Achieve 2002 English - Atlas Copco€¦ · In 1991 Meyer rejoined Atlas Copco as Financial Manager...

AchieveAtlas Copco Operational Report 2002

Atlas Copco ABSE-105 23 Stockholm, Sweden

Phone: +46 8 743 8000www.atlascopco-group.com

Addresses

Atlas Copco Group Center

Atlas Copco AB (publ)SE-105 23 Stockholm, SwedenPhone: +46-8-743 8000Fax: +46-8-644 9045www.atlascopco-group.comCorp. id. no: 556014-2720

Atlas Copco Compressor Technique

AirpowerP O Box 100BE-2610 Wilrijk, BelgiumPhone: +32-3-870 2111Fax: +32-3-870 2443

AirtecP O Box 101BE-2610 Wilrijk, BelgiumPhone: +32-3-870 2111Fax: +32-3-870 2443

Portable AirP O Box 102BE-2610 Wilrijk, BelgiumPhone: +32-3-870 2111Fax: +32-3-870 2443

Industrial AirP O Box 103BE-2610 Wilrijk, BelgiumPhone: +32-3-870 2111Fax: +32-3-870 2576

Oil-free AirP O Box 104BE-2610 Wilrijk, BelgiumPhone: +32-3-870 2111Fax: +32-3-870 2443

Gas and ProcessAm Ziegelofen 2D-509 99 Cologne, GermanyPhone: +49-2236 965 00Fax: +49-2236 965 05 22

Atlas Copco Rental Service

6929 E. Greenway Parkway, Suite 200Scottsdale, Arizona 85254, USAPhone: +1-480-905 3300Fax: +1-480-905 3400

Rental Service Corporation6929 E. Greenway Parkway, Suite 200Scottsdale, Arizona 85254, USAPhone: +1-480-905 3300Fax: +1-480-905 3400

Atlas Copco Industrial Technique

SE-105 23 Stockholm, SwedenPhone: +46-8-743 8000Fax: +46-8-644 9045

Milwaukee Electric Tool 13135 West Lisbon RoadBrookfield, WI 53005, USAPhone: +1-262-781 3600 Fax: +1-262-781 3117

Atlas Copco Electric ToolsPostfach 320D-71361 Winnenden, GermanyPhone: +49-7195-120Fax: +49-7195-126 66

Atlas Copco Tools and Assembly SystemsSE-105 23 Stockholm, SwedenPhone: +46-8-743 9500Fax: +46-8-640 0546

Chicago Pneumatic1800 Overview DriveRock Hill, SC 29730, USAPhone: +1-803-817 7000Fax: +1-803-817 7006

Atlas Copco Construction

and Mining Technique


Atlas Copco Rock Drilling EquipmentSE-701 91 Örebro, SwedenPhone: +46-19-670 7000Fax: +46-19-670 7070

Atlas Copco CraeliusSE-195 82 Märsta, SwedenPhone: +46-8-587 785 00Fax: +46-8-591 187 82

Atlas Copco SecorocBox 521SE-737 25 Fagersta, SwedenPhone: +46-223-461 00Fax: +46-223-461 01

Atlas Copco Construction ToolsSE-105 23 Stockholm, SwedenPhone: +46-8-743 9600Fax: +46-8-743 9650

Atlas Copco WagnerP O Box 20307Portland, OR 97294-0307, USAPhone: +1-503-255 2863Fax: +1-503-255 7175

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Inventions, Innovations, and Incremental Improvements

The Rush is on for Growth in Russia

Committed to Demanding Customers

Atlas CopcoAchieve—

Operational Report 2002

Björn Rosengren Senior Executive Vice Presidentof Atlas Copco AB, and BusinessArea Executive for Constructionand Mining Technique. Employedsince 1998. Born 1959.Nationality: Swedish.Education: M.Sc. in Technology,Chalmers University of Technology,Gothenburg, Sweden, in 1985.Career: Between 1985 and 1995

he held various positions within Esab Group, including interna-tional assignments as Marketing Manager in Switzerland andSweden, and other international positions in the field of Market-ing. From 1995 he was General Manager, Nordhydraulic, Nord-win AB, Kramfors, Sweden. In 1998 he joined Atlas Copco asPresident, Atlas Copco Craelius Division, and prior to his presentassignment he took the position of President, Atlas Copco RockDrilling Equipment Division.External directorship: Pergo, Sweden.Holdings: 2,396 A call options and 22,112 employee stockoptions.

March 1, 2002, Björn Rosengren replaced Freek Nijdam as Busi-ness Area Executive for Construction and Mining Technique.

Hans Ola MeyerSenior Vice President Controllingand Finance. Employed since1991. Born 1955. Nationality: Swedish.Education: MBA, StockholmSchool of Economics, Sweden, in 1977.Career: Meyer was employed byAtlas Copco in 1978 to work withGroup accounting and control-

ling. Later he moved to Ecuador as Financial Manager. He leftAtlas Copco for a few years beginning 1984 to, among otherthings lead the asset management at Penningmarknadsmäk-larna—later JP Bank, Sweden. In 1991 Meyer rejoined AtlasCopco as Financial Manager in Spain, a position he held until hebecame Senior Vice President, Finance and member of GroupManagement in 1993. Meyer has held his current position since1999.Holdings: 571 A, 300 B, 5,384 A call options, and 16,584employee stock options.

Marianne Hamilton Senior Vice President, Organiza-tional Development and Manage-ment Resources. Employed since1990. Born 1947. Nationality: Swedish.Education: Bachelor of Arts at theStockholm University, Sweden, in 1972, IFL School, in 1981.Career: Hamilton began heremployment working with market-

ing analysis at Astra in 1973. Between 1975 and 1990 she was aconsultant for Mercuri Urval, an international consultancy agency.In 1990 Hamilton joined Atlas Copco as Vice President, Organiza-tional Development for the Atlas Copco Industrial Technique Busi-ness Area, and one year later she began in her present position.External directorship: Stockholm School of Economics, Execu-tive Education AB, Sweden.Holdings: 3,175 A, 5,384 A call options, and 16,584 employee stockoptions.

Hans Sandberg Senior Vice President, GeneralCounsel. Employed since 1975.Born 1946. Nationality: Swedish.Education: Master of law, Upp-sala University, Sweden, in 1970.Master of Comparative Jurispru-dence (MCJ) New York University,United States, in 1972.Career: In 1972 Sandberg began

as an Assistant Judge at Södra Roslagen District Court, there-after he was an associate at the Lagerlöf Lawfirm in Stockholm.He joined Atlas Copco in 1975 as Corporate Counsel. He has alsoserved the Group as General Counsel North America, stationedin Wayne, New Jersey. In 1989 Sandberg was promoted to hiscurrent position. Sandberg has been Secretary of the Board ofDirectors, Atlas Copco AB since 1991.External directorship: The Export Association of Sweden.Holdings: 200 A, 3,902 A call options, and 16,584 employee stockoptions.

Annika BerglundSenior Vice President GroupCommunications. Employedsince 1979. Born 1954. Nationality: Swedish.Education: MBA, StockholmSchool of Economics, Sweden, in 1980. MBA, University ofAntwerp, Belgium, in 1995.Career: Berglund began hercareer with marketing analysis in

Atlas Copco in 1979. Since then she has had a number of differ-ent positions in the Group related to marketing, sales, and busi-ness controlling. During an assignment in Great Britain, sheworked as a sales engineer. Prior to her present position,Berglund was Marketing Manager for Atlas Copco Controls, acompany that was divested in 1999.Holdings: 1,300 A, 165 B, 3,006 A call options, and 16,584employee stock options.

AT L A S C O P C O G R O U P

Welcome to the world of Atlas Copco!Atlas Copco is an international industrial group of companies, with close to 26,000 employees in some 70 countries, and its head office inStockholm, Sweden.

In 2002, the Group reached revenues of SEK 48 billion with 98% of revenuesoutside Sweden. The operating margin was 11.1%.

The Group produces and markets compressed air equipment and generators, construction and mining equipment, electric and pneumatic tools, and assemblysystems, and offers related service and equipment rental.

The Atlas Copco Group owns famous brands such as Atlas Copco, RSC, Milwaukee Electric Tool, CP Chicago Pneumatic, and AEG Power Tools.

This magazine gives you an insight into the Group, its values and achievements.If you are curious to learn more, up-to-date information about the Group is avail-able on: www.atlascopco-group.com.

Three Key Publications at Your ServiceAtlas Copco has three separate publications to better serve itsmain stakeholders.

The Annual Report fulfills the legal requirements for informa-tion. It also includes information of specific interest to theinvestor community.

Achieve presents how Atlas Copco works to reach its vision.Strategic moves are highlighted and the Group communicates

what Atlas Copco is focusing on. In this publication you can alsoread how the President and CEO Gunnar Brock describes theGroup in-depth.

The Sustainability Report is Atlas Copco’s report on environ-mental and social issues.

All reports are available in pdf format on the Group’s web sitewww.atlascopco-group.com.

Achieve and the Sustainability Report are not part of the AnnualReport and they are not audited.

Atlas Copco AB and its subsidiaries are sometimes referred to asthe Atlas Copco Group, the Group, or Atlas Copco. Atlas CopcoAB is also sometimes referred to as Atlas Copco. Any mention ofthe Board of Directors or the Directors refers to the Board of Direc-tors of Atlas Copco AB.

Atlas Copco Annual Report 2002 02

Atlas Copco’s revenues declined 7% to MSEK 47,562. Excluding goodwill impairment charge, operating profit was MSEK 5,261, corresponding to a margin of 11.1% (12.0), and earnings per share decreased to SEK 13.88 (14.63).





Atlas Copco Sustainability Report 2002 02

Stable level of value added despite lower profits. Stable environmentaland workplace performance. ISO-certified environmental managementsystems implemented in almost all divisions.

51A T L A S C O P C O 2 0 0 2

Contents4 Group Achievements

Several things glue the Grouptogether. One is ”The Way WeDo Things.”

Innovations There are two kindsof progress: continuous improve-ment and pioneering innovation.Both are important to develop newbusiness, enhance efficiency andboost productivity.

Focus on Russia Atlas Copcoopened its first office in Moscow in1913 when the company was calledAtlas Diesel. Russia is one of thecountries where the Group has thepotential to further strengthen itsposition.

Atlas Copco Group Growth is a top priority tosecure long-term profitability. Supporting strate-gies are market expansion, use-of-products,product development, and multi-branding.

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Multi-Brand When Milwaukeewas launched in Australia, indus-try and professional tradesmengot access to new “Heavy Duty”tools. After 80 years in China,Atlas Copco now operates withmore than one brand.

21

Close Customer RelationsA mining operation in Canadapays by the drilled meter, and inthe United States Butler BuilderNetwork is offered close cooper-ation and online service day andnight.

24

Driving Efficiency By eliminating localinventories and focusing on lean and flexi-ble production, Atlas Copco is striving forexcellence in delivery service. Follow theflow from order to delivery!

38

GROUP ACHIEVEMENTS

4 A T L A S C O P C O 2 0 0 2

Group AchievementsIt is a real honor for me to report on the performance of the Atlas Copco Group for the first time. I sincerely hope that by reading this document you will get agood understanding, and hopefully also a positive view, of what Atlas Copco hasachieved and, above all, what our organization and professional employees arecapable of achieving in the future.

T for the Achieve publica-tion, our operational report, which now is availablein eight different language versions. A complete

review of the 2002 financial results is given in the AnnualReport, and environmental and social issues are covered inour Sustainability Report.

Perspectives on 2002In business, it is very much about getting the right perspec-tives and setting the right priorities. In an ever more complexworld, where information is instant, getting the right per-spective is often difficult and setting the right priorities is verymuch a matter of balancing the short and long-term views.

