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Volvo drops bid to boost executive pay

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12:12 CET+01:00
Sweden's Volvo Group bowed to criticism and said it was scrapping a proposal to raise executive bonuses on Wednesday, the same day that its truck making subsidiary announced it was stopping production at one of its plants because of dropping demand.

"The board of AB Volvo has today decided to withdraw the proposal to the annual general meeting to raise the ceiling for the performance-based variable salary from 50 percent to 60 percent of the fixed salary for the 250 most senior executives in the Volvo Group," Volvo said in a statement.

"The board also withdraws its proposal to increase the number of shares in the long-term incentive program for these senior executives," it added.

The proposal announced last month sparked angry reactions within Volvo, in political circles and among the public given the dire market conditions, the company's large fourth quarter losses and the job cuts it has announced.

"We have noted that the proposal presented created debate, internally as well as externally ... As a result, the board does not want to present a proposal that adversely affects cooperation within the group in these exceptional times," Volvo chairman Finn Johnsson said in the statement.

Volvo posted a net loss of 1.35 billion kronor ($151 million) in the fourth quarter of 2008, and has announced more than 5,000 job cuts in recent months.

The Swedish company had said when it presented the plan that a study showed its executive management received lower pay than in comparable companies.

Proof of the tough times facing Volvo was reinforced on Wednesday when Volvo Trucks spokesman Stefan Karlsson told AFP that production at the Tuve plant in Gothenburg "will be stopped several days here and there every month, totaling about a week a month."

"Time will tell how long we will need to do this, depending on when demand starts to pick up again," he said, adding: "There are no signs of an upswing yet."

Employees, who will receive full pay, will either be entitled to days off, professional training or maintenance projects, he said.

The Tuve factory was Volvo Trucks' second-biggest assembly plant in 2008, rolling out 25,300 trucks. In 2007, it produced 24,000 trucks.

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