Belgium aids Volvo in bid to protect jobs

The Flemish government has responded positively to an appeal from Volvo Cars CEO Stephen Odell to support its Belgian operations.

Belgium aids Volvo in bid to protect jobs

Odell met Kris Peeters, the prime minister of the Flemish regional government, on Monday to discuss support and loan guarantees to the troubled Ford-owned Swedish company, which operates a factory in Gent.

Both Odel and Peeters were satisfied with the outcome of the meeting and the Flemish government confirmed its willingness to support Volvo.

“It is important that the factory in Gent has a future. The jobs there are very important,” Peeters said.

“Under certain conditions we are prepared to provide guarantees of €200 million ($280) to 300 million for the European Investment Bank (EIB) loans.”

The terms of the deal will now be discussed in detail to see if the parties can reach agreement.

For the Flemish regional government it is important that Volvo commits to continuing its manufacture in Gent and protects the Belgian jobs.

Peeters was asked by the news agency TT whether the Swedish government’s decision to freeze discussions with Volvo due to uncertainty over the future ownership structure had an impact on their decision.

“We have discussed it. But we have decided not to freeze discussions. This is the difference between the Swedish government and us.”

The factory in Gent is Volvo Cars largest, larger than in Torslanda in Sweden, and almost 3,800 people work there.

The Gent factory has escaped relatively unscathed from staff cuts. It is here that Volvo’s smaller models are manufactured and also the new XC 60 – Volvo’s best selling model.

The exchange of words between the Swedish government and Volvo led to Stephen Odell penning a letter to the trade and industry minister Maud Olofsson and finance minister Anders Borg last week in which he sought reconciliation, underlining that he did not consider Volvo’s relations to be better with Belgium than Sweden.

The EIB approved a loan of 200 million euros to Volvo Cars in March for the development of environmentally-friendly technology. This research is set to be undertaken in Sweden.

The money was to be paid out as soon as the (Swedish) state guarantees were secured. But negotiations were broken off while the ownership situation remained unclear.

The decision was jointly taken by the Swedish government and Volvo.

As troubled US firm Ford is engaged in a prospective sale of Volvo, the firm was unable to meet the long term commitments required by the government to guarantee the loans.

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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.