation, both in production here, but also in the logistics. We have classified this by added value, non-added value, and we have systematic approach to tackle those waste.
I'm talking about the added value on the production, you will see that during the tour. We talk about Kaizen event eliminating added value, 3M analysis. 3M stands for Muri, Mura, Muda, Japanese word, meaning that we take care not only eliminating the waste, but also making sure that the ergonomy is improved and the variability is also taken away. Because we know if you make it ergonomically friendly, you will make it simple. You make it simple, you will make it easy. On the logistics, we apply the fishbone concept as mentioned, but we also identify the waste through the use of value stream mapping. On the kitting area, you will have plenty of example this afternoon to support the operators and to increase the quality and also the efficiency. We use a help device we call Pick-to-Light to support them in this activity.
This is bringing an average 30% productivity on the kitting area. We know where are waste. We have systematic approach. We have the competence. If we don't have them in-house, we know where to find them in GTO. All those concept that I've mentioned were totally not developed here in Ghent. We have probably copied all those concept from colleagues within GTO. Cost deployment, for example, is something we copied from powertrain. We are on track. We have a good plan, and you will see this afternoon the concrete example, concrete translation of what I've shown here, and you will be able to judge by yourself where we are heading to. A word regarding the logistic services. I mentioned that we have initiated an optimization program here, and the outcome is that we are centralizing all the Volvo CE parts in the Ghent warehouse.
Ghent becoming the main distribution center in Europe. We have also decided to outsource the cross-docking activity, which is happening today. We are talking here about 80 fixed position that will be removed. The synergies that Mikael were mentioning will be also here increased by implementing a global system, IT system for the warehousing. A few words about the visit of today. Some practical things before we go to lunch. We have foreseen for you eight station stops. We will discuss production leveling. We will show you the new axle engine line, side members intake, cab logistics, cab dashboard line. You will really see here how we have put into practice all the concept that you have seen here. You will be able to get also the figures from the floor when it's about quality, economy, and efficiency.
We will have also two stops for logistic services, the efficiency program as such, and also the productivity initiatives in the distribution center. How it will be organized, you all have a badge with a color on it. This stands for a specific group. We have eight groups. We have one guide per groups. They are all with a yellow jacket, very easy to recognize. You will get, for your own safety, a safety jacket. Try to stay in the footpath. You will be also given headsets to hear the presenters. It's time for lunch, and I'm looking forward to meet you again for the visit. Sorry. Maybe I'm going too fast here.
No, it's excellent. Thank you so much, Kamel. We have had a bit of a deep dive into our manufacturing operation, before we walk out into the plant and take a look, we'll have a 45-minute lunch. We'll start to gear up for the plant visit at 12:00 P.M. Oh, sorry, 1:00 P.M. It's lunchtime. Thank you for this morning.
Thank you.
We are just moving into Group Trucks Sales. Before doing that, I hope you enjoyed the tour. I think many of us improve our Japanese knowledge quite substantially with the new expressions and meanings of Japanese words. It is important, though. I do a lot of this. I was in Tuve yesterday, and the same activities that's going on here at Ghent is continuously, as we speak, going on in all the other sites around the world. When I look into the improvements on a site, I think that you can conclude that laying out a production network, which factories to keep, which factories to close, moving lines from here to there, that is not so difficult to do really. It's just a matter of doing the analysis properly. Learning the methods theoretically on how to implement a continuous improvement systems is also not so difficult.
The key is the engagement, the ownership, and the implementation by everyone in a factory. That is where the money and the savings are coming from. When I was standing in front of one of hundreds of these boards, I look in the eyes to the people who present and see if I see the engagement, the ownership, and that they know the issues down to the screw and bolt. If they do that, then I know that the money will come. It could be EUR 6, it could be EUR 6,000, it could be EUR 600,000, but the money comes. You know it's just right now 300,000 more of these out there that you saw today. I hope you enjoyed it. To me, this is a little bit like my Superman jacket. I always put that on when I go out in the factories.
It doesn't give me any strength, so I've tried at all. I take this one off now, and Joachim, where are you? The floor is yours.
Thank you. Thank you, Olof. I wish I had a Superman jacket. Good afternoon, everyone, and I hope you enjoyed the tour as well. My name is Joachim Rosenberg, and as of 1st of January, I am responsible for our commercial operations on the truck side, so sales and marketing. You heard Olof say this morning that it is one of the areas, if not the area, where we have the largest changes this year. Therefore, I thought I would start by explaining what changes have we done. If you look on the left-hand side here, essentially up until the 31st of December 2014, we were organized in three continental truck sales and marketing organizations. That means, amongst others, three continental headquarters. It means three owners of the four different wholly owned brands. Of course, it means, to some extent, slightly different ways of working.
Putting it in one global truck sales organization gives a number of advantages. We have one headquarter is based in Gothenburg. We have one way to prioritize between the brands because there's one owner of all the brands. We have 22,000 colleagues in one organization. We have one way of working. Of course, as I'll come back to very soon, business is local in our industry, we do need to allow for those market differences, it needs to be a conscious decision. Right. Consciously, we're working exactly the same. Consciously, we are allowing for local or regional adaptations. It can't just be happening then. The advantages of having one global Group Trucks Sales organization, or GTS for short, is amongst others, that we can globally coordinate our commercial priorities. Everyone is seeing the same picture. Everyone is talking about the whole Group Trucks Sales.
That's one very important aspect. Specifically, the opportunity to sharpen our focus on the brands and the product line is facilitated in this new structure. I'm not saying it wasn't possible before, absolutely. I'm just saying the new organizational setup facilitates a sharpened focus on that. That's on one side. That will benefit the customer. On the other side, it also enables a more cost-efficient setup, one headquarters instead of three continentals. We will have seven regions, and I'll come back to that. They will be empowered, they will be accountable, and I'll show on the next slide how we sort of split the world in those seven regions. In addition, of course, when it comes down to the market, as you saw here today by the Ghent, it's really down to the detail. It's the same in the market.
It needs to be speedy, it needs to be quick, it needs to be executing. If you take that structure and you add it to the many historical strengths we have in the Volvo Group, of course, our ambition and our clear target is to be the best commercial team in our industry. This will give focus, it will give speed, and it will help the customer. This is a breakdown of the SEK 191 billion of truck sales last year. You can see that the largest region is in North America. You can also see that we've split Europe in two, Europe North and Europe South, they are roughly of the same size in terms of sales.
You can see that Latin America and what we refer to as EMEA, which is Greater Eastern Europe, Middle East and Africa, or EMEA, is roughly of the same size. You can also see that Asia, Oceania and Japan is roughly of the same size. The key to understand here, and I take it from many of your questions today as well as I picked up, is that the business is different in the regions. Of course, in Europe South, Europe North, they of course belong together. Barring that exception, the business is very different. It's left-hand drive, it's right-hand drive, it's different specifications. Is the norm to have big fleets or is the norm to have owner-operators that buy one truck? Is the norm to have many tractors or many rigids? On and so forth.
Our business is different in these different regions, and that's why we split them this way. Olof introduced this slide. Obviously the key here to understand is that the performance compared to where we want to be is different along the brands, along the product lines, and along the regions. Of course, we will need to go on this greenification journey that Olof mentioned. Of course, we cannot do everything at once, right? There are some priorities here. Some of the priorities, given the size, is obviously in North America, where you can see the yellow color for both the Volvo brand and the Mack brand. Remember that towards the end of last year, if you take the fourth quarter isolated, as was mentioned in the last quarterly update, North America was green.
It is clearly going in the right direction, and I'll give you a few examples of that. In addition, due to the size, of course, the Renault brand in the EMEA region, as well as the UD brand in the APAC region, are priorities. Doesn't mean we will not fix everything, like with any major challenge, you need to eat the elephant piece by piece, and then you need to prioritize in sequence. On the right-hand side of this graph, I've tried to summarize our overall levers to go along this journey. We are on a brand journey with several of our brands. I'll give you an example on the Mack brand on the next slide. It's true for the UD brand as well and the Renault brand as well.
The brand is still on a journey, and we're taking step by step, and we do measure this so we know that we're going in the right direction. In addition, as you know, we have invested significantly in our new product ranges for the Volvo brand, for the Renault brand, and for the UD brand. Of course, there's a leverage coming out from that. That's true on the hard product or the truck itself, but it's also true for the new kinds of services and the upgraded services that we can attach to the truck. That's also very important. I'll come back to that. In addition, this is a continuous journey and you're never really done, we of course need to review what and where we sell or the offering portfolio, if you so like.
As well as when we have decided what to sell where, how do we go to market? This is something we'll be focusing on even more in some of the areas going forward then to make sure that we can greenify this picture. Aftermarket is very important in our industry. It is in all automotive industry. As you'll see, we have built population in many of the regions going forward. We have built population in many of the regions, and therefore going forward, the importance of even more capturing the aftermarket is critical. It's going to help us to have an even more balanced business model, in some of our regions.
In addition, the penetration of captive components, for instance, the engine and the transmission that you can see over here, is also helping us in this regard, as well as the enabling of big data or connectivity, the fact that the vehicle can connect via telematics to the dealer, to the customer. Last but not least, the cost structure needs to be adapted. I think that we have been clear on that. We have the SEK 10 billion program. This will, of course, support here. Something that is true on the commercial side in terms of selling expenses, also true, as you have seen today, on the industrial side, for instance, in our operations, but also in our R&D part of the business. This was a short introduction into what is Group Trucks Sales or GTS.
What I'm going to try to do now is to give you a brief overview of each of the seven regions that I spoke about. I'll go a bit deeper in some and maybe less deep in one or two of them in order to respect the time that we have. I'll start from the west with North America. The market in North America is, if you look across the globe, of the major markets, North America is the one currently that is pulling the most. From 2013 to 2014, the market went up roughly with 14%. As we announced in our Q4, we expect roughly that kind of growth as well between 2014 and 2015, reaching around 310,000 heavy-duty units.
