AB Volvo, moving to slash costs in a bid to stay profitable and independent, said last week it will jettison 5,300 jobs from its worldwide payroll.
The job cuts, representing about 7 percent of the group's total, will take effect by the middle of 1999. Volvo estimates the reductions will save about $370 million a year at present exchange rates.
Most of the slots to be eliminated are white-collar, and about half are in Sweden. In North America, about 1,000 positions will be eliminated, or about 10 percent of the total here.
'We felt that we were too slow in reducing costs,' said Leif Johansson, Volvo's president, in a conference call last week with reporters and stock market analysts.
Volvo has 10,150 employees in North America. Most of the cuts here will be in heavy trucks, buses and construction equipment. Rockleigh, N.J.-based Volvo Cars of North America Inc., which already has had a couple of downsizings, will lose 36 slots out of about 600.
The planned shutdown of Volvo's kit-car plant in Halifax, Nova Scotia, is not included in the 5,300 total cut.
Johansson said it will take several weeks to sort out how the positions will be cut, whether through attrition or termination. Besides the 5,300 full-time employees, Vol-vo also will drop about 700 temporaries.
In its third-quarter report, Volvo blamed a fall-off in profits on spending on new products, and sharp sales declines in Asia and Latin America.
'If the turbulence and crises continue and result in a declining total market, measures will have to be taken to adapt the group's level of costs to smaller volumes,' Johannson warned in the October report. The layoffs were announced Monday, Nov. 30.
Through the third quarter, Volvo's group net income was off 40 percent from a year earlier to about $686 million at present exchange rates, even though revenue was up 14.8 percent.
GOING IT ALONE
In the long run, the downsizing has its roots in Volvo's decision to kill a would-be merger with France's Renault SA in late 1993 in favor of going it alone.
Under its new business plan, Volvo has sworn off cross-ownership with other auto companies and sold off noncore subsidiaries in food and pharmaceuticals.
Johansson said Volvo has targets for higher sales volume, faster and cheaper product development and higher profits. He said product development and sales volume growth are on track, but profits are not keeping up.
'We cannot continue (just) to develop wonderful products, and grow. We also have to do the normal rationalization any manufacturer does,' he said.
PLENTY OF TARGETS
Volvo's financial targets include a 10 percent annual increase in revenue, and operating income of 5 percent to 7 percent of revenue.
For the first nine months, Volvo's operating margin slipped to 4.2 percent from 4.4 percent in the year-ago period. That figure does not include subsidiaries that were sold or acquired in that period.
'We were not self-financing at those levels,' Johansson said.
The timing of the layoffs may be related to short-term global market conditions, but Johannson insisted last week that the job cuts and other measures are necessary in the long run.
He said: 'The jobs we are talking about here will not come back if there is an upturn in the business cycle.'