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Volvo slashes consultant staff, pressures suppliers

Volvo slashes consultant staff, pressures suppliers

Published: 14 Sep 2012 12:20 GMT+02:00
Updated: 14 Sep 2012 12:20 GMT+02:00

Volvo Cars announced Friday it would cut up to 400 temporary consultant positions and has reportedly issued an ultimatum to its Swedish suppliers to slash prices by a fifth before 2015.

The loss-making carmaker, which was acquired by Chinese firm Geely from Ford in 2010, said the phasing out of technical consultant positions was due to the completion of work on updating its car models.

"By using highly skilled technical consultants in our engineering operations we have the flexibility to tailor the workforce to short-term needs in our car projects," said Peter Mertens, Senior Vice President, Research and Development at Volvo Car Corporation.

"This flexibility is vital to Volvo Car Corporation as a small car manufacturer," he added in a statement.

Meanwhile, according to Swedish economic newspaper Dagens Industri, the car maker is leaning on suppliers to reduce costs.

The newspaper said that Axel Maschka, the purchasing director for the firm, "told about 400 representatives of sub-contractors active in Sweden that lowering prices by 20 percent is the condition for them to participate in the expansion launched by Volvo to manufacture 800,000 vehicles in 2020."

Volvo sold 449,000 vehicles in 2011, including half of which were sold in Europe.

The loss-making carmaker, which was acquired by Chinese firm Geely from Ford in 2010, wants to quadruple sales in China to 200,000 vehicles a year from 47,000 sold in 2011.

Volvo has been struggling to improve demand, and announced in early September that it lost 254 million kronor ($38.5 million) in the first half.

Maschka did not confirm his ultimatum to Dagens Industri but said he hoped to increase the company's supply from China in order to meet the 2020 sales target.

"We are planning to buy about 25 percent from Chinese suppliers. We will reinforce our cooperation with Geely over our purchases in China," he said.

AFP/The Local

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Your comments about this article

18:28 September 14, 2012 by Uncle
Aaaand ... what? The consultants were TEMPORARY and hired for assembly of the new series. This is not unusual, but rather smart. Now the permanent employees are sufficiently skilled and the assembly line is balanced.

In addition, the losses of the company are not clear here. Were they DUE to the R&D expenses that actually allow the expansion of the car maker? In that case these losses will return. In addition, reducing current prices for the chance to be in future business is as old as economy itself.

Is it DUE to the extra consultants on the assembly line? Then the problem is solved.

Article should be a bit more specific and professional IMHO. Lack of info causes spread of panic -> reduction of stock capitalization and hence real troubles...
09:46 September 15, 2012 by smilingjack
I would suspect this is the savvy chinese getting ready to move the operation to china and ditch the highly ultra protected and overpaid swedish staff. ( by their terms )

why pay 10x the salaries in sweden? common sense really. surely the swedes must see this coming. you dont see i phones being made in america do you.
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