North America is essentially three countries for us, Canada, the U.S., and Mexico. When you split it down, we can also see that it's primarily U.S. that is growing. Both in terms of size, obviously, but also in terms of growth it's primarily the U.S. that's pulling. Let's not forget Canada and Mexico. They are substantial markets. Put together, we're talking about 50,000 trucks, roughly. There are not that many markets in Europe or the rest of the world for that matter that hit 50,000 trucks. In terms of the group's performance in North America, the recent years have been good to us. We have improved our market share, we have improved our penetration of our captive components. We have improved our performance overall. In addition, we are also shaping the industry.
We are leading the industry when it comes to, for instance, introducing the automated manual transmission, the I-Shift on the Volvo Trucks side, as well as the mDRIVE on the Mack Trucks side. From an aftermarket perspective, again, building on some of those captive components, we increased last year with a rather good number, 18%. We see no reason why this should not continue. The market is pulling, that's also, of course, important to trade off this price versus volume balance, which is always in focus for us. Right now with the order intake, it's very important to make sure we get the right price realization in North America. What we've done the last, let's say, five years in North America has a lot been also around distribution. Distribution in North America is exceptionally important.
It's always important because if you ask a customer basically anywhere in the world, the number 1 buying criteria of when choosing a truck is actually what kind of network can you offer me? The truck goes to the network that often, right? In North America, there's no single district or no single point which covers more than 1% of the country, if you take the U.S. as an example. Therefore, having a consistently performing network which has the right coverage as well as the right performance is critical. It's critical in all countries, but it's particularly critical in the U.S. We have expanded our network quite a lot. As I'm sure you know that in the U.S., as an example, we don't own a dealership.
It's private money that has come in, and you can see quite impressive expansion numbers here, 100% more technicians, 60% more salespeople, et cetera, again, comparing 2014 with 2010. $435 million of private capital being injected into our network. It's, of course, extremely pleasing to see that in 2014, those investors or those dealer principals had the best year ever in terms of profitability last year. As I said, we are also shaping the industry in AMTs, and we have, which I think Olof was clear on in the Q4 report, a very positive momentum with the Mack brand. We have revitalized the Mack brand.
We are number 1 in a number of important segments, both the historical ones, like for instance, the refuse and construction. We also see new kind of segments like the natural gas, where the Mack brand now plays a leading role. We have great hopes for Mack going forward as well. All-time high after-sales in North America per vehicle in operation. That's a key measurement for us on the aftermarket side. How much do we sell per vehicle in operation, which is defined as basically how many trucks are rolling in a particular country that we have sold over the last 10 years and that are still on the road.
Of course, on the image side, remember that the U.S. is in a market where both the Volvo brand and the Mack brand is on a positive trajectory, but it's also a market where, for instance, the Volvo brand is not in the number 1 or number 2 position, which generally it is in all other major markets in the world. We have more to do in this area. These are some of the aspects of North America then. If you move a bit south to Latin America, right now the market is not exactly in the same position as in North America. In general, if we take Brazil, which is the biggest market in Latin America, the GDP growth is not exactly the same, or at least the forecast is not the same for this year as has been realized in the past.
There was also a recent change in the Finame rules, which are quite important when it comes to stimulating the demand for trucks, therefore we took down our forecast in the last quarterly update. We are, of course, monitoring this on a daily basis. We are, of course, assessing on whether or not that is the right number. Right now we have no reason to change, and if there is a change, we'll come back in our next quarterly update. The other markets outside Brazil, Chile, Peru, Bolivia, et cetera, if you go through them, it's not as strong this year as it was in previous years then. That's our estimation. One of the things of Latin America for the Volvo Group is obviously that we have moved from strength to strength pretty consistently in Latin America over the last few years.
You can see behind me two quite impressive graphs. One is showing the market share, you can see it's basically a straight line going up, one is showing the population. Of course, it's also given the market growth then going up even steeper, you could argue. Of course, that is a wealth of opportunity to even more than address the aftermarket. Here we will be bringing in, of course, both the basics, which we already have with the parts and the service and the contracts and all of that, but also, of course, as the market matures, we have a wealth of portfolio of ideas and opportunities and services and offerings that we can pick from the rest of the group. That's one of the advantages of being part of one of the largest players in the industry. Volvo is the image leader.
I'm sure you're following this very closely. Not only are we the image leader in the truck side, we're also extremely well appreciated employer in Brazil. Not only when you're measuring the automotive industry, but actually if you measure across all industries. You can see also here that there's a bullet point saying that there's a price pressure, of course, given the downturn, that's going to be the situation then. Given that, a few of the priorities for us in Latin America this year then is, of course, to make sure that we capture the aftermarket. Of course, we will sell. We'll make sure that we defend our market share and try to improve it even further. We also need to even more increase our focus on the aftermarket. Not saying it hasn't been there before. I'll just give you a few examples.
You can see that we have expanded our network in Brazil, and you see quite impressive numbers there as well, +28% on the outlets, even higher numbers for the service base and the technicians, et cetera. In addition, opening of new facilities in other countries, in some cases single branded, in some cases multi-branded or dual or multi-branded. As I said, also in terms of driving penetration then, taking what we have already available in Latin America, but also picking from the rest of the Group's portfolio of services and offerings then. In addition, we should not forget the fact that we have recently introduced the new Volvo range, the one you saw being produced out here in Latin America, in Brazil. And of course, we need to manage that introduction in a good way, given the market situation.
We need to make sure that we establish the right price point, and we need to make sure that the network is prepared to take care, of course, of that truck. So when we do a launch, it is not just a matter of having an event and saying we have a new truck ready to sell. It is also making sure that each technician is prepared to serve that truck when it comes to the service point. And that is actually the bigger part of doing a launch, is making sure that you are prepared to serve. So that is Latin America. Let us move to Europe. In Europe, what we have said in terms of market forecast is that we expect a moderate growth forecast for 2015. Obviously, building on the geopolitical situation, the economic environment, et cetera.
Europe is to a very large extent, a mature market, and the development is generally linked to the economic evolution, of course, which is slightly different then from the developing economies. We have also seen good starts in a number of the countries in 2015, and I have listed a few of them there. Germany is one example, U.K., et cetera. And we also have seen a slightly slower evolution in some of the other markets then, for instance, France or Belgium and Poland. So that is how we see the start of the end. When we look at the Group's performance then on some of those key markets, you can, for instance, see the market share evolution on the bottom left there in Germany.
And of course, it is very pleasing for me to have seen the January results then in 2015, knowing that they are significantly better than the numbers that you see on that graph then, which was end of 2014. In terms of our performance, last year Volvo Trucks took market share, and generally in Volvo Trucks, the new range is exceptionally well accepted by the customers, both on the European continent, but also, of course, in other places where we are launching it then. We have seen good improvements in Germany, and Germany is the largest market. As I said, that improvement is continuing into 2015 then, from what we can see. On the Renault side, we lost some marginal share last year. We have lost some momentum with the Renault Trucks brand.
We had a later introduction for Renault Trucks than many of the other brands in Europe last year. That has taken a small toll on one hand. The other hand, we now have a number of areas where we are working very hard, and there are a number of actions which we can see already now giving results. We are very strong, for instance, in the second, third largest country in Europe, which is France. You can see there on the curve that it's starting to flatten out and bending up then. That's the idea. Of course, Volvo Trucks is very strong in the Nordic region. Again, last year, we were number one in the Nordic region.
Some of the key improvement opportunities that we're working on the European continent, is to come even closer to our customers, to make sure that we simplify the organizational structures that will drive speed. It's easy to say, but it's difficult to do. It's very important when the customer is standing in front of you at the moment of truth in the service workshop, it's very important that the person who's standing there knows exactly what to do and how. Same level of detail that you have seen in the factory today. Remember, a service workshop is actually a service factory. That needs to be clear all the way out. Of course, we have made these huge investments, which we've talked about in the new ranges, and we are there to take share. Make no mistake about it.
We have a big network all around the world, also in Europe. Part of it we own. Of course, for the part we own, but also for the part we don't own, we need to make sure that the customer gets the best retail experience. We are training also the workshops that we, let's say, don't own. We train those mechanics. Of course, we also train our own mechanics and salespeople. We need to improve our retail operations even further. That is key. That is the moment of truth. I took some time and elaborated on Renault Trucks just now. I also want to share with you, of course, what are we doing then to boost the Renault Trucks performance? We have this new fantastic truck, the truck of the year. Okay? The truck is great.
It also is recognized and demonstrated by our customers. That, of course, will have an impact to a much larger extent than before, we believe, on the residual value of the truck. If that is true, then the customer gets a better equation and is willing to pay that extra margin or to buy more trucks. That's the equation seen from the customer's point of view. We will take share with the new range because it's a good truck, and also, as I mentioned, because we have a number of services connected to that truck, which were not enabled before but are enabled now. For instance, when it comes to connectivity. Optifleet, which is the Renault Trucks' telematic solution, is one such example.
If I go back two to three years, we have 10 times increased the penetration or 1,000%, to sort of put it in quantitative terms. In addition, as you know, we have combined the service network in a number of the countries in Europe. That takes time to do. It takes effort. We're shifting around, now we can see the benefits of that coming up. That is also something, of course, we will leverage for Volvo Trucks as well, but not at least for Renault Trucks. If I remember well, we have increased the number of service points for Renault Trucks with 34% year to date than compared to what it was a couple of years ago.
In addition, of course, as with all new automotive products, there is something to do on the product cost side that we are working on the industrial side of the equation. That will also drive performance, will also help us to boost the Renault Trucks volumes. Moreover, in the European context, as with the other parts of the group, we have a structural cost base that we need to address and we need to [improve]. There are a lot of activities going on to address the structural costs within the selling area in Europe. This is an area I was planning to go slightly less deep in Eastern Europe, Middle East, and Africa. Maybe suffice to say for now that one market which is very difficult right now for all the players and for us is obviously Russia.
You can see the dip in market share there. We had and still have a euro-based price list. Some of our competitors had a ruble-based price list. If the only measurement is volume, yes, that's what it looks like. If you think about profitability, I'm very happy that we had a euro-based price list. If you look in South Africa on the left-hand side, you can see a continuous growth, you can see that we are around 26% of the market in South Africa then. In terms of the brand, it's roughly the same story. The Volvo Trucks range is extremely well accepted, as is the Renault Trucks, where we have launched it. Of course, from a performance point of view, there's more to do on the Renault Trucks side.