The general business climate did not improve compared

to 2001. Erratic indications of an increase in demand failedto materialize, and the GDP growth in many important mar-kets declined. There were however notable differencesbetween geographic regions. The important North Americanand European markets had a demand that was flat or slightlylower than the previous year. The relatively sharp decline ineconomic activity in South America was counter-balancedby a good demand level in the Greater China Region, somecountries in South East Asia, Russia and the Middle East.

The major customer segment for Atlas Copco—the con-struction industry in general and the non-residential construc-tion sector in particular—showed a significant fall in demandin both North America and Europe. The general industryhad a weak demand, the motor vehicle industry was stable

Compressor TechniqueBusiness area

5A T L A S C O P C O 2 0 0 2

GROUP ACHIEVEMENTS

and the mining industry showed a relatively good growth.Capacity utilization in most industries remained on a

low level and the purchase of investment related products,which are an important part of our portfolio, was weak.

During 2002 the U.S. dollar declined sharply and theyear-end rate in relation to the Swedish kronor was 17%lower than at the beginning of the year. AsAtlas Copco invoices a large part of its prod-ucts and services in U.S.dollars, this represented a challenge.

Seen and judged against the 2002 perspec-tives, it is encouraging to note that the overallperformance of Atlas Copco must be consid-ered satisfactory and our competitive positionhas been strengthened on many markets.

High and stable cash flowDuring times of low inflation and no growth, inefficiencieswill often become visible. At these times we take the oppor-tunity to review our processes and activities, to improve andbecome even stronger.

The level of operating cash flow is a good indicator ofefficient processes and effective management of both work-ing and total operating capital. The effort invested inimproving our efficiency has paid off in the generation ofhigh and stable operational cash flow. This has provided theopportunity to substantially reduce our interest bearingdebt through the repayment of approximately 3,500.

Operation in four business areasOur largest business area, Compressor Technique, per-formed well. This goes for the stationary industrial com-pressor business and aftermarket activities. However, weexperienced weak sales for portable compressors, particu-larly to rental companies. A new regional support centerwas established in Bahrain, to cover countries in the GulfCooperation Council and Yemen, with focus on the grow-ing business potential. In China, where we want to increaseour presence, the Chinese compressor manufacturer,Liuzhou Tech Machinery Co. Ltd was acquired in the year.

The weak activity levels in the market had a negativeeffect on the Rental Service business area, and both the con-struction and industrial rental activity suffered. Forceful

actions to reduce cost and improve capital efficiency weretaken during the year. Alongside a reduction in the numberof rental stores in low-potential areas and a reduction ofthe total rental fleet, the availability of the rental fleet wasimproved and the utilization rate increased. These actionsimply that when the economy turns, we will stand strong.

The Industrial Technique business area continued success-fully to further penetrate and increase sales of sophisticatedfastening tools and systems to the motor vehicle industry.The Chicago Pneumatic division announced a program toconsolidate its production to two focused production sites.One of the larger marketing activities for professional elec-tric tools was the launch of the Milwaukee brand to theEuropean market. In the United States, an investment isbeing made to expand production capacity and refine themanufacturing technology for accessories. In Europe, thebusiness area is setting up a new assembly plant in theCzech Republic.

Overall, order volumes for our Construction and MiningTechnique business area increased in 2002. In line with themarket development, sales of rock drilling equipment, loaders,associated consumables, spare parts, and service increased,while exploration equipment sales declined. To better servethe mining industry, the drill rig and loader business will beintegrated into one division in Sweden. To broaden the rangeof rock reinforcement bolts, Atlas Copco acquired the rockreinforcement division of Austrian MAI InternationalGmbH. German manufacturer, Krupp Berco BautechnikGmbH, was acquired to complement the range of hydraulicbreakers and demolition tools for the construction industry.

Setting prioritiesA profitable growth must be seen as a priority in order togenerate value for those who have invested in the Group.This does not only relate to a financial investment in our

“The effort invested in improving our efficiency has paid off in the generation of high and stable operational cash flow.”

Rental ServiceBusiness area

Industrial TechniqueBusiness area

Construction and Mining Technique

Business area

Board of Directors

Group Management

Sales and service organizations

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GROUP ACHIEVEMENTS

Group, but also to all those employees who invest their timein the company.

To achieve this growth, it is the long-term value creationthat is important, and to have a too shortsighted perspective isunwise. A focus on research and development, market expan-sion, and increased customer service are of great importanceto Atlas Copco, as the articles in Achieve highlight.

Research and developmentAs well as the creation of major product and service inno-vations, it is vital to create a steady stream of continuousimprovements to existing products. During the year there

has been an increase in resources devoted to product inno-vations and to the development of services.

The software content and service offering in productstoday are often more important than the actual hardware.The importance of organizing the development processes,and securing the necessary competencies that reflect thistrend is close to the heart of our organization. It is importantto have an efficient and effective launch process, in order notto loose valuable time to reach the “moment of truth”—thestage when a satisfied customer places a repeat order.

In 2002, the range of oil-free VSD (variable speed drive)compressors was extended and a VSD version of the suc-cessful PETPACK® compressor for the PET bottle blowingindustry was introduced. To further expand and enhancetesting capacity and reduce time-to-market for more prod-ucts, a new laboratory and test facilities for small andmedium sized industrial compressors and air treatmentequipment was inaugurated.

A number of new tools, both for industrial and profes-sional use, were brought tomarket. Among those arepneumatic drills and screw-drivers and an extremely pow-erful impact wrench with anew patented motor systemfor the automotive aftermar-ket. The range of heavy-dutytools was extended with alarge number of both cordedand cordless tools.

With increased customerproductivity in mind, a com-puterized surface crawler drillwas launched, enabling anincreased production capacityof 10–15%, and two new rockdrills were successfully

brought to the market. To further strengthen the offering tothe mining industry, a new loader was added to the range.

Market expansionToday the Atlas Copco Group is represented in most partsof the world. There is however a large concentration of oursales in North America and Europe and, whilst much effortis devoted to even further improving our positions in theseareas, it is in Asia, Eastern Europe and Russia where majormarket investment is and will continue to be undertaken.

The strong expansion in Asia is continuing. Furtheracquisitions have been made in China and investments are

being made in establishing a strong network ofregional and local sales and service offices thatare manned by local employees. The importanceof recruiting and training local staff must neverbe underestimated.

This issue of Achieve highlights some of ouractivities in Russia. With a relative political sta-

bility and good economic growth, Russia and its neighbor-ing countries offer interesting investment opportunities.Atlas Copco has been active in Russia for many decadesand with today’s focus and improved presence and penetra-tion, the future looks promising. To learn more about theRussian business culture, buying behavior and marketdevelopment, we recently gathered 30 top managers inMoscow with the objective of learning more about how toachieve further profitable growth in this huge market.

Increased customer focusGood customer relations stretch over many years. You sell a product or a system, you service the customer for manyyears and eventually a repeat order is obtained, providedyou have done a proper job. To do a proper job, it is neces-sary to listen to the customer, to learn to know and under-stand his or her specific situation and, above all, to try tohelp grow the customer’s business.

By delivering products and systems that increase thecompetitiveness of our customers we can help them grow.By having an efficient aftermarket and service function wecan contribute towards increasing the efficiency and reli-ability of our products. It is vital to monitor and measurewhat happens in the relationships with our customers.A customer who increases his purchases from us is a satis-fied customer. The measurement of customer satisfactionand customer share are important building blocks forincreased customer focus.

Corporate culture and corporate valuesLarge, global organizations are inherently complex to man-age. There is a need to align people to meet common objec-tives and there is a need to keep motivation and inspiration ata high level. It is in this context where a strong corporate cul-ture can be decisive to the success of a company. Forinstance, if one finds themself in unfamiliar territory, it is thecorporate culture that directs their behavior and even their

”A profitable growth must be seen as apriority in order to generate value forthose who have invested in the Group.”

020100

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200

0

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decision making. At Atlas Copco substantial resources areinvested in trying to create and keep a strong and active cor-porate culture.

Having four very different business areas, each with itsown structure, it is of vital importance that we try to defineand develop areas that unite us as a group. Among the mostimportant are the following:

• We have a shared vision and a common identity• We have a common corporate culture and the same core

values; interaction, commitment and innovation• We share brand names and trademarks• We have common processes and shared best practices that

are collected in a central “The Way We Do Things”database• We are using common services through internal or exter-

nal service providers• Our financial and human resources have free mobility

within the Group

It is by having a strong corporate brand, with a clear iden-tity and relevance, by having values and norms for guidanceand, by giving enough time to discuss and discover how tolive the culture, that we can align our organization to serveour customers efficiently.

Atlas Copco has such a strong corporate brand. Andthis is how we at Atlas Copco have achieved success in thepast, and will achieve success in the future.

Gunnar Brock

President and Chief Executive Officer

”We must bring the view of the customer into the whole organization,”

says President and CEO Gunnar Brock, who frequently meet with customers.

8 A T L A S C O P C O 2 0 0 2

GROUP ACHIEVEMENTS

Achieving alignment through

”The Way We Do Things”

Although Atlas Copco is a decentralized group of companies with focused businessareas, several things glue it together and make the operational parts integral units.Group-wide strategies, processes, and shared best practices are collected in thedatabase “The Way We Do Things.”

9A T L A S C O P C O 2 0 0 2

T , the Groupmakes “The Way We Do Things” available to allemployees, for information and guidance. Because

of its importance, general managers are regularly trainedon the material by their colleagues in Group management.The goal is to enhance knowledge and alignment regardingcertain Group processes—communication and positioning,people management, legal practices, sustainability, andbusiness planning and control—throughout the geographi-cally widespread organization.

In 2002, a new round of General Managers’ Seminarswas launched. This time, the training was based on a man-agement acquisition case, well-suited to applying the mainprocesses on. Just before year-end, close to 30 managersgathered in Stockholm, Sweden, for a three-day seminar.The group included people from all business areas with apresence in European countries.

Those who were new in their positions received an in-depthintroduction and learned more about what Atlas Copcostands for, while more experienced managers were updatedwith the latest refinements. Mixing both categories of peopleat the same meeting has a purpose. It is a way for people toreinforce company values and culture, share ideas, make newfriends, and—not to be forgotten—have some fun together.

Steer the businessOne of the presenters was Hans Ola Meyer, Chief FinancialOfficer, who is responsible for ensuring that Group-widebusiness planning and control principles are applied asintended. Addressing the participants Meyer said, “Busi-ness control is the responsibility of all of our general man-agers. See the financial data as an important tool: It is thereto help you manage and steer the business.”

At the third General Managers’ Seminar of 2002, around 30 general managers—with a mix of new and

experienced—gathered in Stockholm to enhance their knowledge of “The Way We Do Things.”

The Way We Do Things“The Way We Do Things” is Atlas Copco’s collec-tion of common principles, guidelines and sharedbest practices relating to Group-wide processes.The processes covered are communications andpositioning, people management, legal practices,sustainability, and business planning and control.

The information itself is stored electronicallyand is available to all employees. Although mostof the documentation is self-explanatory, trainingon how to implement the processes is providedto general managers on a regular basis, chiefly inthe form of seminars.

Wherever they are based, Atlas Copcoemployees are expected to operate in accordancewith the principles and guidelines provided.

11A T L A S C O P C O 2 0 0 2

INNOVATIONS

No Flashes Out of the Blue

“There are two kinds of progress: continuous improvementand pioneering innovation. The former can be planned for, butthe latter are really the exceptions that prove the rules,” saysSverker Hartwig, Research and Development Manager.

I from a clear blue sky. A need has to bedefined and analyzed. Not until then can an innovator get an idea that solves a spe-cific need. During the analysis phase, intelligence is challenged. Many ill-considered

ideas are rejected, and the innovators concentrate their efforts on the better ones.“However, it is more or less impossible to predict what problems a breakthrough inven-

tion is going to face. You can only make reasonable estimates if you continuously makeincremental improve-ments,” SverkerHartwig says. Greatuncertainty charac-terizes the first cycleof designs, proto-types, and a shorttest-run in series before genuine production can start. In every phase, many things can gowrong and time and money are spent on something that might or might not become asuccess. “As a matter of fact, if I look back at all my innovations, they have never provedto be everything I envisioned from the beginning, but many have demonstrated otheradvantages that I did not foresee,” he says. He emphasizes how hard it is to estimate how

“Finding the very best solution to a customer’s problem—could any-thing else give more satisfaction?”

