Swedish car maker Volvo Car Corporation, part of American major Ford Motor's Premeire Automobile Group, announced this week that it plans to cut its personnel by some 2,000 as part of a larger cost reduction programme.
Volvo said it planned to slash its work force by 1,400 white collar staff and 600 blue collar workers, it's biggest ever round of job cuts, to offset the impact of a weak auto market and surging raw material costs.
The job cuts will affect 1,200 employees at Volvo Cars in Gothenburg and Olofstrom in Sweden, some 300 employees abroad and some 500 consultants, and are expected to be carried out in the next six months.
The company, which has about 25,000 employees, has long been the victim of negative currency swings from dollar weakness as well as surging steel prices. Recently the situation had worsened, it said.
"Previously, this had been balanced with the help of cost reduction and efficiency programmes," it said in a statement. "However, with a continued declining U.S. market, continued price increases on raw materials, and weaker market conditions in Europe, the situation has deteriorated."
Volvo said the lay-offs were part of a scheme to slash costs by 4 billion Swedish Kronor ($166 million) and included cutting one of three shifts at its Torslanda plant in Gothenburg where it produces its bigger car models.
"We must tackle the difficult market conditions, most of all in the US market. The market contribution to cover Volvo Cars' costs is very small," Volvo CEO Fredrik Arp said in the statement.
Last November, Ford took Volvo, which reported a first-quarter pretax loss of $151 million (76 million pounds), off the auction block and said it planned to integrate its subsidiary more closely into purchasing and development efforts and that it would focus on improving Volvo's cost structure.
Over the past several months the US automaker has sold high-end brands, including Jaguar and Aston Martin, to raise cash as it struggles to return to profitability. Last week, Ford warned its automotive results would be weaker this year than in 2007 and said it would be difficult to reach break even next year due to slumping US sales.
Volvo cars are famous for their longevity. According to some figures the average age of a Volvo being discarded is second only to Mercedes at 19.8 years. Reliability is considered better than average and in the US, Volvo dealers are listed by Forbes as one of the best among all car makers (9th) and luxury car makers (6th).