Job cuts key to Swedish auto sector survival: experts

The path to survival for Sweden’s auto industry is cutting jobs and focusing on niche products, experts said on Wednesday.

The country’s leading automakers, Saab and Volvo, have been put up for sale by their US owners General Motors and Ford, leaving a question mark over the future of the industry.

Saab is currently engaged in a legal reorganization process similar to bankruptcy protection.

But two studies on the Swedish auto sector say that while job cuts may be necessary to keep the car companies competitive, the industry can continue to be a key part of the economy, which represents 14 percent of the country’s total exports.

A report by the Swedish Agency for Growth Policy Analysis said the country’s car industry was not productive enough when compared to 29 of its foreign rivals.

“Sweden has a fairly low productivity level compared to the other 29 countries (in the study),” said one of its authors, Peter Vikström.

“The future seems bleak considering those figures; that’s one estimation of why we have this crisis. There are some structural problems (within the industry),” he added.

Vikström pointed to Sweden’s low share of world automotive exports in relation to the number of people employed in the industry.

A separate study by the Swedish Agency for Economic and Regional Growth and the consulting firm WSP found some 190,000 people are employed in the automotive sector out of Sweden’s 4.5 million-strong workforce.

Only Germany and Slovakia have a higher percentage of their active workforce employed in automotive-related jobs.

“There is overcapacity in the sector … a limited demand compared to production (levels) because people are buying fewer cars,” said Maria Lindqvist, one of the analysts behind the report.

She said, however, that the Swedish automotive industry could survive, but said it should “focus on certain niche products, specific parts” and not necessarily produce the entire car.

Vikström said any job losses from the auto industry could free up skilled labour for growth industries specializing in new environmental and energy technology.

“It could be one viable growth engine in the future, especially if you consider the amount of investment needed in this sector if we want to reach the climate goals of reducing CO2,” he said.

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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.