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much a pioneering innovation costs and how long it takesfrom development to being on the market.

For Hartwig, characteristics that innovators must showare superior knowledge of the application, intelligence, andexperience. They also need plenty of stubbornness and self-confidence, because many obstacles can arise along the way,some of which are human. The first draft idea of a com-pressor with a variable speed drive was produced approxi-mately 15 years before being launched in the market. Ittook many years of hard work by several people, and stillrequired three years in the market before it was considered asuccess. It is easy to see why innovators must be so persis-tent and have so much self-confidence.

The very best solutionWith 27 years at Atlas Copco, Hartwig is considered one ofthe most prominent innovators in the Group. To him, fun atwork consists not only of finding a solution to a definedproblem but of finding the very best solution by workingtogether with other people to make it come true. He hasworked for several divisions in the business areas IndustrialTechnique, Compressor Technique, and Construction andMining Technique, in the United States, Switzerland, andGreat Britain. Now, he is based in Örebro, Sweden, a three-hour drive from his wife and two teenaged children inStockholm. “Most weekends I spend rebuilding my houseor my hydro plant in southern Sweden, or with my familyand friends, but at least one week every fall, I go moosehunting.”

A couple of years ago, when Hartwig started to work forthe Atlas Copco Rock Drilling Equipment division in

Örebro, he felt the need to make the factory appealing asdivisional headquarters. He applied his talent for sculpture,and today his own design stands in front of the office:water pouring out of a rock form. Sverker Hartwigdesigned this and other sculptures in the area. He hasplans for more.

As Research and Development Manager, he has 140people working to make the rock excavation cycle more pro-ductive. During 2002, the Group decided to integrate AtlasCopco’s drill-rig and loader/truck businesses into one dedi-cated division. Thus, during 2003 the production of loadersand mining trucks will be transferred from Atlas CopcoWagner, Portland, Oregon, the United States, to the RockExcavation Technology Center in Örebro, Sweden. Withprevious experience in trucks and loaders, Hartwig’s team is looking forward to taking care of the development of thewhole underground excavation cycle.

Experience on the production line”Some might think Atlas Copco works on mature markets,but there is a lot we can do. The potential for organic devel-opments and growth on the borderlines is enormous,” hesays. ”However, work on short-term solutions always dis-tracts from long-term development. It is hard to prioritizework on innovations. To make great innovations the bestpeople are needed, and you cannot take them out of pro-duction. To be able to define a problem and find the bestsolutions, engineers need to work on the line. This meansthey concentrate on day-to-day tasks rather than innova-tions. It is hard to make long-term developments the toppriority,” Hartwig says.

One of the things Sverker Hartwig is very proud of is the new portfolio ofproducts in the Rock Drilling Equipment division.

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INNOVATIONS

Sverker HartwigBorn: 1946.Position: Research and Development Manager at the AtlasCopco Rock Drilling Equipment Division, Construction andMining Technique Business Area, Sweden.Education: Master of Science from the Royal Institute ofTechnology in Stockholm.Employed by Atlas Copco: Since 1975. He has worked asEngineer, Technical Manager, General Manager, and Divi-sional President at companies in three business areas:Industrial Technique, Compressor Technique, and Construc-tion and Mining Technique. He has worked in Sweden, theUnited States, Switzerland, and Great Britain.

Achievements he is most proud of: Being part of when AtlasCopco started working with high-performance electric tools,the automation of Construction and Mining Technique, anda new portfolio of products in the Rock Drilling Equipmentdivision. “During the years, I have learned to employ onlythe very best people, which is so important to our success.”Number of patents: More than 30.Awards: The John Munck Award, Atlas Copco’s prestigiousaward for innovators, and several design awards from dif-ferent institutes.Favorite hobby: Hunting.

Ludo Van NederkasselBorn: 1944.Position: Engineering Manager, Industrial Air Division, Compressor Technique Business Area, Belgium.Education: Master in Electrical and Mechanical Engineering from the KUL University, Leuven, Belgium.Employed by Atlas Copco: Since 1968, as one of the first electrical engineers in the company. He has worked as Engineer andgroup leader in Atlas Copco in Antwerp and as a manager since 1998.Achievements he is most proud of: Energy-saving control principle for fixed-speed compressors and the VSD.Number of patents: 4.Awards: The John Munck Award, Atlas Copco’s prestigious award for innovators.Favorite hobby: Exploratory traveling, ancient technologies, and fixing things in the garden and around the house.

15A T L A S C O P C O 2 0 0 2

INNOVATIONS

The Environment —A Driver for Development

One way we can move towards sustainable development worldwide is to reduceenergy consumption. And a way to do that is by using variable speed motors.

A cannot adjust the air supply to a specific need, something a VariableSpeed Drive (VSD) compressor can. Tests show

that VSD compressors can reduce energy consumption up to35%. By varying the speed of the drive motor to match theactual power need, energy consumption is minimized. “Thisshould be implemented in all kinds of electrical devices, andnot only in compressors,” says Ludo Van Nederkassel, Engi-neering Manager at the Industrial Air division.

To him, there is a distinctionbetween an improvement andan innovation. An improvementcan be achieved step-by-step.An innovation involves chang-ing many aspects simultane-ously and takes tremendousefforts to realize. Using thisdistinction, the VSD compres-sor might not be considered an innovation in the field ofcompressors. In this case, the

innovation was more in the field ofelectronic frequency converters thatmade it technically and economi-cally feasible to integrate speed variability in electric-powered com-pressors.

A breakthrough in noise reductionA major innovation in compressed air thatwas achieved in the past 30 years was the oil-free screwcompressor, where no oil comes into contact with the com-pressed air—a must for instance in the food and beverageindustries. Development began in the early 1960s, butnobody thought it was possible. Though the oil-free screwcompressor was introduced in 1968, it took another 10years to master the technology. The replacement of the piston compressor by the oil-injected screw compressor wasanother great innovation. “In fact, only five years after theintroduction, the market for larger piston compressors wasdramatically reduced,” says Van Nederkassel.

“Taking part in a major developmentgives enormous satisfaction.”

20102000199019801970

Average Noise Output

90

80

70

60

dBa

16 A T L A S C O P C O 2 0 0 2

One might also consider the reduction of noise levels aninnovation. This was made possible by various changes incooling systems and other compressor elements. Efforts tomake air-dryers and other air-treatment equipment morecompact so that they could be integrated into a compressorpackage ultimately resulted in the WorkPlace Air System®

concept. “Placing the compressor in the working environ-ment and not in a separate compressor room could be con-sidered a breakthrough innovation. This concept savesinstallation costs, space, and energy costs, because thepipelines are shorter, resulting in lower pressure drops andless risk of air leaks.”

Commitment to the futureAs a young boy, Van Nederkassel dreamed of becoming aninventor. After university, he was employed as an electricaldesigner by Atlas Copco Airpower in Antwerp, Belgium.He moved on to become group leader of various depart-ments, always able to take an active part in the innovations.In his current position as manager for product developmentin the Industrial Air division, Compressor Technique busi-ness area, he has 100 employees on his team. So he cannotparticipate in the teamwork as he used to. “There is always aconflict between the desire to take part in the developmentphase and to contribute to the management of the division.”

Van Nederkassel still thinks that taking part in a majordevelopment gives enormous satisfaction, and he finds itvery encouraging when he is able to guide his people inachieving a major design improvement.

In the past 10 years, his department has tripled in cap-acity. Half of the staff hold a master’s degree in engineer-ing, and half are younger than 35 years old. “This showsthe commitment of the division to the future,” he explains.Despite the administration involved, his department spendsan increasing amount of time and money on applying fornew patents. “Unfortunately, people do not realize thattheir ideas are new or special. Young people in particularcannot believe that such simple things that they haveinvented themselves can be patented.”

Drivers for Product Developmentof Industrial Air Compressors• Environment: noise and pollution reduction, energy andspace savings

• Complete solutions: full offering with a wide productrange, integration, and full service

• Customer value: best reliability and cost/benefit

17A T L A S C O P C O 2 0 0 2

INNOVATIONS

“Young people cannot believethat such simple things thatthey have invented themselvescan be patented.”

18 A T L A S C O P C O 2 0 0 2

Norbert PaprockiBorn: 1960.Position: Vice President Marketing and Product Development, Chicago.Pneumatic division, France.Education: Engineer, Paris Raspail; MBA from Grenoble, France, and San Francisco, theUnited States; DESS Marketing, Grenoble, France; HEC commercial training, Paris, France. Employed by Atlas Copco: Since 1989.Achievements he is most proud of: Building a strong marketing, research and develop-ment team for the development of Chicago Pneumatic division.Favorite hobby: Motorbike racing, car racing, airplane aerobatics.

19A T L A S C O P C O 2 0 0 2

INNOVATIONS

The power of the engines, the competition, and the speed thrill Norbert Paprocki. A former

professional motorcyclist, he cannot stop entering races. But as Vice President for Chicago

Pneumatic division and General Manager for the product company CP Georges Renault in

France, he loves the teamwork that goes into inventing tools.

N is responsible for productdevelopment and product marketing. In his posi-tion, he has the means to find out what features

customers dream of having on nutrunners and other toolsof the future. Despite periodic customer surveys and close

customer contacts, seldom are customers able to describethe tools they would like to use in the future. Thus the goalfor Paprocki’s people is to find the features of the best solu-tions for the future and to find out what will be used beyondthe horizon of three to five years.

Driven by a Competitive Spirit

20 A T L A S C O P C O 2 0 0 2

MULTI-BRAND

CUSTOMER

NEED MASTER

SPECMASTER

SPEC

How to Innovate Note that every phase contains several unforeseen problems to solve…

Be presented with acustomer need

Use application knowledgeand get ideas

Design

Make a masterspecification

Discuss productfeasibility

Make a prototype

Test

First serial trial

Produce

Launch to customers

“The fun part is to try a drifferent anglefrom the obvious. The frustration comeswhen you realize that it takes two to threeyears before the product can belaunched,” he says. “And even when theproduct is ready, one cannot guaranteethat the introduction is timely. Sometimeswe are too early, and the market might notbe ready to take the next step.”

High-flying ideasIn 2002, Paprocki crossed the desert onhis motorbike in the famous Tunisia rally.He did not expect to win the race, as he

did when he competed professionally, but he cannotstop racing. “I feel a strong urge to compete in

everything I do. I love engines and motors,and racing is part of my life.”

Apart from different kinds of motorsports, he has another, private hobby—

hanggliding. At the age of 22, he designed an ultra-light glider that weighed less than those available in

the market: 130 examples were sold throughout France.He has now stopped inventing on his own, to become

more of a teamworker. “I get many ideas, and sometimes my

teammates think the ideas are worth examining a bit closer.Really, it is my team that is creative, and without them I couldnot invent anything.”He emphasizes the importance of work-ing with a strong team and that the success of the ChicagoPneumatic division is a result of their efforts.

During 2002, the Chicago Pneumatic division launched196 new industrial tools. The constant renewal is important,and more than one third of the division’s turnover wasachieved with products that have been launched in the pastthree years.

“My team is creative and they try every angle. Without them

I would not be able to invent anything.”

Australia

Multi-Brand Strategy in Practice

When Milwaukee’s electric tools were launched in the market “down under,”professional tradesmen got access to new “Heavy Duty” tools, and Atlas CopcoAustralia had a new brand to nourish.