On the UD Trucks side, we have a phase out in these markets of the, let's call it the current offering, we have a phase in of our new Quester truck, which I will come back to in a few minutes. The focus in this part of the world is going to be for us to consolidate our strongholds. South Africa, that I spoke about, is one of them. In addition, we need to think through and are, of course, already taking action on Russia. Turkey is another big market where we need to define the path going forward. Also Algeria, which is about seemingly, potentially, changing legislation in terms of what industrial footprint that is required in that country.
These are some of the major markets where we have a big share of the market in many of them, where we need to think through exactly how we want to set it up. The key though, here is going to be selection, because there's 100 countries here in this region. We need to select which are the growth markets in Africa, for instance, or in Middle East that we want to place relatively more emphasis on, and which ones do we want to, let's say, not forget, absolutely not, but not push as hard. We can't be putting the same priority on everything then. One structural change that we're about to do in this area is to make sure that we move our regional setup into the market.
Today it's set up in Western Europe, in Sweden and in France. Here the idea is, of course, to come closer to the customer. One example of doing that is to move the regional setup into the market that it serves. For Asia and Oceania, it's also a lot of countries. I'll split the discussion in a few buckets. If we talk about Australia and Korea, these are mature markets. For instance, the Korean heavy-duty market typically varies ±500 trucks. It's around 11,000 heavy-duty trucks at any given point in time. They are for us and for many other players, important profit contributors. I'm very pleased about the market share evolution there. You can see Australia on the left-hand side as well as Korea in the middle. It's all going roughly in the right direction then.
For Southeast Asia, of course the markets are growing with a GDP of normally around 5%-5.5%. In terms of truck terms, we have not seen exactly the same growth path the last one or two years as has been the case in the past. We had some political turmoil, for instance, in Thailand, we had it in Indonesia and so on and so forth. Of course, looking forward, with potentially the opening up of mining and other activity, we'll see. Right now it's below the historical growth path. For India, there's clearly a revival in the heavy-duty market, and also potentially an opening up of the mining activity, which has been more or less restricted from the government for different reasons recently. I'm sure you noticed also the lowering of the interest rates the other day in India to further stimulate.
There are numbers coming out recently which talks about GDP growths which are quite high, in the range of China or even higher for this year then. In China, speaking about that country, we see a lower European segment. Again, remembering that the European segment in China is very, very small. The reason for that is that these segment in China for the European imported trucks is tightly linked to infrastructure and housing. That is a market which right now is not at its peak in China. In terms of our performance then, Volvo has been the number one brand in Asia/Oceania for a number of years. We have strengthened that further, and we are number one in most of the countries in this region.
When it comes to the UD brand, which I'll come back to on the next page, we had some teething issues on our new truck, as well as some market restriction issues, which I'll cover soon. For Mack, which is essentially in Australia for us in this part of the world, we see an improving performance. Last year was all-time high in terms of unit sales in Australia. For the Eicher brand, we have many strengths. We have the bus side, which is growing heavily. We have the export side, we have the light and medium duty side, and of course now with the launch of the new PRO 6000, we are focusing even more on the heavy duty side. I mentioned the new Quester truck, and I received some questions on that during the day so far as well.
What we have done is that we have so far limited the very broad offering that the Quester enables. So far in the market, it's been an 11 liter, 6x4 combination. That's it. We wanted to sort out and secure the potential quality issues and the industrial matters as well as the market points. We see that opening up now, and therefore we will broaden the offering on the Quester this year. We'll add the 8 liter engine, we'll open up the 4x2, the 6x2, the 8x4, the hub reduction axle, and all the different combinations that the Quester platform is built on. That together with sorting out some of the market issues, because we have seen some increased protectionism in this part of the world, will hopefully help us to drive growth.
At the end of the day, the most important thing is, of course, that the truck delivers in the eyes of the customer. Therefore, I'd like to share with you this example. This is the most demanding operation that this truck will be exposed to. It's a mining operation. It's an advanced customer, which has a lot of equipment in Indonesia. This test has been going on for many, many months. What the customer has done, not us, what the customer has done, is taking the Quester and putting it head to head with the current, let's say, incumbent that this customer is using, which happens to be the market leader in Indonesia. The data on this page is not coming from me or the Volvo Group, it's coming from the customer.
Without going into too much into detail, if you have 14% higher payload and 11% fuel consumption, which is better than the next guy, obviously, you have to conclude that the truck is a pretty good truck. Speed, acceleration, and of course, also a higher emission standard because we start with Euro III in the Volvo Group, and Indonesia at present is Euro II. On many dimensions, and this is not the only test obviously, we feel more and more confident about opening up and broadening the offering, and thereby also, of course, increasing the volumes. In Japan, last year, 2014 versus 2013, had a good growth in Japan. I think it's in the range of 25%, or it is in the range of 25%. This year, we're expecting more of a flattish evolution.
If I look at the early indications on the market in January and February, it's going slightly up. We're, I think, roughly right there. The market is supported both by replacements, but also construction. There's a lot of construction going on in Japan for two major reasons. One is still in certain parts, like the Tohoku region and other regions, of the Great East Japan earthquake, which happened in March 2011, still being rebuilt. Tokyo was awarded the 2020 Summer Olympics, which Tokyo is preparing for. There's a lot of construction still ongoing. For your information, there is still 100,000 people in Japan that hasn't returned to their home yet, which are still living in temporary housing, three and a half years, almost four years after the earthquake.
We have the Abenomics, of course, with the one first, second, and third arrow, which I'm sure that you are very well informed about, that also drives this market. In terms of profitability, it is different on the heavy duty side and the medium duty side. On the Quon side, the heavy duty, we have a good, healthy business. We have a new offering coming in, and it's also consuming a fair share of aftermarket. In Japan, the customers are very loyal to the OEM when it comes to aftermarket. On the medium duty side, we have a cost issue, which we are, of course, working on to make sure that also that part of the business becomes even more healthy then. We have, as I've spoken to you before about, the Retail Excellence Program, the REX program in Japan.
The summary there is essentially taking the Volvo Group's way of doing business into Japan. How do we sell a truck? How do we serve a truck? How do we take care of our people? Which processes do we have? Which IT systems do we have? Et cetera. It takes some time, but you can see on the KPIs at the bottom that they are going in the right direction. The one on the left is actually showing you how many trucks does a salesperson sell. Unit sales per salesperson or sales force productivity. You can see that it's going up, and the one in the middle shows you the growth of the aftermarket business. We are pretty confident that it's going in the right direction. You can see the market share also, the curve's starting to turn around.
Of course, we have high hopes to improve that even further this year then. That's the seven regions then. If you put all this together, what are then the priorities on the commercial side for 2015? Well, first and foremost, we need to sell and serve. Regardless of any potential restructuring that we're doing or new ideas, et cetera. At the end of the day, there are thousands and thousands of customers that are being serviced in our many dealer points and service points every day. We need to take care of them. We need to leverage, of course, our new product ranges. This is a huge investment and it's time to make sure that we, I wouldn't say harvest, but that we get the payback from that. Optimizing the price volume by region. Of course, that is different.
The North American situation, for instance, is different from the Latin American situation, is different from the European situation, and so on and so forth. Of course, in several of the markets, you can see me talking about an even further greater emphasis on the aftermarket, and that means different things for different regions. That's running the business. Also taking this opportunity to review the business, to create now the Group Trucks Sales, making sure that we implement one way of working, making sure that we structurally get benefits of the new setup. Making sure that we leverage the possibility to sharpen our focus on our brands and our product lines. These are some of the examples in the establishment. Driving retail excellence, I talked about that. Thinking through what offering should we have? What does that brand market product combination look like?
Again, that's an ongoing business. With the map that Olof showed you and that I've also showed you, it's clear that we have more to do to make sure that we get even more bang for the buck in the market. Making sure that we review our distribution coverage, making sure that we increase the performance inside the workshops. Again, it is a bit difficult to transmit that to you on a PowerPoint, but it's like the plant that you have seen. To hear that we have 300,000 ideas per year targeted here for 2015 in GTO is one thing. You go out and you see all the ideas that are coming into reality on the factory floor. That's the same thing at the service workshop.
Last, but absolutely not least, make sure that we drive out now the structural cost and the cost efficiency then. We have a number of opportunities to do that. Obviously as GTS, we have our fair share of the SEK 10 billion program done. There are structural changes that are sort of in the planning and will go on, simplifying the organization and making sure that we have the right size, in this area going forward then. Those are some of the priorities that we have, and the most important ones then in GTS going forward. With that, I'd like to introduce my friend and colleague, Martin Weissburg, who'll take you through the CE part of the Group's business. Thank you very much.
Good afternoon. My name is Martin Weissburg. I'm pleased to be with you this afternoon to speak about Volvo Construction Equipment. I'll be sharing with you the very strong strategic foundation we have and how it links to the priorities of the marketplace moving forward. We'll be speaking about the obvious correction in the emerging markets for the industry, but for us as a key participant, and the impact that's had on our results, especially recently, and also activities started a while ago to drive profitability improvement. Short-term cyclical activities, but also the structural activities, and then some summing up. Volvo CE has a very strong strategic foundation, and we have scale. We are a top three participant in the construction equipment industry. In 2014, in our served segments, we're number 2 in units and number 3 in revenue.
We are very well invested, some of the cornerstones of our strong foundation, which I'll talk on each of these now, is our products and our investments made in our product range and technology. A competitive advantage we have, which is our dual brand approach and our dual brand strategy, I look forward to sharing this with you. We're a global company from an industrial footprint, distribution, effective dual brand distribution around the globe. I'll be showing in the slides to come that in addition to the strategic foundational aspects, other aspects that you will see link not just well, but in an important way to the trends, the dynamics, and how the market is moving, and how we're moving not just with it, but quickly. Starting first with some of our products. We have a very strong product portfolio, very competitive in our core segments.
