September 4, 2013 4:47 pm

Volvo Cars swings into loss amid tough European market

Volvo Cars swung into a loss in the first half as a tough market in Europe continued to weigh on the Swedish premium carmaker and caused a drop in revenues.

But Håkan Samuelsson, chief executive of the company owned by China’s Geely, insisted that Volvo could reach its target of breaking even this year in spite of an operating loss of SKr577m, compared with a profit of SKr349m in the first half of 2012. Revenues fell 14 per cent to SKr56.4bn.

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Volvo has struggled in recent years as sales at the Swedish group famous for its safety standards are seen as too low to enjoy big economies of scale, while its brand has a lesser image than larger rivals such as BMW and Audi.

But Mr Samuelsson, a former chief executive of German truckmaker MAN, said he was confident about breaking even for four reasons: new vehicles are being introduced this half-year; Volvo cut inventory heavily in the first six months; the sales trend in July and August was positive; and that “the lion’s share” of its SKr1.5bn cost-cutting programme had already been achieved.

“This is absolutely according to plan, especially as this stock reduction has made these six months tougher. It also means that according to plan we have to turn this around. But we are confident this is possible,” Mr Samuelsson said.

But Europe “is still problematic” for Volvo, Mr Samuelsson conceded. “Although maybe you could say we have reached a bottom here . . . we have to wait until 2015 before that will give us any momentum.”

Volvo’s sales for the first eight months fell by 2.5 per cent to 270,000, with those in Europe dropping 7 per cent while China’s rose by 40 per cent.

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