In 2001, the Milwaukee brand of professional electric tools was

introduced in Australia, and during 2002 on a larger scale to the

European market. Through this launch customers got access to

a top-of-the-line North American product range.

22 A T L A S C O P C O 2 0 0 2

MULTI-BRAND

B , Atlas Copco Australia wasalready working with electric tools branded AtlasCopco and AEG Power Tools, in addition to the

industrial tools branded CP Chicago Pneumatic, CP Desoutter, and Atlas Copco. Additional emphasis was puton maintaining development and growth of these brands as well.

By merging the recognized Atlas Copco electric toolbrand into Milwaukee, Australia sharpened its focus in themarket. In the United States, Milwaukee has won awardssuch as “Best New Tool” and “Top Rated” on many prod-ucts. So when the black Atlas Copco electric tools brandwas replaced by the red Milwaukee brand, end-users inAustralia got a strong premium brand with an attractiverange of products. Now distributors get a brand at a pre-mium price level, a market niche never before exploited.

A clear strategy“With our strong customer orientation, our company isplainly structured to concentrate on its brand responsibili-ties,” says Herbert Hermens, General Manager of AtlasCopco Tools Australia.

Although Milwaukee is the leading brand used byindustry and professional tradesmen in the United

States,* the Milwaukee brand was not well knownin Australia, according to a brand awareness

study conducted in Australia before the launch.“The key to the brand launch so far has beengood people, shared beliefs, and a determina-tion to succeed, in combination with goodproducts and a clear strategy,”Hermens says.

The brand introduction strategy includedselling the vision internally of having Mil-

waukee positioned as the premium product in the market.The launch focused on personal visits to as many distribu-tors as possible, followed by training sessions in each local-ity. At the training sessions, both AEG Power Tools andMilwaukee were represented by product and promotionalincentives.

“We sold to the distributors the role of each brand andthe key decision criteria between them, for their businessand for their customers,” Hermens says. “Now it is theirturn to use this knowledge and help the customers buyproducts that fit their needs.

“The challenge was to have Milwaukee perceived as thebest range of electric power tools while ensuring that theMilwaukee brand does not take market share away fromAEG Power Tools.”

The strategy proved to be successful, as Atlas CopcoTools Australia considerably increased its sales.

* According to a brand study by MRO Today, U.S. trade publication,October 2001.

Why Promote More Than One Brand? Human beings are varied and as such they have different preferences for personal, economic, or other reasons.

A professional tradesman, for example, wants more robust tools that last longer under constant use and is prepared

to pay more for them than someone who just does the occasional home improvement.

Even within professional segments, individual preferencesvary, and it is essential for a group such as Atlas Copco tounderstand and support all customers in the best possibleway. The Group’s products are differentiated and marketedthrough different distribution channels to better satisfythese specific customer needs.

How a brand is perceived is crucial, and a strong brandfosters loyalty and induces people to try other productswithin the range. In fact, the bigger the investment, themore likely it is that a customer will buy a wellknown brand,a brand to rely on.

It is not easy to create a relevant promise or to communi-cate it. And the promises have to be precise. If they get toobroad, they lose focus, and the brand loses value. Thismeans that each brand has its limitations.

The Atlas Copco Group owns more than 20 brands.

The multi-brand strategy recognizes that each brand has itsmarket segment and can thereby focus on a well definedmarket need. Each business area is responsible for the pos-itioning and value of the brands that it communicates.

Many of the Group’s brands have leading positions intheir respective market segments, making them valuableassets for the Group. From a revenue point of view, AtlasCopco is the most important brand, followed by RSC, Mil-waukee, Prime Industrial, and Chicago Pneumatic.

To build strong, valuable brands, three things are needed:• The brand must be made known, • The brand needs a relevant promise that expresses thesoul of the brand and differentiates it from competitors,

• The brand needs authority so the customer feels that thepromise will be fulfilled.

Herbert Hermens

Greg Borland, Mark Devitt, and David Gilbert are

ready to hit the market.

23A T L A S C O P C O 2 0 0 2

China

Chinese Brand Strengthens the Portfolio

T , founded in 1995, assembles oil-injected screw compressors and refrigerant air dry-ers and manufactures screw elements. “The com-

pany will continue to operate under its established brandLiutech, which has a clear profile and a good brand reputa-

tion within its customer base, mainlysmall and medium-sized local com-panies. The main geographical focus ison mainland China,” says RonnieLeten, President of the Industrial Airdivision, which Liutech became part of.

Liutech aims at different market seg-ments from Atlas Copco-branded com-pressors. The company has an estab-lished sales and service organization,with distributors throughout mainlandChina, and it is now further developing its network.

Having two brands in the Chinese market to satisfy dif-ferent customer demands, using different sales channels, isa good example of how Atlas Copco’s multi-brand strategyworks in practice.

In Spring 2002, Atlas Copco acquired the Chinese compressor company LiuzhouTech Machinery, based in southern China, thereby taking another strategic steptowards strengthening its position in the Chinese compressor market.

One Brand for 80 YearsAtlas Copco began exporting to China in the 1920s. About60 years later, Atlas Copco signed agreements with Chi-nese companies for the assembly of compressors andrelated products. In the 1990s, joint ventures for assemblyof compressors were established. In China, the Groupoperated solely with the Atlas Copco brand until the pur-chase of Liutech in 2002.

24 A T L A S C O P C O 2 0 0 2

CLOSE CUSTOMER RELATIONS

One Company Covers Eastern AfricaAtlas Copco Kenya and Eastern Africa Region was estab-lished in 1936. It covers Kenya, Uganda, Tanzania, Ethiopia,Eritrea, Sudan, Mauritius, Madagascar, Somalia, and Dji-bouti. Atlas Copco Kenya employs 37 people in the Nairobioffice. Distributors serve neighboring countries. Extensiveproduct marketing and employee and distributor product

training has resulted in successful placement of new prod-ucts in the region. The vast opportunities in the aftermarketbusiness in the region are in focus, with active involvementof distributors and creation of local expertise and spare partsholdings. The aim is to become and remain first in mind—firstin choice in all the markets.

“Nature is irreplaceable,” says

Helen Kiruiru, Regional General Manager,

Atlas Copco Kenya

25A T L A S C O P C O 2 0 0 2

Kenya

Wildlife No Longer at RiskWhen the rivers are low and rain no longer falls, hydropower is reduced, and theKenyan electricity board has no choice but to impose power rationing.

T caused by the dry seasons isdefinitely an inconvenience to the people, but to theunique wildlife in this part of the world, a drought

can be deadly.That is when generators come to the rescue. Nationwide,

these generators ensure uninterrupted service for hospitals,gas stations, schools, and telecommunications.

“Because nature is irreplaceable, its preservation is toppriority for the game wardens of the Nakuru National

Park, Kenya. Now, an Atlas Copco generator provides the power to pump up precious water that gets the animalsthrough the dry season,” says Helen Kiruiru, RegionalGeneral Manager, Atlas Copco Kenya and Eastern AfricaRegion.

Within the Atlas Copco Group, care for the environmentgoes much deeper than occasional philanthropy. It is an inte-gral part of every product design.

26 A T L A S C O P C O 2 0 0 2

United States

Benefiting from a Great Partnership

Butler Manufacturing Company, the world’s leading producer of pre-engineeredmetal building systems and architectural products for the nonresidential construc-tion market, would like to model more of its vendor relationships on the success-ful partnership it has developed with Rental Service Corporation.

A , Director of MaterialsManagement, not only is Rental Service Corpora-tion the sole rental equipment supplier endorsed

by Butler, but it is also one of the most successful vendors.“Rental Service is an example of the type of partnership

we are striving to perfect with all of our suppliers,”says MarkHarrington, Marketing Coordinator for the Butler BuildingsDivision. “The suppliers we select to partner with our BuilderNetwork must provide a superior product and superior ser-vice. Rental Service offers many advantages to the ButlerBuilder Network, one of the most important being theirInternet-based online reporting system, E-FACTS.”

Harrington says E-FACTS is the kind of value-addedservice the division is trying to achieve with all of its partners.

It used to be that a customer had to work during thebusiness day’s operating hours in order to process a requestor get information about their account status. But now, cus-tomers can work with Rental Service Corporation whenever the customer decides to do so, at the customer’sconvenience.

Online day and nightThe benefits of the Internet-based online reporting systeminclude full access to a customer’s rental account activityand information that brings increased efficiency throughthe control of more of their entire rental process.

“E-FACTS provides our Butler Builders® with the abilityto go online at any moment of the day or night and view

numerous reports unique to their private account,”Harring-ton notes. Some of the reports include a list of equipment thatis currently on rent, informing customers of their exact statusto more effectively manage their equipment use and expenses.Total rental costs by project is another report that offers valu-able summary information to the project managers by moni-toring rental expenses as they accrue. Anotherreport offers a summary of rental projectsinvoiced, for quick and easy reference, any time.Beyond reports it also gives customers the abilityto call equipment off rent through interactivetechnology that returns a unique confirmationnumber to the customer. Thus, many of theseimportant customer transactions are now accurately recordedand are available for review and analysis. This “electronictrail”of history and information helps customers keeprecords throughout their entire rental experience.

“Construction is a complicated business, and Rental Ser-vice has proven many times over they have the ability to beflexible in time-sensitive circumstances,” says Harrington.

Butler Manufacturing was established in 1901 and isbased in Kansas City, Missouri. Today it has 27 offices in 17 countries, including seven regions throughout theUnited States. As the largest source of related developmentand construction services, Butler can handle projects of alltypes throughout the world.

A good fitThe global Butler Builder Network is made up of morethan 1,500 independent contractors in more than 50 coun-

tries. These network contractors are authorized to sell anderect Butler Buildings, and they can provide everythingfrom initial design to completed construction.

Butler Builders® offer a variety of construction optionsfrom erecting shells; to full-service, design-build contracting.Building applications include “big box” retail stores and

distribution centers, verycomplex manufacturingfacilities, multi-site retail orservice facilities, restaurants,and offices.

The primary objective forHarrington and Cross is toprovide one-stop shoppingfor Butler Builders®. Theyprovide builders with theresources they need, from overhead doors and dock equip-ment, to backhoes and dozers from network providers suchas Rental Service Corporation. It provides all the equipmentneeded, from generators and skid-steer loaders, to hand toolsand forklifts.

There are several reasons Butler Builders® chose topartner with Rental Service Corporation, according toJohn Cross. “The combination of the brands Prime Energy,RSC, and Prime Industrial made for a broad network ofservice providers across the country—so that was a goodfit,” he says. “Also, Rental Service is dedicated to the con-struction industry.”

Additionally, Cross says, Rental Service Corporation’swillingness and eagerness to work with the Butler BuilderNetwork largely influenced the company’s decision to formthe partnership.

“There was just a good, friendly exchange from thebeginning,” he says.

27A T L A S C O P C O 2 0 0 2


“Rental Service is an example of the typeof partnership we are striving to perfectwith all of our suppliers”

A Digital Rental ProcessRental Service has developed a rental process on theInternet for select key customers in the United States.The application enables the selection and booking ofrequests for rental equipment. To complement this, E-FACTS allows customers to access numerous reports,including a list of equipment currently on rent, totalrental costs by project, rental projects invoiced, andeven the ability to call equipment off rent. All of this isavailable at the customer’s convenience.

Rental Service Corporation’s rental stores

29A T L A S C O P C O 2 0 0 2

I , Atlas Copco manages the entire inventory ofdrilling consumables and delivers directly to the miners underground. The minepays a monthly fee to the supplier. As a result, the mine saves on the cost of inven-

tory and warehousing, the drillers can rely on having the right equipment, and becauseAtlas Copco’s earnings are based on meters drilled per month, both parties have aninterest in achieving the best results.