I'll be showing you soon how in our served market, which is quite large, 800,000 units, 70% of those units are excavators or wheel loaders. Keep that in mind, if you would, please. Globally, in wheel loaders, we're the number 1 market shareholder, both brands, Volvo and SDLG combined. Articulated haulers, which is a smaller segment, but we're number 2. Close back to being again number 1. In excavators, which is the largest segment of our industry, we're number 6 with room to grow, and we are growing, gaining share profitably. Number 4 in what we call. We have segregated in the compact equipment and then the general-purpose or production equipment, medium and large size, where we're number 4 globally with an outstanding product and gaining ground.
As Olof has said, as Joachim has said, Mikael Bratt, and others, as a group, and at CE, we have continued to invest wisely in our product line, listening to the customers and driving things ahead. Not least amongst those has been, from a regulatory standpoint, very successful launch of the Tier 4 Final engines. Already with almost 4,000 units in service. Some of these already with 5,000 approaching 6,000 service hours. Very solid quality. Industry-leading technology. We continue to invest in this product lineup, new ranges, new products, upgrades. Last year, we concluded the acquisition of the Terex truck business, which is the Terex rigid truck and the Terex articulated hauler, which are now part of our product portfolio as well.
The marketplace has indeed shifted over the years, we've talked about this on the truck side, and there's some parallels to the construction equipment side too, as we look at the value proposition that customers look for as the markets themselves have shifted. Again, as you think of our served market of about 800,000 units, which I hope you agree is quite large, about 70% of that, or 550,000 units, fall into what's more the value segment. The remaining 30% more into the premium and high-end segment. We cover all of those value propositions, increasingly adding to that. If you start then with our SDLG product, Second, one of our two brands, Volvo and SDLG.
It's the company that we own 70% of, Chinese-based manufacturing, number 1 manufacturer of wheel loaders in China domestic, continues then to drive, offering that value proposition, very important in this large and growing market, not just in the developing marketplaces, but increasingly, as I'll describe, in some of the mature marketplaces as well. Then the Volvo brand, if you will, on the upper right, especially with the larger equipment, the premium product, the large production pieces, premium pricing, strong aftermarket business, the heritage of our company that we continue to leverage in a very strong way. However, one of the trends that I'll describe is that even in the premium segment, one size does not fit all.
We continue to work on our product positioning and taking the Volvo branded piece more with product cost reduction, but always maintaining the brand promise, the brand equity, durability, quality, reliability into the high-end segment. What sells perhaps well in Europe may sell less well in North America. These are shifts that we've been making. On the value brand, as I will show you, we are expanding that offering with some of the shifts that we're making from traditional Western manufacturing and design, more so to China. We have the products. We cover the range, premium, high-end value, increasingly as we add. How do we bring this to market? We at Volvo CE and in the Volvo Group, we have a competitive advantage.
We have the two brands, we have the products, we have SDLG, which is a premier leading Chinese domestic manufacturer, very strong in China domestic marketplace. We add to that, outside of China, the Volvo CE distribution network, one of the strongest in the industry, well-capitalized, well-established, multiple points. This allows us then to drive our dual brand strategy, which I'll speak about more in a minute. First, let's speak about our export strategy. Today, SDLG is in the number 1 position of Chinese domestic manufacturers when it comes to export. Today, we're in the number 1 position. Our goal is not just to stay number 1, our goal, and what we will accomplish, is to expand our lead and grow this, because this is our competitive advantage. We have the Chinese manufactured product. We have the outside of China mature market and developing market distribution.
To give you some figures on this, both brands today, we have dealer groups or ownership groups, if you will, of 360 dealers. Those 360 dealer groups, be it family businesses or whatever, combined represent or provide 2,600 dealer locations, sales, service, parts, combination thereof. As you look at the global map and think 2,600 touch points to customers, very strong. Within China, the SDLG distribution network and the Volvo CE distribution network are to 98% separate. Outside of China, what we're doing, and will continue to drive, we're leveraging the SDLG export opportunity by taking these strong, well-established Volvo CE dealers and having them add to their business structures an SDLG distribution, typically separated, but under common ownership and perhaps with shared resources. Today, of the Volvo CE dealers not in China, say 200 plus or so, about a third of those are also SDLG dealers.
In Latin America, this has been going on for a few years, quite successfully, not just in Brazil, but throughout. In Southeast Asia, it's been going on for a while, and we continue to build then, and we measure our dealers not just on Volvo share, but also on SDLG share. A recent accomplishment, and surprising to many of our competitors, is that in the United States, this time last year, of our Volvo distribution network, not one was also an SDLG dealer. Not much of a demand in the U.S. for Chinese-manufactured construction equipment, to be fair. As of today, we have 20 SDLG sales points in the United States tied to Volvo CE dealers, and it's growing by five every month. A year ago, we were selling zero SDLG wheel loaders in the United States.
Today, we've penetrated that, while it's very small still, but strategic, we're the number one Chinese importer of construction equipment wheel loaders into the United States. This is an important competitive advantage that we have around the globe. It's evolving, it's developing, and we're pushing a lot of resources and focus on this. It's a key part of our strategic initiative. Every Chinese manufacturer, including SDLG, which is us, has an export strategy. We have the export strategy coupled with global distribution. As Joachim said, it's the promise of the aftermarket. It's the uptime. It's the reliability. Even the best products need repair and service and parts. This is what is going to allow us to continue to drive this unique competitive advantage. A little bit more about the product, if I may. This chart is our served market in units for the entire industry.
Again, picture 800,000 units or so. You can see that wheel loaders and excavators, about 70% of that. Why is this important? Because we're leaders in wheel loaders and excavators. Let's talk about this. Wheel loaders, again, we're number one market share, both brands globally. Articulated haulers, number two. Excavators, while we're not yet in the top five globally, okay, we continue to drive and grow on both the large equipment, the medium size and large, 10 tons and larger, and on the compact, which is a large and growing market. I point out the excavators because it's a very important and significant growth opportunity for us that we're driving to with significant focus and energy. We have the focus on the core products.
We continue to invest in our core products, we continue to work with and train our dealers to sell these core products and support them, both brands, all countries around the globe. We have the products, we have the value coverage, we have some geographic strongholds. We're not completely satisfied, as I will show you, with how good we are in every part of the world. Again, this is our served market, okay? We're not in Japan, but we show Japan because of the product we sell, this 800,000 units, a lot of it's sold in Japan, but we have none there. Fortunately, we have a very strong truck business in Japan. China, even in a down year last year, was the number one market, we'll talk about China with more detail coming forward, followed by North America, Europe, and you know the score.
We're in all these places other than Japan. In China, again, Volvo CE is number one in market share, both brands combined. In Europe, we're number four and gaining ground. In greater EMEA, we're number three. In Europe, we're number four, and we're number one in medium size and large machines. Volvo branded premium and some high-end production construction equipment, high quality, premium product, very strong aftermarket business. In North America, we have significant opportunity, and we're not at all pleased. In excavators and in excavators around the globe, North America, all products, but excavators in particular, we're very focused and we know how to grow it, and we know how to do it with our dealers.
From the past few slides, you'd say, well, everything's quite good for Volvo Construction Equipment, but as you know, we've had a difficult year last year and a quite difficult fourth quarter. Part of this is cyclical. Part of this are the structural things that have already been announced that we're fixing. I'm going to talk about first some of the emerging market activities that have affected the industry and have certainly had a big impact on our financial performance. This is clear. The red line, this is unit sales, served market. The red line is China. You can see a dramatic growth up and equally dramatic growth down. As you know, our view is that China unit sales, and again, still the single largest market in our industry. Even in a bad year, quite big.
China unit sales in 2015, as we've said, we feel will be down from 2014, we see some points of stabilization, and we are leaning into China, not away. The blue line, the rest of the BRICS, let's say. Again, where we're impacted. Brazil, Russia, India, Indonesia. Not the same dramatic, right, but still down. Impact on industry and certainly on CE. Let's talk more about China specifically. As we've stated, as Olof has stated, this correction has had an impact on our results. We wanted to share with you a little bit more detail on this. This compares 2011 versus last year, 2014, both brands' revenue mix. As you see, in 2011, 31% of our revenue was from China. Last year, 20%. Both in units and in revenue, a drop of almost 50%.
In those good heady days of strong growth in China, those were a lot of larger pieces of equipment, especially on the Volvo side, excavators, bigger equipment, good margins. The mix now has shifted. Still a lot of good size excavators, but more of a balancing between the compact equipment and the larger production equipment. As you see, though, while the impact has been significant for us by this chart, for Volvo CE, China remains, even last year, number two region for revenue and number one region for units. In a few slides, we'll speak about what we're doing in China to secure our base and leverage our investments there. The geographic changes, the emerging markets had an impact on us. Like many of our other industry participants, mining's had an impact on us.
As you may be aware, Volvo CE does not manufacture or sell the very large mining equipment. We're in the 100 ton and lower. We're not in the very large, but we support and are very active in the mining industry, of course. Okay. Not just in China, but also in rest of Asia Pacific as well. You can see, similar to the China pie charts, mining went from both brands' total revenue of some 21% to almost cut in half 2011 to 2014. This has an impact on our earnings. Mining pieces are larger pieces, bigger pieces, premium product, more margin, stronger aftermarket. We share this with you so that you have the visibility. Okay. The next question is: what are we doing about this? We don't sit and just be victims of this.
We have been taking action, we are taking action to drive our profitability. I now show the same slide that Olof started with earlier, Joachim has shown recently, same information that Olof showed, but split by our two brands. Again, this is our internal reference point. As you can see, we don't grade ourselves so well. We're not happy with this. We're driving past this. This gives us, and we have the focus of the targeted and very selective activities and solutions to drive and not kid ourselves that the global average is going to pull us through. It's good to have good global averages, we have to perform in each region, in each product line, and each brand. We have that focus, and we have the activities to drive that in a very good way.
To be more specific, I'll speak about some of the activities. The list is quite long, just to give you the highlights. I'll talk about it both short-term profitability improvement or cyclical, more long-term, some of the structural. On the cyclical, starting many quarters ago, we started hitting the brakes on spending and expenses, cutting back the frames, selling and administration, R&D, same as the total group. Also, managing inventory in line with demand. Some of these activities, in I think a very good and responsible way, showed up in the fourth quarter as our absorption then was less. I think we've managed inventory down in a reasonably good way, but not at the expense of being able to respond quickly to good opportunities or increases in demand.
