A sharp decline in U.S. sales has pushed Volvo Car Corp. to slash costs to preserve its status as parent Ford Motor Co.'s most profitable luxury brand.
Volvo will reduce its manpower by as many as 1,500 employees by year end, says spokesman Olle Axelson. But not all will be direct company employees, he says.
Negotiations on the job cuts will take place during the first two weeks of this month at Volvo's headquarters in Gothenburg, Sweden.
Four groups of personnel are involved :
- Hourly Volvo workers
- Salaried Volvo employees
- The employees of companies from which Volvo buys services.
Swedish newspapers have reported that Volvo made a profit of between 6 billion kronor and 7 billion kronor in 2004 on revenues of 97.1 billion kronor (about $12.7 billion at current rates), a 6.2 to 7.2 percent profit margin.
The weak U.S. dollar is a primary factor in the cost-cutting decision.
Volvo sales have dropped 5.9 percent to 88,246 units in the United States through the first eight months of this year compared with the year-ago period.
The United States is Volvo's largest market. About one in three Volvos built is sold here.
The automaker's drop in U.S. sales has been offset by gains elsewhere. Sales are up about 1 percent globally this year.
But Volvo executives are worried about the trend, Axelson says.
"Very late in the first quarter, we saw the cost base was going up," he says.
"It was getting increasingly expensive to sell cars. Volume went down, and profits went down."
The negotiations in Gothenburg coincide with a change in leadership at Volvo. Swedish industrialist Fredrik Arp on Saturday, Oct. 1, took over as CEO from Hans-Olov Olsson, who became Volvo chairman.
Arp was president and CEO of Trelleborg AB, a Swedish auto supplier specializing in advanced polymer technologies.