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Volvo slashes consultant staff, pressures suppliers

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.

Volvo slashes consultant staff, pressures suppliers

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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VOLVO

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.

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