We've maintained the flexibility and the ability to respond to upticks, not if they come, but when they come around the globe in our marketplaces. Common sense indeed, we're much sharper and analytical on managing our mix and driving absorption factors mindful of the currency, some of which are in our favor. On the industrial side, as Mikael Bratt pointed out from a group perspective applies to CE as well, driving industrial efficiency both on a variable cost a fixed cost. One of the messages that I want to give is that these aren't new activities because we had a bad fourth quarter. These are activities we've been driving for five quarters, we continue to accelerate these activities with more to come. Now more on the structural side.
Before I go through the slide, I think one of the most strongest examples of structural changes, you could even say cultural changes at Volvo CE was, as we announced last November, was product portfolio changes, which we will admit we had been a little slow perhaps to react on. But last November, we announced the complete exit from the milling machine business. Why? Because it hadn't been a money maker for us for years. Others do it better than we do, quite frankly. Refocus those energies on our core products and what customers want.
Even bigger for us was ceasing on Volvo-branded backhoe loaders and motor graders, the design and manufacturing as and where we had been doing it for a generation plus in our Western facilities, and switching the design and manufacturing of backhoe loader and motor graders to our SDLG facilities in China to leverage that investment. That's part, again, of our accelerated SDLG export strategy to still in select markets provide backhoe loader and motor grader SDLG-branded value product, not the premium product. That's an example of product positioning changes. The premium product, quite frankly, was not our best investment. So structural. More sourcing from China, leveraging our investments there, finished goods, but also components back into the Volvo system. Product positioning I spoke about. Industrial footprint changes with the backhoe loader exit. We're exiting the CE side of our plant in Poland.
We've taken down capacity throughout our industrial network over 2014 and 2015. As announced last year, headcount reduction tied to the product shifts from Western to China, plus other non-product related headcount reduction just for efficiency measures of 1,000 Volvo CE employees, which is progressing ahead of plan. On the commercial side, and I'll shortly speak more about China and North America because both of them deserve more attention. We're driving our activities in both those markets, rationalizing the product portfolio. Again, best examples having been the backhoe loader and the motor grader Volvo brand. As you'll hear almost at the end of my presentation. More focus, investment, and accelerating our activities and our energies in aftermarket business. With light truck, it's big, it's profitable, it's important, and we want to get more of it.
But we have to continue to invest in the next generation of the aftermarket. China, what are some of the activities there? You see on your left-hand side what's the situation, which you all know if you've read a paper in the last nine months or so. Significant money for our industry, excess equipment inventory sitting, low capacity utilization at the factories industry-wide, but low equipment utilization, monthly hours that the equipment is running. So in China, we have a few periods still yet for us to work through this correction. But what are our activities we're doing? Still one of our largest and most important markets that we're leaning into and leveraging our investments. We continue to take a strong, aggressive commercial view of this. There's still going to be a spring in China. There's still 200,000 pieces of construction equipment sold in China.
We still have the strong dual brand presence in China. We will continue to leverage this, maintain and grow our share, continue to drive on our strategy in China. We do need and are continuing to work through this downturn, which is not easy, but we have the skills and the resources to do this. Also in China, driving the export business, as said, leverage our industrial investment, which is good and strong, the expansion of our technology efforts. Three years ago, we launched our new tech center in Jinan. We continue to recruit, invest, and hire the best and brightest engineers in China because, again, as a reminder, we are a Chinese construction equipment manufacturer in addition to being a global equipment manufacturer.
To be big and strong in China, you have to be in China, not just with manufacturing, but with technology, product development, and support. North America. Solid, quite good conditions right now. This year, 2015, flat to reasonable to last year. Obviously, for us, not our traditional home market, even though we've been there for quite a while. Right? Strong domestic competitors who take strong notice of our dual brand strategy and take very strong notice of the quality of our products. We continue to drive distribution development in the traditional way, but also North America. In North American market, the rental business is a very important, large, and strategic aspect. We continue to work with our dealers who are already leaders in this to develop their rental fleet capabilities within their dealerships, we provide them the tools to do this.
It's one of the keys to us driving our excavator share in North America. Of our regions, North America is one of the strongest for us in aftermarket. Again, a testimony to the strength of the Volvo CE distribution network in North America. We continue to push that and leverage it. Dual brand strategy that I spoke about. I think North America is actually one of the best examples of where our changes in our product positioning are not just important, but are strategic. If you recall the graph with the premium high-end and value, North America is a good example where we are shifting the product cost and product specs of some of our premium products, Volvo branded, into more of a lower spec, better price formula because we haven't been gaining the share that we need in North America.
The customer's voice needed to be listened to a little bit more closely. Again, within the same product category, but driving that down. The focus in North America, as we have been doing with some significant success last year, is increasing share and doing it in a profitable way. Much like in the truck business, certainly in our bus business within the Volvo Group and in our Penta business, at Volvo CE, it's not just about the hard product. It's about the complete Volvo Group offering, the integrated commercial offering. We take the hard product that I've described and the markets that I've described, we add to that the capital. Volvo Financial Services is a competitive advantage of the Volvo Group. Perhaps not unique to other large construction equipment manufacturers, but not all of them have a top captive.
This really allows us to drive the business, even more so than trucks, I would say. The sale of construction equipment, especially in mature markets, is very much driven by financial merchandising and programs, and has been for a while. It's also important because it allows us then to not just gauge, but to provide the capital to our distributors for them to continue to build their rental fleets. We take the hard product, we take group capital, we add to that our strong focus on the aftermarket, and then we drive this further as we go into the next generation, which is connectivity, very similar to what Joachim Rosenberg spoke about. Takes me then to my second to last slide. The market is shifting. Volvo CE is staying with that and getting a half step to a step ahead of that. It's away from selling iron to selling productivity.
Our customers are telling us, we're increasingly providing solutions where it's more cost per ton moved than it is how much does that excavator cost. The ability to do this and do this well requires data, requires analytics, requires the connectivity, telematics, machine control, smart machines. We're here to tell you that we are investing in this increasingly. We're driving these solutions because the market is moving this way, and the speed of change is increasing, and we're keeping pace with this plus. Summing up then, as Olof said, we're well invested. We have the assets. We have the products. We have the coverage with our dual brand strategy. We have the distribution to make the sale. We have market leading positions from both a product and certain geographies.
We have the SDLG that leverages all the above, and we have the technological leadership that we've invested in for decades and decades. This is that solid strategic foundation that I hope then that you see and agree to a large extent links and ties to where the market is and where the market is moving. We're not happy with our financial performance, and we have cyclical aspects, and we have structural aspects, and we've discussed today the strong actions that have started not just recently, but a while ago. Okay? We need to continue to drive this profitability. As Olof said, and as Joachim said, we are driving to the green. We're driving for the green, you can say, but we'll keep it on the fairway. These activities are well underway. They're being executed on now with more to come.
We have the traction, and we have the momentum to drive towards our goal, again. This ends my presentation. With that, I hand it back over to our CEO, Olof.
Thank you so much, Martin. I am not only, as I said, closing, also now starting the presentation that is closing the CMD for this year. What I would like to spend the next 20, 25 minutes with you is actually to talk about the fundamentals of creating a stable and profitable and successful group going forward. In order to do that, if you put yourself in a helicopter and look out, what kind of ingredients do you really need to have in order to build? What platform do you need to have? These are the basic platform that every company needs to have to enable long-term success in the market. You need to have the leading brands and products for each segment. I think what we have shown today, what Joachim has shown, what we have seen out in the production, look at the industrial footprint.
We are not only talking about us invested in the hardware, it is all system that benefits the platform. I think you have, and you follow us very closely, and you can see all the novelties that we come out when it comes to product and product features, but very much connected to our core values in terms of safety, quality, and care for the environment. Also the add-on features that we do in all our new launches that we are doing. Finally, the global distribution presence and the global distribution network that is absolutely needed to do that. It is good to have all those pieces one by one, the real trick is, of course, to combine that if you really expect to be a global player and combine it in different dimensions, and I will come back to that a little bit later as well.
The direct feedback is, of course, for the centerpiece of this picture. The direct feedback, if you are successful or not, is the market share. It is how successful you are around the globe. Here is, of course, something that is important to create a critical mass in the regions that you are in. If you look at those consolidated numbers, I take the heavy-duty trucks now as an example, you can see that we do have that critical mass. We are 20 plus in all the regions with our combined market share, that is very important. Why is that important? It means that there is enough volume there for our dealers to make money, to have the balance sheet in order to continue to invest and grow with us in the different regions, that is extremely important.
The dual brand and the combined market share is of very little value if you can't manage a house of brands. I will come back a little bit later how we are addressing that issue, because that is extremely important. Having that critical mass then has transformed into, those are numbers. You can see the number of touch points or service points we have in the different regions. As Joachim has said, and as you know as well, we are growing that population every year quite substantially. Again, not only from a numbers point of view, rooftops, but also with content in terms of the people working in it. It is very important to look at the distribution network and service as a factory. It should be the same kind of approaches we have seen here out in the factory of today.
Finally, looking at the products. If you then take the different aspects we have, adding all those products that we have gone through, if you take that in combination with all the investments we're doing, well, then you have actually our basis, our platform for moving forward. If you then add to that a competitive cost base, which is then the huge work that we have been doing over the last years, of course that is what we have to build on, and that is our prerequisite to take the next step beyond 2015 and into the future. It's also good to recognize that the large investments, of course, investments in this industry comes in waves, and those are not quarterly waves. Those are 10-year waves.
We have one 10-year wave behind us now, both in terms of the product side, but also in terms of the investment in the industrial system. Of course, these enormous investments we have done has been a burden to our financial results over the last years in combination with everything else we have done. I talked about the house of brands, we are extremely proud. As I've said many times to you, I think this is one of the key assets that we have. The foresight of previous management in the Volvo Group to really go from local or western regional, going really global in this industry has been tremendously good. This sort of development has also come to a cost. That is, again, what we're addressing with the SEK 10 billion program.