Atlas Copco Secoroc’s Area Manager Dave Cooke says, “Under the previous sys-tem, material was hoarded in case deliveries weren’t on time. After just four monthsusing this service system, there is no hoarding underground.” Drill Blast Co-ordinatorSeppo Haapamaki, at Falconbridge’s Kidd Creek copper and zinc mine in Timmins,Ontario, comments, “The reliability of the system has been outstanding. Before, drillershad to sharpen their own bits. Now that we’ve reassigned that responsibility to the sup-plier, the bits are immediately available, and drillers can concentrate on the task ofdrilling.”

A technical service representative from Atlas Copco’s off-site shop delivers equip-ment to all 28 active mine areas. He drives to the bottom of the mine and then works hisway up to the surface, where used equipment is taken back to the shop to be sharpened,reconditioned, or repaired.

Al Grydsyk, head of the underground warehouse and delivery service, says, “Thenew system has taken a big load off the service. Hauling all that material up and downused to be very labor-intensive.”

A Solution—Not Only a ProductThe focus on Atlas Copco’s “use-of-products” strategy ensures even greater participa-tion by the Group in its customers’ business activities. When customers get a solution,rather than just a product, they can concentrate on their core business. Revenues from“use-of-products” have increased year-on-year, making the Group less vulnerable toswings in demand.

“Use-of-products” covers service and maintenance, spare parts and accessories,consumables, and equipment rental.

Canada

Streamlined Service WinsInstead of paying for each drill bit used, a majormining operation in the Canadian province ofOntario pays for each meter drilled. This stream-lined service is boosting performance and cuttingcosts, while fostering a strong mutual interest inachieving the best results.


Ready for the

FOCUS ON RUSSIA

New Russia

Growth is the key to securing long-term profitability. All operational unitswithin the Atlas Copco Group follow a proven course of development: stability first, then profitability, and finally growth.

Russia is one of the countries where the Group has the potential to furtherstrengthen its position. This vast two-continent country, stretching across10 time zones, has a population of 148 million.

32 A T L A S C O P C O 2 0 0 2

FOCUS ON RUSSIA

Pnevmatika Machine Plant in St. Petersburg,founded by the American engineer JohanLenke, produced hand-held tools based onChicago Pneumatic (CP) technology. AtlasCopco bought Chicago Pneumatic in 1987.

T is mainlyscattered around the Volga region, in the Europeanpart of Russia. This industry employs about

300,000 people and has annual sales of roughly 45 billion.One of the largest plants is the Russian AvtoVAZ (Volga

Automobile Plant), producing LADA cars, a brand alsorecognized outside Russia. Established in 1970, the growthof this company has been tremendous. During 2001, thecompany celebrated its 20,000,000th car, and during 2002,

annual production reached 700,000 cars. Every 22 seconds,a brand new car sees the light of day.

AvtoVAZ uses many different pneumatic assembly toolsfrom Atlas Copco to fasten screws and bolts. Some yearsago, it decided to improve the quality by installing the elec-tric nutrunner Tensor® S. “This introduction improved thequality of assembly, thus the safety of the car. It alsoimproved the working environment by minimizing bothvibrations and noise,” says Igor Spektrov, manager in thetools analysis department of final assembly at AvtoVAZ.After the first introduction, AvtoVAZ invested in more ofthese tools, and, when it established a joint venture withGeneral Motors for the production of Chevi-Niva, a sportutility vehicle, it equipped the entire plant with Tensor® Selectric tools for the safety-critical applications. It tookonly one year to set up the plant, from the date of establish-ment until the first car left the production line.

Other Western car producers have also noticed the grow-ing Russian market and established local production. “Weare happy to support projects of customers like BMW, GM,Ford, and Scania. Their quality standards and requirementsare at the same high level as everywhere else, and we stronglybelieve in our ability to provide a high level of services toour customers,” says Vitaly Markelov, Business Line Man-ager, Atlas Copco Tools and Assembly Systems.

Tightening Up on Safety Issues

Russia has a population of 148 million people, and the Russian motor vehicleindustry produces 1.3 million cars annually, 95% of which are produced to satisfylocal demand.

Built-in IntelligenceA car contains more than 2,000 screws and bolts, and

each screw must have the correct torque applied,because too much or too little torque couldresult in component failure on the road. Tensor®

electric nutrunners have built-in intelligence andcan be programmed to control exactly thetorque applied to a fastener with very high accu-racy. What Tensor® S has done can be traced,and that is why it typically is used when there

are extremely high safety requirements to ful-fill, on applications such as safety belts, axleassemblies, and airbags.

In Russia Long Before the Revolution

FOCUS ON RUSSIA

Atlas Copco, formerly named Atlas Diesel,opened its first foreign office in Moscow.

The Russian revolution ends the reign ofCzar Nicholas II, and a communist state isestablished. Business and sales opportu-nities are at a standstill, and Atlas Copco’s

activities are dismantled. Having done so in very few cases,Atlas Copco takes some pride in the fact that it takes a revolu-tion to make the Group leave a market and its customers.

> >

“Every 22 seconds, a brand new carfrom AvtoVAZ sees the light of day.”

33A T L A S C O P C O 2 0 0 2

> The Atlas Copco department Eastern Sales toCentral and Eastern European Countriesfocuses on the Soviet Union, mainly on indus-tries that earn hard currency, such as metalmines, motor vehicle manufacturing, and ship-yards.

First order for the mining area in Norilsk.

34 A T L A S C O P C O 2 0 0 2

FOCUS ON RUSSIA

A new company, Atlas Copco International AB,is formed to handle the Russian market fromSweden.

As the market grows more diversified, a repre-sentative office is established in Moscow, whichwas allowed to carry out sales activities on atrial basis without being regarded as a perma-nent establishment for tax purposes in Russia.

>

C the companies is not new—Atlas Copco has been supplying mining equipmentto Norilsk Nickel for more than 30

years. This harsh Siberian environment is reallytesting the equipment, which includes hundredsof Atlas Copco machines: loading equipment,face drilling rigs, production drilling rigs, raise-boring equipment, and exploration drillingequipment. However, Atlas Copco does morethan fulfill equipment needs. Equally important is helpingthe customer to solve drilling and mining problems and pro-viding expert advice. Norilsk Nickel’s operators are trainedthrough both simulated and practical exercises. To open aservice center was the next logical step to extend the cooper-ation even further.

The service center employs 12 people from Atlas Copco, fiveof whom are service engineers based at the mines. They go

underground several times a week to make Atlas Copcomachine audits and check the performance (maintenanceprogram, machine repairs, and the like). Reports are pre-sented weekly to the management of the mine.

“For the mines around Norilsk, there are two mainadvantages to having a service center. They can pay in local

One Step Closer Atlas Copco cooperates closely with Norilsk Nickel, the largest nickel mine in theworld. Atlas Copco was the first foreign company ever to set up a service center inSiberia, 300 kilometers north of the Arctic Circle.

“In winter, you have to leave the enginerunning all day—otherwise the enginewill stop working because of the cold.”

35A T L A S C O P C O 2 0 0 2

currency and they do not have to wait several months to geta spare part replaced. They can more or less buy it in theshop,” says Branch Manager Jean-Paul Dutillieul.

Freezing coldDutillieul is Belgian, but he has lived in Siberia for morethan two years. “During two summer months, the polarlight turns the nights as bright as the days, and once in awhile the team spends the evenings barbecuing out on thetundra. However, during a large portion of the year it iswinter: long, dark, snowy, and very, very cold.” The temper-ature goes below –55° C (–69° F). Dutillieul points out that

compared to lifein other places,many thingsare reversed inNorilsk. “Hav-ing a companycar is often con-sidered a privi-

lege, but here it isa burden,” Dutil-

lieul says shakinghis head. “In

Siberia, the serviceengineers are in charge of the cars, since they need them

to get to the mines. Six months a year, the service engi-neers wake up at five o’clock, and with a shovel in one hand,they take the bus to Norilsk, where Atlas Copco rents twogarages. When the garage door is cleared and the car’sengine is running, it is time to take their colleagues to work.In winter, you have to leave the engine running all day—otherwise the engine will stop working because of the cold.The service engineers spend three hours a day commutingbefore they get to work, and in the evening they do it allover again.”

Dutillieul lives in Talnakh, 40 kilometers from Norilsk.By having the service center in Talnakh, the companycomes closer to three of its major customers, which operatethe majority of the Atlas Copco fleet. The service centeralso contains a surface workshop that is better and easier touse than workshops underground, where the environment isnot as clean. “We are now able to give our customers world-class treatment and a proper backup service, just like AtlasCopco does in other parts of the world,” Dutillieul adds.

Despite the harsh conditions, he likes Siberia because of the friendly Russian mentality and the good atmosphereamong people.

The sales company ZAO Atlas Copco, a closedjoint-stock company, is formed and based inMoscow. Within the framework of this com-pany, a small compressor assembly operation

is established. It was closed in connection with the economic crisisin Russia in 1998.

ZAO Atlas Copco establishes branch offices inSt. Petersburg (1998), Ekaterinburg (1999), andNorilsk (2000). Whereas the former two are pri-marily commercial branches, the latter is also

the center for the extensive service activities to serve the mines inthe Norilsk area.

>

Norilsk Nickel is Russia’s largest producer of precious andnonferrous metals. The company produces one-fifth of theworld’s nickel and platinum, 60% of its palladium, and aconsiderable amount of rhodium, cobalt, and copper.

The flight from Moscow to Norilsk takes four hours, andthere is a time difference of another four hours. There are no

alternatives, because there are no roads and no railways toNorilsk, which used to be a prisoner camp. This camp wasclosed in the late 1950s, but Norilsk remained a closed townuntil the early 1990s, and foreigners could not visit this area.You still need a special permit to reach Norilsk.

Production of Precious and Nonferrous Metals

Jean-Paul Dutillieul

North Pole

Norilsk

Volga

Moscow

Stockholm

Arctic Circle

36 A T L A S C O P C O 2 0 0 2

FOCUS ON RUSSIA

The sales company moves to a new, modernbuilding in Moscow. A service center is openedin the Norilsk area.

Preparations for establishing a leasing opera-tion in Russia are made, and the companyAtlas Copco Customer Leasing AB is incorpo-rated for this purpose.

>

A , Econika-Techno, one ofEconika’s four branches, sold practically onlyRussian equipment, but this has changed, and

now the company is selling and renting more than 20brands throughout Russia, Ukraine, and Kazakhstan.

“Selling a high-profile brand like this requires that bothour sales people and our service department have been welltrained by Atlas Copco,” Kirillov says. “Our experience isthat customers very often do not know what they want tobuy. After our sales representative has asked several ques-tions, the customer realizes that they actually need a differ-ent compressor than what they had originally expected.Sometimes this is a less expensive model, sometimes a moreexpensive one. Whatever the outcome is, we think it is veryimportant that we are able to guide the customers towardsthe best solution.

“Part of the deal when selling a compressor is the ser-vice that is given afterwards. Our focus on service is veryimportant to our customers, especially for a high-profilebrand,” he says.

The company is in the process of buying land south ofMoscow to build new premises with a big exhibition hall,office, and warehouse. “Together with our efforts in informa-tion technology, we can see the stock in real-time,”Kirillovnotes. “And, by marketing and selling online we will reducepaperwork, make fewer telephone calls, and cut costs.”

Guiding Towardsthe Best Solution

“Econika-Techno started to sell Atlas Copco compressors in 1997, when the localprice of a compressor had changed from being 10 times as expensive as a domes-tic one, to only 3 to 5 times as expensive,” says Vadim Kirillov, General Directorand one of the five founders of the holding company Econika.

37A T L A S C O P C O 2 0 0 2

From Order to DeliveryA top priority for customers is reliable delivery. By eliminating local inventoriesand focusing on lean and flexible production, Atlas Copco is striving for excellentdelivery service. The system includes a superior sales-feature service and makesit easy for customers to do business with Atlas Copco.

In 15 CountriesAtlas Copco Group manufactures and assembles products in15 countries on five continents. Manufacturing is concen-trated in the United States, Belgium, Sweden, Germany, andFrance. Most suppliers of core assembly components areclose to Atlas Copco manufacturing plants.

