Volvo Cars freezes salaries to avoid redundancies

Swedish car maker Volvo Cars announced on Thursday a freeze on salaries of all employees and slash executive pay in an attempt to avoid further redundancies.

“Volvo Car Corporation has today signed a unique agreement with the local unions which most probably means that the company can avoid further employee separations,” the Ford-owned car maker said in a statement.

“The agreement means that all employees – both white collars and blue collars – will contribute to lowering personnel costs in the company during 2009 through, for example, postponed salary revisions,” it added.

Volvo stressed that “the cost savings also include the company’s top management,” pointing out that 40 executives had accepted a five-percent pay-cut between April and December.

The company also said no bonuses would be paid this year or next.

“We are in an extreme situation with a continuing weak global market for new cars, especially in the United States and Sweden, and we need to take action to further reduce our costs,” Volvo Car CEO Stephen Odell said in the statement.

Volvo Cars, which was purchased by Ford in 1999 and which counts nearly 20,000 employees worldwide – 15,000 of whom work in Sweden – announced last years plans to slash more than 4,600 jobs.

The Swedish car maker was on Thursday waiting for word on whether it would receive a massive loan from the European Investment Bank (EIB).


Sweden’s Volvo regains strength after pandemic puts brakes on earnings

Swedish truck maker Volvo Group was hit by a sharp drop in earnings due to the coronavirus pandemic, but business rebounded at the end of the year.

Sweden's Volvo regains strength after pandemic puts brakes on earnings
Volvo Group CEO Martin Lundstedt. Photo: Adam Ihse/TT

In 2020, the group saw “dramatic fluctuations in demand” due to the Covid-19 pandemic, chief executive Martin Lundstedt said in a statement.

For 2021, Volvo raised its sales forecasts in its trucks division – its core business – in Europe, North America and Brazil.

However, it said it also expected “production disturbances and increased costs” due to a “strained” supply chain, noting a global shortage of semiconductors across industries.

The truck making sector is particularly sensitive to the global economic situation and is usually hard hit during crises.

In March, as the pandemic took hold around the world, Volvo suspended operations at most of its sites in 18 countries and halted production at Renault Trucks, which it owns, in Belgium and France.

Operations gradually resumed mid-year, but not enough to compensate for the drop in earnings.

With annual sales down 22 percent to 338 billion kronor (33.4 billion euros, $40 billion), the group posted a 46 percent plunge in net profit to 19.3 billion kronor (1.9 billion euros).

Operating margin fell from 11.5 to 8.1 percent.

However, the group did manage to cut costs by 20 percent.

“We have significantly improved our volume and cost flexibility, which were crucial factors behind our earnings resilience in 2020,” the group said.

Volvo's business regained strength in the second half of the year.

“Customer usage of trucks and machines increased when the Covid-19 restrictions were eased during the summer and this development continued during both the third and fourth quarters,” it said.

“Both the transport activity and the construction business are back at levels on par with the prior year in most markets.”

For the fourth quarter alone, the company reported a 38-percent rise in net profit from a year earlier.