This asset now it's our responsibility to take to the next level because there is no other competitor that have that kind of span all the way from the basic segment all the way up to the premium segment with the Volvo brand. It takes a lot to create and also to manage this house of brands. Let's take an example and focus in on the premium and on the high-end segments. That's the Renault, that's the Mack, that's the UD in Japan in particular, and it's then the Volvo brand. How do you deal with actually creating the scales of economics and making sure that the house of brand is an asset and not a liability? Well, the first step is to look at the high volume components and the key core components, we have talked about this a number of times.
When it comes to the engine, the engine platforms, we talked about the transmission, we haven't talked that much about the blood system of a truck. The blood system of a truck is the electronic architecture. Today, there is so much intelligence built in in a truck, and the way the whole truck is managed is so much dependent on the architecture you have in the truck. It decides the feature levels. It decides so many things, how you run the engines, and so on and so forth. These three together, we have been working for a long time. On the engine platform, we have moved from always, okay, Christine, now it's 18 to 2, and then we added one on the medium duty, so we have basically three engine platforms.
The transmissions we talked about, we have basically one platform for the automatic manual transmissions, that is the mDRIVE and the I-Shift, and so on and so forth. It's not only within the truck business. We're also then utilizing that both on the buses and on Volvo CE and, of course, of Penta. The whole group is sort of forming around this volume. As you can see from a value point of view, we have moved from 5% in 2001, and we are up now to 65% value commonality within the group. Will that ever be 100%? The answer is no. I will come back to why that shouldn't and should never be 100%. The next step of managing this is, of course, to see how do you actually develop your trucks. Here the CAST, the Common Architecture & Shared Technology comes in.
On the left-hand side on your slide, you see this green, yellow, and red truck. Basically, the system is that you decide in the beginning what is absolutely common, and that is green. That is the common architecture really where you can scale up tremendously. Engine is such a thing. Transmission is one. Also you see some of the structures, you can really benefit from a lot of commonality. There is yellow one, which is variances of that, like the fuel tanks and other things. Then you have what has to be brand unique and what is a differentiator. That is basically, for instance, the cab, the cab shape, and so on and so forth.
What you do then in the third step is then that you add exactly what you saw today, a common production system, a common processes, and also one production flow that takes care of this. That means that you can utilize the scale of the high running components, get the cost down of that. You can design in a much faster way, then you can, at the end, create a really separated and for the customer, a differentiated truck that is exactly to spec, to cost what he wants to have. Then you can also with utilizing the combination of volume and specification, utilize all the investments we have done over the years, thereby managing the house of brand. This is something when I'm coming back to talking again about the greenification of our brands and regions.
Here we have a huge opportunity, we need to work further on that. We have come a long way, as you can see. We have actually expanded 40% in the last 10 years, and portion of them are 30, but here is more to do going forward as well. We're actually starting the same journey now if you look at the basic and the value segment. The benefit of Dongfeng and Eicher together with Quester is not the brands. It is, of course, the brands by itself, but it's not only that. It's also the fact that now we can start this journey also on the value and the basic segments. That gives us a cluster which is big enough addressing a market that is very big in those segments going forward.
Here we are just starting the journey now, looking at the engine, starting at the cab, starting at the transmission, the structures, and so on and so forth. This is something that will be ongoing. As you saw in the previous slide, this is definitely something that comes over time and takes years to manifest. You have to start somewhere. You have to start sometime. We have started, and we will continue to do this going forward. I think this slide shows that we have been successful in that. If you look at the heavy-duty trucks, number 2, the heavy-duty engines, 9 liters and upwards, we're number 2. If you take 10 liters and upwards, if you're interested in statistics, it's actually number 1. Then we have talked about construction equipment, buses, and marine diesel engines. Very strong positions as well. That's good.
We believe there is definitely more to do. By taking the greenification map, as we talked about, and focusing on the different areas, we have the untapped opportunity to move further with that because we have the assets that we believe is the foundation for doing that in the future. What we have been doing, and I've talked to you that many times, it's the 2012 to 2015 period in this company's history, is not only the SEK 10 billion program. It is so much more. It is what you saw out there in the factory today. It is about the branding positioning. That is only a couple of years old. That didn't exist before. It is about the organization, the way of working, the functional. You're awake now, right? This is interesting to see if I can come back on that one.
It is very much about the culture of the company as well. What we have to do now is to make sure that the improved cost base that we will have after this year, which has lifted the profitability of the company proportionately because of general activities, as we said, mainly. We need to take that, combined with the assets I just talked to you about, and focus the activities going forward now into respective business area, brand, and region, and step by step, taking that one. That is exactly what we are looking on, and it has to be very much focused. This is not only about the technology, it's not only about cost reduction, this is so much about culture. You should remember that this company and this group came during 10-ish years from a very specific growth culture, very specific and targeted growth culture.
The board put a growth target to the management, we lived in that environment. That has been very helpful. It has been extremely good in creating the base that we now benefit from, it did come to a cost. We realized that three years ago when we said that the cost base that came with this expansion is too high, and we need to get that competitive. Hence, what then became the SEK 10 billion program. We have to correct that. When we're done going through this now, it has been very much a cost culture during this year. I can assure you, cost cutting only is not a business idea. You need to create a cost-cautious culture that is hungry for making money.
That is exactly what we're doing now, moving in from this period of the company into 2016, focusing on the profit, creating a cost-conscious, but profit-hungry organization that wants to make money. Everyone, at the end of the day, wants to be part of a winning team. I can assure you, we are creating a winning team as we speak. Summing up, I hope that we have transmitted to you, as a team, the confidence that we have that the activity, actions, not only what you have seen today, but the thousands and more than thousands of activities around in the group actually drive us to what we want to achieve. At the end of the day, the theme of this day is closing the gap, and the gap to close is to become number one or number two in profitability in our industry.
I hope you had a really good day, and thank you so much for coming. Now comes the Q&A, and then I will ask my colleagues here. I guess, Chris, I know the line now. There will be microphones handed out for you. Please raise your hands and we will come to you. Come up. Okay. You need a mic.
All right. Hampus Engellau, Handelsbanken. I have two questions. This is maybe simplifying a bit, You've been talking of all of these bits and pieces, and there's a big chunk of cost savings to be generated this year. I would be more interested if you would like to say, what is the major event to really push forward this SEK 6.7 billion in savings this year? Second question is more on a market intelligence side. If I look at profitability for the sector the last three years, it's lower if we compare it to before the crisis in 2009. My feeling is, where do you see competition in moving in terms of cost saving, et cetera, and how do you feel you are going to be positioned compared to them, let's say, after the end of this year? Those are my two questions. Thanks.
Okay. I'm a very generous person, so I let Johan think about the first question, so you get a really good answer, and I'll take the second one first then. Basically, I can say that when it comes to competition and cost savings, we are not the lone people in the world who is driving cost and trying to be more efficient. I think at the end of the day, the interesting point is what is the starting position? What is actually the inherent potential in the activities that you're doing? I must say that without having any comparison, but I can assure you, and as I talked to you many times, the potential coming from this growth phase, going into the cost-efficient move that we are now, is, of course, enormous.
I've always said that when we're done now at the back end of this year with the SEK 10 billion, we are taking an enormous step towards the target we want to see. Will we be there or not? Nobody knows. It depends on where we're seeing. I think also it's important to say that life doesn't stop after 2015. We have already now started to gear ourselves into the next phase in our culture, the next phase in our focus, and that's the Swenglish greenification slide up there. Oh, I'm not quite sure if I followed your question. The 6.5 you refer to the-
I was referring to the SEK 3.3 billion you have already generated, and the remaining SEK 6.7 billion. There's a lot of bits and pieces, and I was wondering if there's a major event that you could comment on that would realize the last part this year.
I think to start with, when we talk about the different parts, you remember it's these kind of fixed cost in manufacturing or structural cost in manufacturing, R&D and SG&A. I would say Mikael came off fairly well and pretty early in this process, and that's why you can see a lot of focus there, and that's also started to show in the SEK 3 billion-SEK 3.5 billion that we have done so far. Also within admin, quite the progress and also to start to level our R&D on the, you can say the right level. So I think I have to actually look at Mikael, sorry, Joachim here as well. Where we are now picking up speed when it comes to putting the selling, the expenses on the right level is actually within the selling.
While at the same time, of course, all the efforts that Mikael is doing is continuing through and also on the R&D. You can say it started a little bit earlier there.
Thanks.
You're welcome.
It's Colin Gibson from HSBC. I've got three questions, and they're all for Martin, so congratulations, you've lucked out. First of all, I wanted to go back to your slide 35. That's the ones with the colored boxes. Now I am actually color blind, so I may have just been reading that slide wrong, but it looked to me as if you were saying that profitability in North America was weaker than profitability in China, which would be a surprise for my earnings model, in 2014. Is that really what you meant? That your margins were worse in North America than they were in China in 2014?
As I recall, the profit, it's a 2014 full year. If you include both brands China, it was better than the Volvo brand alone, where we had the impairment in the fourth quarter.
Thank you. That's clear. My second question was, again, thinking about impacts on profitability at the moment. You talked a bit about the situation in China. What about the impact of the strength of the Korean KRW? Can you say anything about that?
It's.
Your currency expert.
Exactly. No, the Korean won has been working in the wrong direction for us for actually for quite some time. You can say more or less the last 12 months or something like that. Yeah, that's what it is for the time being.
Okay. Thanks very much. Then back to Martin for my last question, which was a more strategic question about Volvo CE. If you tell us you're number 3 in the world, we're going to say, well, number 1 is good, number 2 is good, but number 3 is the first of the losers, right? To believe that world number 3 is something worth being, I guess it would be helpful to understand that number 6 position in excavators, which is of course, the world number 1 product across the whole marketplace. That number 6 position, which sounds quite weak in excavators, how geographically concentrated is that? Are you number 6 everywhere, or are you number 1 here, number 1 there, number 1 there, but just not everywhere?