Within a Few Days Urgent demand of spare parts are availablefrom stock for delivery the same day. Stockreplenishment is determined by ordersreceived and the actual level of demand. A non-stocked standard product like acompressor will be assembled and deliv-ered a few days after the customer hasordered it.

38 A T L A S C O P C O 2 0 0 2

DR IV ING EFF IC IENCY

Distribution Centers in Europe and the United StatesAtlas Copco has a few well-established distribution centersboth in Europe and the UnitedStates. These centers specialize in the entire outbound logistics chain and areresponsible for all administration of goods, from the time they enter the ware-house, to the time they reach the customer.

Airpower Service Center

The Airpower Service Center in Antwerp, Belgium, is a worldwide outboundlogistics center for the Compressor Technique business area. The service cen-ter deals with shipping and export documentation of machines and full sup-ply-chain management of spare parts. Their fully integrated and automatedorder-handling system offers tracing and tracking on the Internet. They getone order every five seconds, and with 62,000 articles, it is important to auto-mate whenever possible and economical. Each day, the center sends morethan 2,500 parcels weighing from 100 grams to 15 tons.

Power Tools Distribution

Tools are shipped daily to the customer service center of Power Tools Distrib-ution (PTD), located in Hoeselt, Belgium. Initially PTD served one division, but11 years later it now serves five divisions in two business areas, 10 productionunits, and some 800 subsuppliers. ISO 9002 and ISO 14001 certified, PTD has180 employees maintaining a stock of more than 65,000 different articles,including tools, spare parts, and accessories.

Zero-Defect SuppliesOn the assembly lines, Atlas Copco fre-quently uses the kanban system. There isno traditional warehouse, but the assemblylines gets daily deliveries from suppliers,who are in charge of delivering zero-defectsupplies at the plant.

Walking along an assembly line, onecan see how the flow teams work and howthe machines grow, be they compressors ordrill rigs.

39A T L A S C O P C O 2 0 0 2


Direct DailyDeliveryBoth the Airpower ServiceCenter and Power Tools Dis-tribution (PTD) work with theDirect Daily Delivery (DDD) con-cept.

Airpower Service Center

In Europe, DDD means that all customers, big or small,independent of location, have access to the total range of stockedproducts, accessories, and spare parts within 24 hours. Despitetransportation time, the favorable time-zone difference makes itpossible for a customer in the United States to get spare parts sentfrom Belgium within 48 hours. The Air-power Service Center has introduced“time windows” on a customer basis. If acustomer orders within the time window,the Airpower Service Center guarantees dispatch of the spare parts the same day. All orders received within their time window are picked,packed, and dispatched on the same day. The average time from order to dispatch is a mere 3 to 4 hours.

Power Tools Distribution (PTD)

PTD ships to more than 110 countries, with deliveries to 24 countries in Europe and North America. The DDD conceptmeans that all customers, big or small, independent of location,have access to the total range of products, accessories, and spareparts the same day. All orders received before 4 pm local time arepicked, packed, shipped, and invoiced on the same day. The timefrom order to delivery is between 24 and 48 hours depending onthe location of the customer’s operation. Thanks to the DDD sys-tem, these divisions can offer the broadest product range in theindustry, in terms of availability and speed.

40 A T L A S C O P C O 2 0 0 2


24–48 hours delivery

A Few, Integrated ForwardersPicking and packing lists, shipping instructions, invoices, and the like, are printed in the lan-guage of the destination for the product.

Daily, 50 shipping trucks leave the Airpower Service Center for further transport by air,ship, and truck. The policy target is to use few but fully integrated forwarders.

PTD’s transport coordinators have a highly developed transport network at their dis-posal. The group of forwarding companies in this network has been selected very care-

fully for the efficiency of their organization.

Track the OrderOn a personalized site, the customer can track the location oftheir order and shipment. From the point when he or she entersthe order until the recipient physically gets the parcel, the ordercan be traced all the way from ordering to delivery.

41A T L A S C O P C O 2 0 0 2


42 A T L A S C O P C O 2 0 0 2


T and profitable mer-chandise business, Rental Service has changed itssupply chain and its distribution strategy of mer-

chandise sold in the rental stores.

The purchasing process has been centralized, and nowthere are only a handful of buyers instead of more than1,000. The number of vendors has also been reduced, from1,200, to 120 preferred vendors. Consequently, the numberof purchase orders has decreased by one fourth, and a fur-ther 50% reduction has been projected for the end of 2003.“We get better purchase prices as a result of vendor con-solidation and cost savings from administration and oper-ational efficiency gains,” says Åke Larsson, Vice Presidentof Distribution at Rental Service Corporation.

One central warehouseInstead of six regional warehouses, there is now only onecentral warehouse, located in Memphis. This centralization,combined with direct deliveries from suppliers to stores, hasmade the flow much more efficient and reduced the capitaltied up in stock.

For transportation, a freight policy has been devel-oped and implemented, pricing agreements have beensigned with a couple ofcore carriers, and synergieswith Milwaukee ElectricTool’s transportation havebeen found.

“The most importantbenefit of this improved flowis that Rental Service cannow serve its customers in abetter way,” Larsson says.

Focus on MerchandiseHandling

In rental stores, Rental Service not only offers equipment for rent but also sellsmerchandise and used equipment. The product assortment available for saleranges from safety items to accessories and small equipment like generators,electric handtools, and gloves. In short, customers can find rental equipment andeverything else they need to do their work properly.

43A T L A S C O P C O 2 0 0 2


Capitalizing on Synergies

O such support is AtlasCopco ASAP Europe. It employs approximately250 people and offers administrative services in

areas such as information systems, accounting, reporting,and human resources to sales companies in 15 Europeancountries.

“Our focus is always to do things in a better way. Moreefficiency plus higher quality equals a lower price for ourcustomers,” says Anna-Karin Stenberg, General Manager,Atlas Copco ASAP Europe (ASAP). Standardization andcontinuous improvements are typical examples of howASAP saves the sales companies money.

ASAP makes great efforts to improve information tech-nology infrastructure. Having fewer servers, standard PCs,and standard setups, they keep equipment costs lower.Additionally, the standardized setup makes installationand maintenance easier.

One of the projects within the field of accounting iscalled Quality Fast Closing, aimed at getting people to workon “closing” the books continuously during the month,instead of postponing it to the end of the month. By fol-

lowing an individualized checklist, the closing will be ontime, allowing more time to analyze the data. A continuousworkflow is an essential part of the development ofprocesses like these.

“To further enhance efficiency, some of our people par-ticipate in teams that dedicate up to 20% of their time todeveloping new, better standards. This borderless team-work can be achieved in live meetings, virtual meetings, orphone conferences,” says Stenberg. “It’s great to see howpeople grow in fulfilling their mission.”

ASAP helps several European companies, including tak-ing care of administrative tasks for customer centers basedin Essen, Germany.

“Sharing administrative services between our six com-panies, combined with a streamlined workflow, has begunto show efficiency gains,” says Yngve Revander, GeneralManager, Atlas Copco Tools Central Europe in Essen.

More Support FunctionsThe mission for Atlas Copco’s service providers is sim-ple. They should provide services with higher quality,faster than before, and at a lower price. Besides ASAP,the Atlas Copco Group includes service providers suchas the Internal Bank, which serves the Group with tai-lored banking services, and Industria, an internal insur-ance and risk management company. ISP, in the RentalService business area has a mission similar to that ofAtlas Copco ASAP Europe. There are also ASAP organi-zations in other countries and regions.

Apart from continuously improving the efficiency of its operations, the AtlasCopco Group develops synergies between support functions where the potentialfor efficiency gains through greater volume has been identified. The direct benefitis that the sales operations can fully concentrate on their customers.

North America

South America

44 A T L A S C O P C O 2 0 0 2

ATLAS COPCO GROUP

Atlas Copco Group

With the Vision to Be the Leader

Growth is a top priority for the Atlas Copco Group, in order to secure long-termprofitability. The objective is to grow 8% on an annual average over a businesscycle. Supporting strategies are market expansion, use-of-products, productdevelopment, and multi-branding.

Vision and targets Atlas Copco’s vision is to become and remain first inmind—first in choice. To be a leader in each of its busi-nesses, Atlas Copco expects all products and services toboost customers’ productivity and competitiveness, thusbecoming the preferred partner and supplier. All divisionsshould also be leaders in the area of environmental care.The overall objective is to achieve a return on capital

employed that always exceeds the Group’s total cost ofcapital.

Financial targets for the next business cycle: • to have an average annual revenue growth of 8%,• to have an average operating margin of 15%, and • to continuously challenge the operating capital efficiency

in terms of stock, receivables, and rental fleet utilization.

Africa/Middle East

Asia/Australia

Europe

Distribution of revenues by business area and region

■ Compressor Technique ■ Rental Service

■ Industrial Technique ■ Construction and Mining Technique

45A T L A S C O P C O 2 0 0 2

This will lead to that shareholder value is created and con-tinuously increased. The strategy used to achieve theseobjectives will follow the proven development process for alloperational units in the Group of stability first, followed byprofitability and growth.

In the past five years, compound annual growth averaged9.6%, mainly as a result of acquisitions. The Group’s operat-ing margin averaged 12.4% for the past five years. In 2002,the operating margin was 11.1% (12.0).

StrategiesThe Group is focusing on organic growth, supported byselected acquisitions.

Market penetration and expansion will be achieved byoffering new products developed from core technologies, byfinding new applications in new market niches, and byincreasing the scope of supply, but also by increasingand/or acquiring businesses that offer complementaryproducts and/or services. The Asian markets are in focustogether with Eastern Europe and the United States.

The Group will also expand revenues related to use-of-products, aftermarket activities, such as service and main-tenance, spare parts and accessories, consumables, andrental. These aftermarket activities help the Group form acloser relationship with its customers, and ensure evengreater participation in customers’ business activities.

The development of the Group’s products and core com-petences, is executed by continuous improvements in exist-ing operations and by innovations. Continuous improve-

ments in manufacturing, products, marketing, organiza-tion, and business flows are intended to provide customerswith better service and to safeguard short-term profitability.Break-through innovations are a means of staying ahead ofthe competition and maximizing performance in the longrun. The Group strongly supports specific projects to fosterinnovation in technology, concepts, and methods.

The Group’s multi-brand strategy plays a significant role.To better satisfy specific customer needs, products and ser-vices are differentiated and marketed under various brandsthrough different distribution channels. The Group willfocus on the development of these sales channels andbrands. The Group owns more than 20 brands: each brandhas a clear segmentation and differentiation, and is justifiedwhen it adds to revenues and profit for its respective business.

Market presence in close to 150 countriesThe Atlas Copco Group has a strong market presence.Atlas Copco manufactures and assembles products in 15 countries. Manufacturing is mainly concentrated to theUnited States, Belgium, Sweden, Germany, and France.

Products are marketed through the Group’s own salesoperations in approximately 70 countries and through dis-tributors and a service network in another 80 countries.

One objective is to have the same presence in terms ofsales, service, and production in each of the Group’s majorregions: Europe, the Americas, and Asia. During recentyears, Atlas Copco’s presence in Asia has grown rapidly, andmuch of this growth relates to success in China.

The American markets account for 51% of the Group’s rev-enues, (55), the European market totals 32% (30), andAsia/Australia 12% (11).

Increased importance of use-of-productsThe Group’s growth strategy—to expand revenues relatedto use-of-products, such as service and maintenance, spareparts and accessories, consumables, and equipment rental—has shown overall good development. The strategyinvolves the basic concept of increased service during thelifetime of the products to secure competitive advantages.All business areas deal with rental, not only Rental Service.

The trend towards outsourcing continues, to rent insteadof own, and companies look for suppliers that offer a func-tion rather than a product, even if affected by the currentrecession. Providing a rental service is in line with AtlasCopco’s use-of-products strategy and allows the Group tocome closer to the end user, which in itself has substantialmerits.