We have very strong parts, and we have some weaker parts, right? In China, we're strong. Volvo-branded excavator, SDLG excavator gaining strength as well. In the U.S., our excavator has an outstanding reputation, but not a big enough of a population. This is part the rental fleet issues, the dealer issues, but also some of our product positioning. I'd say in Europe, not as strong in excavators are we are in our traditional haulers and loaders. There's room for growth in excavators globally, and we take this as an opportunity. I disagree with if you're number three, I didn't hear you exactly, that you're the first loser.
In a market of 800,000 units, with the critical mass and scale that we have and the products that we have We like our number three position, and we're not necessarily driving for growth for the sake of growth to say that we're number two. We're driving to maintain the critical mass that we have and drive the profitability, and we can do that with the assets that we already have.
All right, thank you.
Hi, it's Rob Wertheimer at Vertical. A general question and a specific, if I may. It's obviously a competitive environment. You're improving very rapidly, and some of the investments you've made over the past several years hopefully starting to pay off. Do you feel as though, can you even tell if you're improving faster than competition? Which is to say, will you be able to keep the margin that comes from all these savings, or will it get price competed away as people also improve and price down? I don't know whether you think price costs will be positive in the next two, three years, or whether everybody improves and it gets down. Specifically North America Truck is one area where pricing maybe hasn't been as robust in the industry, not necessarily for you as people would have expected.
Do you expect that to turn as orders continue to be strong?
I think if I take the general and Joachim, you can take the specific. One of the strategic target we do have, which is still very valid even though we don't follow that up on a quarterly basis, is the price realization strategic target. I think you saw the short out there. Every station you were was setting the strategic target. The first one is that. I must say that give or take, I'm reasonably pleased with the price realization that we have seen, particularly on the Volvo side with the new introduction. That's for sure. I would say that we have, as Joachim said, work to be done on the Renault side.
In general, the culture and attitude has been that now we have a once in a lifetime opportunity and duty to the company to make sure that those new products comes in on the right price level, because otherwise you will have to fight for years before you get the right price level. That we have succeeded with.
I'm not sure I can predict the pricing behavior of the customers all over North America, but if we review some of the facts are that we have the best quality in our products that we have had in a really long time, and we follow that obviously very thoroughly. We're filling those products with more value. The automated manual transmission, the AMT over here is one example. Our customers are benefiting from the best fuel economy they've had in a really long time. The order intake is very strong and our customers, considering the interest rates and considering the fuel prices, are making more money than they have been doing in a long time. If you put all of that together, where I was coming from, I was saying that in that environment, we need to make sure that we realize the price we want to realize.
Okay. Hi, Michael Rapp, Kepler Cheuvreux. Just two quick questions. First of all, more on the long term strategic outlook. Going beyond 2016, to what extent do you think you'll be able to sustain your current industrial footprint in trucks in Europe? Or do you think you'll probably have to trigger more concentration of production volumes in fewer factories than is the case right now? Also talking about scale economies going forward and perhaps foreshadowing a little bit on your next generation medium duty engines for trucks and all other product of yours. To what extent is Deutz still going to play a role in that game? Thanks.
Okay, if we start with the structure, Michael, on the European side.
I think it's very clear that the structure footprint changes that I talked about before here, that is what we have in our plans. No other restructuring activities in terms of footprint questions is on the radar screen. We are working with the plans we have, and we see great opportunities to improve productivity in that existing footprint, and that is what we're going for.
When it comes to the medium duty engine side, we do have Deutz, as you know, as a supplier on CE, and that will continue, and that's the plan going forward as well. Deutz play a role in the total sort of engine setup structure we have, and have done so for a long time.
Thanks.
Yes, Björn Eriksson, Danske Bank. Question on construction equipment again. Coming back to construction equipment. You said you're number three in the world, that's I guess basically that you are number one in China and pretty far from one elsewhere on the Volvo brand. Is it possible to organically grow enough in regions outside China to really take the desired position?
Yes, absolutely. We have areas where we can grow in all of our core products, not the least of which are the larger excavators, which again is a key piece. We have growth ambitions and plans in the compact equipment to continue to grow in the wheel loader segment. We're very strong in the higher end, the larger wheel loaders. We have growth opportunities around the globe, especially in North America, in mid-size wheel loaders and in compact wheel loaders. There's good segments of the marketplace in our key product platforms where we want to sell more, and we have the products. We may need to adjust some of the product positioning and the product cost to be a little bit more competitive and quite frankly, to be more profitable. These are the plans we have in place.
There's certainly the ability and the plans to drive this organically to reach this.
You said, I think back in Q4 that you were break even in China, which I guess is
Very good achievement given the severe market reaction we have had there. That tells us that you are loss-making elsewhere, and Europe has been pretty flattish last few years, and North America is pretty strong. Something must be very difficult for you. You also had a big restructuring program a couple of years back for construction equipment. Again, do you have the size that you really need to have in Europe and North America?
We have significant investments made in our industrial platform. We have more capacity than we're able to utilize right now. We're driving our activities to bring down the fixed costs, right-size the industrial capacity while we drive the organic growth with the good products and in the good markets that we have. Fourth quarter was a difficult quarter, and we made some decisions on inventory, and we took some of the pain in the fourth quarter on this. You're right, Europe is a traditionally and still a solid marketplace for us. We still have products that we have to continue to drive product cost and product profitability within our existing ranges. We have the plans to do this. This is why we showed the colors on the grid. We can continue to drive it to green with focus on products by brand and by region.
Without getting into great detail, we're driving this in the right direction. It's not going to happen overnight, the plans are in place and we're doing this.
Last question, you also said that value segment is now 70% of the market. If you look a couple of years ahead, where do you think value segment will represent this?
Probably getting larger, not getting smaller. Do we think it will go to 80? No. Do we think it's going to continue to pick up? Yes. It's a trend. The ramp up is continually growing so big, but we don't see it getting smaller than the 70%. I guess we'd say it that way.
Where will you take SDLG into Europe?
Excuse me?
SDLG brand into Europe.
We're looking at this now. Our European Volvo dealers are asking when can they start getting some of the SDLG product.
Thank you.
Pleasure.
Tim Rokossa, Deutsche Bank. Here in the back. Hello. A couple of questions as well, please. The first one is, I was actually hoping you can quantify some of the nice slides that you have shown us today a bit more in detail. For example, this 300,000 ideas that you're targeting for this year. Is there somehow a measurable impact of that? I know it's probably bits and pieces here like we've seen today in the plant visit, but somehow like a back on the envelope calculation that you would associate with a certain idea that's out there. Then also for the colored slides that you've shown us, what's your benchmark for that? How do you determine what is a very good performance, what is a low performance, and what's a mediocre one?
I didn't really catch the first part, I think it was for you, Mikael.
I can touch upon that. We will not quantify what 300,000 implemented ideas will mean. I also stated that it's not the number itself that drives, it's the content of the ideas. You saw some example here where you have quite big ranges between the different ideas here. When I talk about driving down 5% productivity per year, of course, those implemented ideas is the key success to accomplish that in connection then with some structural activities and also with securing it through the process maturity here. We would not quantify what that means per idea or anything like that, because I don't think that's meaningful either.
When it comes to the, we need to come up with a name of the picture, instead of greenification picture, but the map where we show all the different colors. Basically, what we have done is that, first of all, we looked at where do we see improvements, where are we pleased with the performance compared to a number of different reasons, but mainly of course internally and see where do we have the opportunities. It's a little bit of a mix, and it's more of an indication where we do see improvement potential and also indicating both to you where we're going to focus on in the future, but also internally. Again, we try to be transparent to show that these regions, brands, is now under scrutiny, and there will be a lot of activities that we need to focus on that.
Maybe two quick ones, one on construction equipment and one on trucks. The announcement yesterday to sell a stake, at least a part of the stake in Eicher, will that have any consequences on your strategy regarding that brand at all with the joint venture? On construction equipment, maybe just quickly touching up on the positive signs you've seen of a stabilization in the Chinese market. Just to really understand the situation, given the capacity utilization that we've seen, given the high inventories that are still out there, is a stabilization really enough in China to change the situation significantly, or would we not require to see pretty strong growth actually?
The first question was very direct, and the answer would be very direct, no. No change whatsoever.
The second question, if I may, Olof, is some small signs stabilization in China, not seeing stabilization in China. China is in a significant correction mode still. Equipment utilization, hours per month that our customers are utilizing equipment, still low. We are waiting to see that come back up before we can comfortably say that we are at the bottom. We don't think we are there yet. In general, though, amidst this downturn, this correction, we are seeing the industry regain its stability and its footing. Dealers are much more skilled at used equipment remarketing. We see the strengths of the channels coming back up. We are seeing some of the larger customers, the big fleets, starting to place the orders for infrastructure. We don't yet see that trickling down to the subcontractors and the sub-subcontractors, the onesie-twosies. I don't call it a stabilizing market.
We think there is a few periods still before we can start seeing it come the other way. We see 2015 as being lower unit sales than 2014 in China, we are optimistic about it regaining its footing, certainly coming soon.
Who has the mic? Who wants the mic?
Yes.
There. Okay.
Okay. Thank you.
Yeah.
I'm Zuano from [audio distortion]. I have three questions, and one's about the aftermarket. I would like to know the target level of the % against the sales, including the scenario on how to increase the level. The second is about the variable cost. I would like to know the target or for the variable cost %, or what is the key driver for increasing the variable cost, I mean, the %. Third is about the construction equipment. We heard that there are some issues in quality management regarding the export from China, and I would like to know how to solve this issue or how to overcome.
Okay. I think if we start with the last question.
Forgive me, the question was quality issues on Chinese export products?
Yeah.
We have no today significant large quality issues on the SDLG product that we're exporting from China to the rest of the world. In fact, the quality is quite good, and customers are quite impressed. To ensure that we're protecting against this, because we're leveraging the Volvo CE distribution outside of China for this export, we're making sure that we're protecting quality, parts availability, service technicians, and training. Thus far, the quality has not been a problem. Reception from the marketplace is quite strong. Thank you.
Okay, then the variable cost side, Mikael?
Sorry, could you repeat that question?
Sorry. You told us that the variable cost percentage around 60% at this moment?
No. What I described there in that slide was that the variable cost is 60% of total cost, and the fixed cost is 40%.