Despite the growth of the aftermarket, the Groupremains sensitive to the cyclical changes surrounding capi-tal goods investments in various public and private sectors,such as manufacturing, infrastructure, and mining.

The important customer groups in the manufacturing andprocess industries demand and invest in compressors,industrial tools, and assembly systems. Also, customers inthe construction and mining industries invest in equipment,including drilling rigs, drilling tools, breakers, portablecompressors, and generators. Investments in large construc-tion projects, like infrastructure, railways, and power plants,often depend on political decisions. In the private sector,however, underlying construction activities, interest rates,metal prices, and stocks of metals can influence investmentsfrom the construction and mining industries.

Finally, when sales of capital goods increase, demandfor consumables and services is likely to rise. Customersneed tools, spare parts, drill bits, and accessories on anongoing basis. Demand for these products and services isrelatively stable compared to the capital goods themselves,which exhibit more cyclical demand. The gradual shift tomore consumables and services has a stabilizing effect onAtlas Copco’s total performance.

Use-of-products accounts for approximately 35% in theCompressor Technique business area, more than 90% inRental Service, 23% in Industrial Technique, and 56% inConstruction and Mining Technique.

46 A T L A S C O P C O 2 0 0 2

ATLAS COPCO GROUP

Compressor Technique 33%

Rental Service 27%

Industrial Technique 24%

Construction and Mining Technique 16%

Revenues by business area

North America 48%

South America 3%

Europe 32%

Africa/Middle East 5%

Asia/Australia 12%

Revenues by geographic area

Mining industry 8%

Construction industry 38%

Manufacturing industry 24%

Process industry 13%

Service industry 7%

Other 10%

Revenues by customer category

0201009998 0201009998

Revenue growth

Average 98–02

Target

Growth from previous year

40

30

20

10

0

–10

%

0201009998 0201009998

ROCE

Weighted average cost of capital (pretax)

Return on capital employed

25

20

15

10

5

0

%

0201009998 0201009998 *

Operating margin

Average 98–02

Target

Operating margin

*) Excluding goodwill impairmentcharge

15

12

9

6

3

0

%

47A T L A S C O P C O 2 0 0 2

ATLAS COPCO GROUP

1998 Acquisitions: Ceccato’s compressor operations, Italy(CT); JKS Boyles, Canada (CMT). Divestment: Robbins, the United States (CMT).1999 Acquisitions: Rand-Air, South Africa (CT); ABIRD BV,the Netherlands (CT); Rental Service Corporation, theUnited States (RS); Tool Technics NV, Belgium (IT). Divestment: Atlas Copco Controls, Sweden (IT).2000 Acquisitions: Various small rental companies, theUnited States (RS), Hobic Bit Industries, Canada (CMT).

Divestment: Atlas Copco Rotoflow, the United States (CT).2001 Acquisitions: Christensen Products, the United States(CMT), Masons, Great Britain (CT), Grassair, the Netherlands(CT), various small rental companies, the United States (RS).2002 Acquisitions: MAI-Ankertechnik, Austria (CMT),Liuzhou Tech Machinery, China (CT), Krupp Berco Bautech-nik, Germany (CMT). Divestment: Revathi, India (IT).

Important Acquisitions and Divestments 1998–2002

Primary Drivers of Atlas Copco Group RevenuesRental, consumables,

Equipment 45% and other aftermarket 55%

Industrial machinery investment

Metal and ore productionMining machinery investmentMining

Construction Construction activity/outsourcingInvestment in infrastructure

Industrial productionIndustry

Board of Directors

President and Chief Executive Officer

Executive Group Management and Corporate Functions

Compressor Rental Industrial Construction and Technique Service Technique Mining Technique

Industrial compressors

Portable compressors

Generators

Specialty rental

Gas and process compressors

Equipment rental

Sales of merchandise and parts

Industrial tools

Assembly systems

Professional electric tools

Drilling rigs

Rock drilling tools

Construction toolsequipment

Load-Haul-Dump vehicles(LHDs)

Airtec

Portable Air

Industrial Air

Oil-free Air

Gas and Process*

Rental Service Corporation

Milwaukee Electric Tool

Atlas Copco Electric Tools

Atlas Copco Tools andAssembly Systems

Chicago Pneumatic

Atlas Copco RockDrilling Equipment

Atlas Copco Craelius

Atlas Copco Secoroc

Atlas Copco Construction Tools

Atlas Copco Wagner

Divisions

Product Areas

Business Areas

Organization

* The division was called Atlas Copco Applied Compressor and Expander Technique until December 31, 2002

48 A T L A S C O P C O 2 0 0 2

ATLAS COPCO GROUP

% of revenues Business concept Brands*

* Registered trademarks.

33%

16%

24%

27%

Compressor Technique develops, manufactures,markets and distributes oil-free and oil-injected aircompressors, portable air compressors, gas-and-process compressors, turbo expanders, electricalpower generators, air treatment equipment (suchas compressed air dryers, coolers and filters), air management systems, and a variety of aftermarketproducts. Compressor Technique has advancedresearch and development facilities for its core tech-nology areas, as well as assembly facilities and themanufacturing capability for production of com-pressor elements and other core components. Fur-thermore, the business area offers specialty rentalservices based on compressors and generators.

Construction and Mining Technique develops,manufactures, and markets rock drills, rockdrilling tools, tunneling and mining equipment,surface drilling equipment, construction tools,and equipment for exploration drilling and groundengineering applications.

Industrial Technique develops, manufactures, andmarkets industrial power tools and assembly sys-tems, as well as professional electric power tools.It serves the needs of advanced industrial manu-facturing like the automotive and the aerospaceindustries, industrial maintenance, light construc-tion, and building installations.

Rental Service satisfies customer needs for rentalequipment, new and used equipment sales, andmaintenance and service through its North Ameri-can network of more than 500 stores in the UnitedStates, Canada, and Mexico. The focus is to offer a comprehensive range of high-quality productsand services mainly to the construction andmanufacturing industries. Rental Service is thesecond largest equipment rental company inNorth America.

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Facts in Brief

49A T L A S C O P C O 2 0 0 2

ATLAS COPCO GROUP

Customers/Applications Characteristics Key events in 2002

The products are intended for a wide spectrum ofapplications where compressed air is used as asource of power, or where it plays an active rolein industrial processes. Clean, dry, oil-free qualityair is the preferred solution for applicationswhere compressed air comes into direct contactwith the end product. Air treatment equipment isfully integrated in the compressor package, orcan be installed separately. Portable compressorsand engine-driven electric power generators are areliable power source for machines and tools inthe construction sector, but also in numerousother industrial applications. Gas and processcompressors and expanders are supplied to vari-ous process industries.

The continued success of Compressor Techniqueand its position as the global industry leader isbased on Atlas Copco’s philosophy to be andremain first in mind—first in choice through prod-uct innovation and customer interaction andcommitment. This is a solid position maintainedand driven by continuous research and develop-ment in compressor technology and in fieldsrelated to energy savings and environmentalcare. All major operations are certified accordingto ISO 9001 for Quality Management and to ISO14001 for Environmental Management.

• Continuous flow of innovative new products.

• Expansion in new markets.

• Acquisition of Liutech in China.

• New product development facility for small andmedium sized industrial compressors.

The products are sold, rented, and serviced forbuilding and construction companies, large infra-structure projects, quarries, and mining com-panies around the world. The business area hasits principal manufacturing plants in Sweden,South Africa, the United States, Canada, andIndia.

Construction and Mining Technique builds itsbusiness on its well-established reputation as aglobal supplier of state-of-the-art products for theconstruction and mining segments. The businessarea aims to safeguard its position as a leader interms of quality, reliability, productivity, service,the environment, and ergonomics.

• Solid volume growth.

• Acquisitions further strengthens market position.

• Consolidation of manufacturing to Örebro andFagersta, Sweden.

• Strong development of use-of-products revenues.

Industrial Technique is the world leader in indus-trial tools and assembly systems for safety-criticaljoints. Industrial tools are used for manufacturingapplications like assembling, fastening, tighten-ing, drilling, grinding, and riveting. Assembly sys-tems are supplied primarily to the motor vehicleindustry for multiple and synchronized nut tight-ening. Professional electric tools are used forlight construction and building installations in theindustrial, commercial, and residential construc-tion markets.

Industrial Technique’s success is based on inten-sive research and development, innovative prod-ucts with extraordinary performance, the abilityto serve customers on a global basis, a uniquedistribution system, and products carrying worldfamous brands. Industrial Technique is the secondlargest manufacturer in North America for profes-sional electric tools and among the top five manu-facturers worldwide.

• Enhanced penetration and increased sales to themotor vehicle industry.

• Successful launch of Milwaukee heavy-dutyelectric tools in Europe.

• Increased pace of product development andcontinuous launch of products.

• Strengthening of manufacturing and supplychain structure.

Rental Service serves a well-balanced and diver-sified customer base of contractors, industrialcompanies, and homeowners with differentneeds and activities. Rental Service fulfills therental and sales demands of the construction,industrial/petrochemical, manufacturing, govern-ment, and homeowner markets. Rental Servicehas more than 330,000 active customers in theUnited States, Canada, and Mexico. With a strongNorth American competition base, Rental Servicestrives to set itself apart from the rest with super-ior customer service, quality equipment, andaggressive pricing to serve as every customer’scomplete equipment provider.

Rental Service has developed its strong marketposition by applying superior service concepts,efficient information systems, and economies ofscale to logistics and purchasing. Highlights of itsbusiness that benefit Rental Service customers:24/7 Customer Care, short- or long-term rentals,customized rental programs, national accountprograms, equipment delivery and pick up, newand used equipment, small tools and supplies forsale, and rent to own/rental purchase option pro-grams.

• Decentralized organization with focus toimprove service to customers.

• Continuous efficiency improvements.

• Strong cash flow.

• Goodwill impairment.

Atlas Copco is a global industrial group headquartered in Stockholm, Sweden. Revenuesfor 2002 totaled MSEK 47,562, MEUR 5,200. The Group employs close to 26,000 people andmanufactures products in 15 countries on five continents. The products are sold andrented under different brands through a worldwide sales and service network reachingsome 150 countries, half of which are served by wholly or partly owned companies.

Financial targets over a business cycle Target Last 5-year

Revenue growth (%) 8 9.6

Operating margin (%) 15 12.4

50 A T L A S C O P C O 2 0 0 2

ATLAS COPCO GROUP

Group ManagementGunnar BrockPresident and Chief ExecutiveOfficer for the Atlas Copco Group.Employed since May 2002. Born1950. Nationality: Swedish.Education: MBA, StockholmSchool of Economics, Sweden, in 1974.Career: Between 1974 and 1992he held various positions within

Tetra Pak including international assignments as ManagingDirector in Belgium/Luxembourg, China/Taiwan/Hong Kong,Australia/New Zealand, UK/Ireland, President for Tetra PakEurope, the Middle East & Africa, and Executive Vice President forthe Tetra Pak Group. Between 1992 and 1994 he was Presidentand CEO of the Alfa Laval Group, and 1994 to 2000 President andCEO of the Tetra Pak Group. Prior to his present position he wasCEO for Thule International. External directorships: OM-Gruppen, Sweden; Lego AS, Den-mark. Member of the Royal Swedish Academy of EngineeringSciences (IVA). Holdings: 2,500 A and 22,112 employee stock options.

July 1, 2002, Gunnar Brock replaced Giulio Mazzalupi as Presi-dent and CEO for the Atlas Copco Group.

Bengt KvarnbäckSenior Executive Vice Presidentof Atlas Copco AB, and BusinessArea Executive for CompressorTechnique. Employed since 1992.Born 1945. Nationality: Swedish.Education: Graduated at theRoyal Institute of Technology inStockholm, Metallurgical Engi-neering, in 1970.