Yes.
That was what.
Do you have any target image for the 2016, for example, for 60% to 64% or 65% in 2016?
No, we don't have that kind of target to see what is variable and cost. Of course, there is an advantage to have less fixed and more variable and be able to cope with the market swings, but we don't have a specific target to communicate around that.
Yeah. Graham Phillips from Jefferies. Two questions. One on the truck business and the other one on the construction equipment. We've learned today a lot in this factory and what you've been talking about today to us on the slides about improvement in quality. Can you give us indication about warranty provisions, what will have happened to them, say, in the fourth quarter in the truck division compared to a year ago? How much benefit have you had from that? It'd be nice if you give us some accurate numbers, but if you can't, and you won't, is there much more room to bring warranty provisions down as a percentage of sales? How do they compare against, say, peer group or competitors? I'll ask the construction one in a minute.
If we start with the truck, we take the construction, of course. In general, you can say that the quality and of course what you have seen out here are rendered in an improved quality, definitely. What we see also, the new product lines we're putting in place, we get very good feedback also on the product. Of course, we have a big rolling stock out there. Johan, I don't know how much detail we give on the guarantees or the warranty reserves and the movements.
No, we definitely don't give any forecast on where the provisions will be at the end of this year. As you know, the underlying quality per truck is when that comes through, it will definitely, with all other things, when we talk about volumes and so on, of course, mean that we have to provision less. That's the way it works. On the other hand, if volumes increases, maybe the provisions are on the same level as before. Basically, we don't give any forecasts on that.
I'm not asking for Okay, if you don't give a forecast, could you say in the fourth quarter of the year completed and the fourth quarter previously, did they improve in trucks? Did the percentages of sales go down?
No, I don't comment on that either.
Okay. On Construction Equipment, and you talk about the value segment, do the margins differ considerably between what you can make on a Construction Equipment in a value segment compared to the premium segment?
Generally speaking, the margins on the value segment are not as big as they are on the premium segment, both on the initial sale but also on the aftermarket. Generally speaking, yes, the margins are not as big.
Going forward, it sort of puts a bit of a cap on where margins could go, given that you want to grow the value segment compared to premium. Compared to previous years, if we look back at peak margins for Construction Equipment, if this mix is going to be different 5 or 6 years later from where the previous peak was?
I'd say we don't forecast that, obviously, but it's about mix and it's about leverage that we're going to be gaining. I think it's important to point out that the value segment is complementary and incremental, and it allows us and our dealers to leverage fixed costs already invested in.
Thank you.
Hi there. It's Mike Tindall from Barclays. Two questions, if I may. The first, today we saw, I think, a pretty comprehensive and extensive review, I'm way out here at the back, of your production processes. It does seem that for most of the activities, there was an associated cost or investment. I guess the question I have is, where are we in the cost-benefit cycle? Is there still more investment to be made to reap the benefits, or are we now truly into the harvesting phase of all of the costs that you've put in? The second question, I'm afraid, back to CE yet again. In China, in CE, you've mentioned an industry inventory problem, but you've also said that you don't have an inventory problem.
I guess my question would be, how do you maintain share when your competitors are more desperate than you are?
If we start with the investment question, I would say that we are on a declining trend, so to speak, in terms of how much we invest in hardware in our industrial system. I would say that what you saw here today also is not large investments in complicating fixed infrastructure. It is really about having a flexible industrial system inside the plants. We can do that in a very cost-efficient way, and that is what we will see being more and more implemented as we move forward. I would say from industrial system perspective, we are on a declining trend here, absolutely.
Am I right to interpret that to mean then that the investment is just ongoing? The savings come, there is a cost-benefit relationship, and if you are in a positive territory, it just keeps happening. There wasn't one big investment phase, which is now in the past.
No, exactly. We look at it case by case, but as in pure amount of money, it is coming down in total systems.
For CE, to answer your question about inventory, the comment about the balance inventory at the end of the fourth quarter was relative to our global network. Okay. In China, we have ample inventory to address all growth needs at the dealers, both new and used.
Would I be right in thinking that your competitors have more inventory than you have, though, in China?
I'm sorry, it's difficult to hear.
Sorry. Would I be right in thinking that your competitors have more inventory than you have in China?
I can't comment on that. I don't know. I can tell you that we will have appropriate amount of inventory for the spring season coming up, and that we have ample inventory sitting in China to make sure we don't miss on any sales opportunity.
Thanks.
On truck in North America, you seem confident in the order flow that you're seeing, but you haven't been willing to add, say, a skeleton third shift. What would you need to see to ramp up production, and what kind of timing could we expect on that? Conversely, sounded like the Brazil outlook might have a little bit of downside risk to it. Is that at a low enough level right now that even if it was reduced, that forecast, would there be much of a financial impact?
When it comes to the ramp up here to meet the demands, we have a very thorough process here where we look at the sales volumes forecast, and based on also the order intake that we see, we are taking the steps necessary to meet the order requirements. We're looking at the lead time also. As long as we stay within the parameters agreed with the marketing side here, we are keeping that. When necessary, we are making the steps up here. We have seen a slight increase here during spring. I would say we are still within the parameters that we should be, and with the measurements we are taking also here. We try to avoid major shift steps. In order to do that, you need to see the necessity, definitely, before we take that decision.
Would you be willing to share those parameters? I'm trying to get an understanding. Is it six-month lead time, eight-month? Just so we know what, if any, impact it could have on 2015 on potential ramp up.
From the industrial system, we have a commitment to meet a certain number of weeks towards the sales organization. That is our guiding principles to see if we need to go up or, for that matter, also going down in terms of our capacity. What we're trying to do is that we don't want to go up in shifts unless we absolutely need it, because it's a lot of incremental cost associated with that, and also then the flexibility on the way down is limited and more costly. Right now, we are within the parameters with the sales and marketing organization, and we also see that we can meet this demand without going up in another shift. We are fine, and when we need to take the decision, we'll take the decision. I will not here predict how that will look like going forward here.
I was mentioning Olof earlier. I think the confidence in the cycle, people question North America beyond 2015, your unwillingness to add an incremental shift or a skeleton shift does raise the question, how do you view the cycle after 2015? If you had more confidence in it, you might be willing to add those costs, so-
Not to give 2016 North America truck guidance, I'm just throwing it out to you to see.
Exactly
Your reaction.
It almost sounded like it, but I understand you don't know. What we're looking at, and we do it there, two processes where one is the yearly process we do, and we look at our estimation for the full year. We do that once a year, and we don't speculate in the year to come. On top of that, we have the visibility issue, and that means also how long visibility do we have not only on forecast but actual. That is what really drive us in terms of the decisions, because you cannot really gamble on those kind of big decisions. You need to have the visibility, and that visibility is much, much shorter. If you look at the normal market position, we have a visibility of 6-12 weeks. That's the visibility and order backlog we have.
That's what's sort of guiding the short-term adjustments that we are doing. These are the two parameters that we're looking at when we're balancing the production. What does that happen in 2016? That we will come back and talk about to you in the back end of this year.
I'll pass the mic. The comment on Brazil, please?
Yeah.
Thank you.
It was unclear to me if the comment on Brazil was an industrial one or a commercial one. On the commercial side, as I think was clear from the map with the different colors, relatively speaking, the Volvo brand, which is the dominant brand we have in South America and obviously in Brazil carries a, relatively speaking, higher performance than some of the other sales. On the commercial side, going down in Brazil further, which you are speculating in, would of course have some impact, yes.
I wasn't trying to put words in your mouth, would you agree with that there's a little bit of risk to that Brazil down 19% as a starting point?
I think as I mentioned, we gave our forecast in the Q4 reporting. We are assessing this obviously very frequently, and if there's a reason to change, we will do so in our quarterly updates. We only give one number per quarter, as you know.
I appreciate it. Thank you.
Thanks.
Another one from the back. It's Fredrik Stoll from UBS. I want to go back to your brands, and I think it's clear on construction equipment, how you position SDLG and Volvo there. In trucks, I think it's less clear. I want to ask you, when you one day start selling Dongfeng and maybe Quester trucks in Europe, will there really be room for the Renault brand in Europe?
Definitely. If you look at the market and the market development and what we see coming, here we're talking about slow movements in terms of market and market position and brand position movements because it's based on features, it's based on development of the underlying need and demand of the market and the customers. I would say absolutely when it comes to the European market, it's big enough, it's diverse enough, and you would have the customer differentiation that is big enough to actually keep that brand position that we do have. Then we will have to see what happens over time when it comes to other entries into the European market.
As I've said, and we have discussed it as well, for me, it's much better to be a part of and be able to decide how that should be managed if and when it comes, rather than being sort of surprised with some entries. By having both on the CE side with SDLG and both on the Dongfeng and the Eicher side, of course, we are very much part in that process. I definitely believe that the positioning that we have for which is called a high end, it's definitely a segment that we're going to see in Europe for a long, long time.
Hi, Mike Rapp again from Kepler. I'm sorry for having to get back to the Deutz complex, could you help me understanding what going forward the rationale would be behind retaining the work split between yourselves and Deutz? To rephrase things, why would you spend the money twice, sacrifice scale economies, and if so, would the role of Deutz, this constellation still be as important as it is today?
The reason why, I think you can appreciate that, is that the reason why I will not go into that is that that is core strategy to us. How we are moving ahead with the different models, with the different platforms, with the different features on our core engine side is nothing we sort of discuss externally. Secondly, I can assure you that the cost-conscious culture that we now implement, it goes very much also into how we develop the different products and, for instance, engines. We of course, are making sure that we don't spend the money twice for the same thing. That's for sure.
Thanks.
You're welcome. Okay. If there is no other question, I thank you, dear colleagues. Before Chris gets all the floor for all the practicalities going forward, I just would like from my side and from my team's side, once again, thank you so much for coming, and I hope you had a great day, and you're more than welcome to dinner, and we can continue discussions there. Thank you so much.
Just some logistical information from my side. We have buses outside, some buses going to the airport, some buses going to the hotel for the dinner. For those who are jumping onto the bus to Brussels, I think you should hurry up to make sure we get that bus rolling as soon as we can. Please go to those buses.