Career: Between 1970 and 1982 Kvarnbäck held various posi-tions within Sandvik AB, Sweden. Kvarnbäck was then Presidentfor Secoroc AB, Sweden, and later for Invik & Co AB, Sweden.He held the position as Executive Vice President for Industriför-valtnings AB Kinnevik, Sweden, prior to joining Atlas Copco in1992 as Senior Executive Vice President, Industrial TechniqueBusiness Area.External directorships: Member of the Board of Directors ofVolvo Penta AB, Sweden.Holdings: 11,371 A, 57 B, 9,014 A call options, and 33,168employee stock options/SARs.

Freek NijdamSenior Executive Vice Presidentof Atlas Copco AB, and BusinessArea Executive for Rental Service.Employed since 1970. Born 1940. Nationality: Dutch.Education: Graduated at HighSchool, UTS Mechanical Engi-neering, in 1959.Career: Nijdam began at AtlasCopco in 1970, after seven years

as representative for Bostich staple machines. During his years inthe Group, he has held many different positions, in several coun-tries (the Netherlands, Belgium, Mexico, Germany, Sweden, andthe United States). He has been President of Atlas Copco’sApplied Compressor and Expander Technique division and, priorto his current assignment, Senior Executive Vice President, Con-struction and Mining Technique Business Area. External directorships: Putzmeister AG, Germany.Holdings: 1,317 A, 2,784 A call options, and 29,482 employeestock options/SARs.

February 28, 2002, Freek Nijdam replaced Thomas Bennett asBusiness Area Executive for Rental Service.

Göran GezeliusSenior Executive Vice Presidentof Atlas Copco AB, and BusinessArea Executive for IndustrialTechnique. Employed since 2000.Born 1950. Nationality: Swedish.Education: MBA, StockholmSchool of Economics, Sweden, in1973. M.Sc. in Chemical Engineer-ing, Royal Institute of Technology,Stockholm, in 1977.

Career: Gezelius joined the Sandvik Group in 1982 after beingsales engineer at Dow Chemical AB, Sweden, and working withenergy-related projects and investigations at the Association ofSwedish Heating and Ventilation Engineers, Sweden. Prior to join-ing Atlas Copco in 2000, he was President of the Sandvik Sawsand Tools Business Area. (Renamed Bahco Group in October1999, when the business area changed ownership from SandvikAB to Snap-on Inc.) Holdings: 33,168 employee stock options.

Björn Rosengren Senior Executive Vice Presidentof Atlas Copco AB, and BusinessArea Executive for Constructionand Mining Technique. Employedsince 1998. Born 1959.Nationality: Swedish.Education: M.Sc. in Technology,Chalmers University of Technology,Gothenburg, Sweden, in 1985.Career: Between 1985 and 1995

he held various positions within Esab Group, including interna-tional assignments as Marketing Manager in Switzerland andSweden, and other international positions in the field of Market-ing. From 1995 he was General Manager, Nordhydraulic, Nord-win AB, Kramfors, Sweden. In 1998 he joined Atlas Copco asPresident, Atlas Copco Craelius Division, and prior to his presentassignment he took the position of President, Atlas Copco RockDrilling Equipment Division.External directorship: Pergo, Sweden.Holdings: 2,396 A call options and 22,112 employee stockoptions.

March 1, 2002, Björn Rosengren replaced Freek Nijdam as Busi-ness Area Executive for Construction and Mining Technique.

Hans Ola MeyerSenior Vice President Controllingand Finance. Employed since1991. Born 1955. Nationality: Swedish.Education: MBA, StockholmSchool of Economics, Sweden, in 1977.Career: Meyer was employed byAtlas Copco in 1978 to work withGroup accounting and control-

ling. Later he moved to Ecuador as Financial Manager. He leftAtlas Copco for a few years beginning 1984 to, among otherthings lead the asset management at Penningmarknadsmäk-larna—later JP Bank, Sweden. In 1991 Meyer rejoined AtlasCopco as Financial Manager in Spain, a position he held until hebecame Senior Vice President, Finance and member of GroupManagement in 1993. Meyer has held his current position since1999.Holdings: 571 A, 300 B, 5,384 A call options, and 16,584employee stock options.

Marianne Hamilton Senior Vice President, Organiza-tional Development and Manage-ment Resources. Employed since1990. Born 1947. Nationality: Swedish.Education: Bachelor of Arts at theStockholm University, Sweden, in 1972, IFL School, in 1981.Career: Hamilton began heremployment working with market-

ing analysis at Astra in 1973. Between 1975 and 1990 she was aconsultant for Mercuri Urval, an international consultancy agency.In 1990 Hamilton joined Atlas Copco as Vice President, Organiza-tional Development for the Atlas Copco Industrial Technique Busi-ness Area, and one year later she began in her present position.External directorship: Stockholm School of Economics, Execu-tive Education AB, Sweden.Holdings: 3,175 A, 5,384 A call options, and 16,584 employee stockoptions.

Hans Sandberg Senior Vice President, GeneralCounsel. Employed since 1975.Born 1946. Nationality: Swedish.Education: Master of law, Upp-sala University, Sweden, in 1970.Master of Comparative Jurispru-dence (MCJ) New York University,United States, in 1972.Career: In 1972 Sandberg began

as an Assistant Judge at Södra Roslagen District Court, there-after he was an associate at the Lagerlöf Lawfirm in Stockholm.He joined Atlas Copco in 1975 as Corporate Counsel. He has alsoserved the Group as General Counsel North America, stationedin Wayne, New Jersey. In 1989 Sandberg was promoted to hiscurrent position. Sandberg has been Secretary of the Board ofDirectors, Atlas Copco AB since 1991.External directorship: The Export Association of Sweden.Holdings: 200 A, 3,902 A call options, and 16,584 employee stockoptions.

Annika BerglundSenior Vice President GroupCommunications. Employedsince 1979. Born 1954. Nationality: Swedish.Education: MBA, StockholmSchool of Economics, Sweden, in 1980. MBA, University ofAntwerp, Belgium, in 1995.Career: Berglund began hercareer with marketing analysis in

Atlas Copco in 1979. Since then she has had a number of differ-ent positions in the Group related to marketing, sales, and busi-ness controlling. During an assignment in Great Britain, sheworked as a sales engineer. Prior to her present position,Berglund was Marketing Manager for Atlas Copco Controls, acompany that was divested in 1999.Holdings: 1,300 A, 165 B, 3,006 A call options, and 16,584employee stock options.

AT L A S C O P C O G R O U P

Welcome to the world of Atlas Copco!Atlas Copco is an international industrial group of companies, with close to 26,000 employees in some 70 countries, and its head office inStockholm, Sweden.

In 2002, the Group reached revenues of SEK 48 billion with 98% of revenuesoutside Sweden. The operating margin was 11.1%.

The Group produces and markets compressed air equipment and generators, construction and mining equipment, electric and pneumatic tools, and assemblysystems, and offers related service and equipment rental.

The Atlas Copco Group owns famous brands such as Atlas Copco, RSC, Milwaukee Electric Tool, CP Chicago Pneumatic, and AEG Power Tools.

This magazine gives you an insight into the Group, its values and achievements.If you are curious to learn more, up-to-date information about the Group is avail-able on: www.atlascopco-group.com.

Three Key Publications at Your ServiceAtlas Copco has three separate publications to better serve itsmain stakeholders.

The Annual Report fulfills the legal requirements for informa-tion. It also includes information of specific interest to theinvestor community.

Achieve presents how Atlas Copco works to reach its vision.Strategic moves are highlighted and the Group communicates

what Atlas Copco is focusing on. In this publication you can alsoread how the President and CEO Gunnar Brock describes theGroup in-depth.

The Sustainability Report is Atlas Copco’s report on environ-mental and social issues.

All reports are available in pdf format on the Group’s web sitewww.atlascopco-group.com.

Achieve and the Sustainability Report are not part of the AnnualReport and they are not audited.

Atlas Copco AB and its subsidiaries are sometimes referred to asthe Atlas Copco Group, the Group, or Atlas Copco. Atlas CopcoAB is also sometimes referred to as Atlas Copco. Any mention ofthe Board of Directors or the Directors refers to the Board of Direc-tors of Atlas Copco AB.

Atlas Copco Annual Report 2002 02

Atlas Copco’s revenues declined 7% to MSEK 47,562. Excluding goodwill impairment charge, operating profit was MSEK 5,261, corresponding to a margin of 11.1% (12.0), and earnings per share decreased to SEK 13.88 (14.63).





Atlas Copco Sustainability Report 2002 02

Stable level of value added despite lower profits. Stable environmentaland workplace performance. ISO-certified environmental managementsystems implemented in almost all divisions.

51A T L A S C O P C O 2 0 0 2


Atlas Copco ABSE-105 23 Stockholm, Sweden

Phone: +46 8 743 8000www.atlascopco-group.com

Addresses

Atlas Copco Group Center

Atlas Copco AB (publ)SE-105 23 Stockholm, SwedenPhone: +46-8-743 8000Fax: +46-8-644 9045www.atlascopco-group.comCorp. id. no: 556014-2720

Atlas Copco Compressor Technique

AirpowerP O Box 100BE-2610 Wilrijk, BelgiumPhone: +32-3-870 2111Fax: +32-3-870 2443

AirtecP O Box 101BE-2610 Wilrijk, BelgiumPhone: +32-3-870 2111Fax: +32-3-870 2443

Portable AirP O Box 102BE-2610 Wilrijk, BelgiumPhone: +32-3-870 2111Fax: +32-3-870 2443

Industrial AirP O Box 103BE-2610 Wilrijk, BelgiumPhone: +32-3-870 2111Fax: +32-3-870 2576

Oil-free AirP O Box 104BE-2610 Wilrijk, BelgiumPhone: +32-3-870 2111Fax: +32-3-870 2443

Gas and ProcessAm Ziegelofen 2D-509 99 Cologne, GermanyPhone: +49-2236 965 00Fax: +49-2236 965 05 22

Atlas Copco Rental Service

6929 E. Greenway Parkway, Suite 200Scottsdale, Arizona 85254, USAPhone: +1-480-905 3300Fax: +1-480-905 3400

Rental Service Corporation6929 E. Greenway Parkway, Suite 200Scottsdale, Arizona 85254, USAPhone: +1-480-905 3300Fax: +1-480-905 3400

Atlas Copco Industrial Technique


Milwaukee Electric Tool 13135 West Lisbon RoadBrookfield, WI 53005, USAPhone: +1-262-781 3600 Fax: +1-262-781 3117

Atlas Copco Electric ToolsPostfach 320D-71361 Winnenden, GermanyPhone: +49-7195-120Fax: +49-7195-126 66

Atlas Copco Tools and Assembly SystemsSE-105 23 Stockholm, SwedenPhone: +46-8-743 9500Fax: +46-8-640 0546

Chicago Pneumatic1800 Overview DriveRock Hill, SC 29730, USAPhone: +1-803-817 7000Fax: +1-803-817 7006

Atlas Copco Construction

and Mining Technique


Atlas Copco Rock Drilling EquipmentSE-701 91 Örebro, SwedenPhone: +46-19-670 7000Fax: +46-19-670 7070

Atlas Copco CraeliusSE-195 82 Märsta, SwedenPhone: +46-8-587 785 00Fax: +46-8-591 187 82

Atlas Copco SecorocBox 521SE-737 25 Fagersta, SwedenPhone: +46-223-461 00Fax: +46-223-461 01

Atlas Copco Construction ToolsSE-105 23 Stockholm, SwedenPhone: +46-8-743 9600Fax: +46-8-743 9650

Atlas Copco WagnerP O Box 20307Portland, OR 97294-0307, USAPhone: +1-503-255 2863Fax: +1-503-255 7175

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Atlas CopcoAchieve—

Operational Report 2002

http://www.atlascopco-group.com/

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