Volvo to speed up plans for output cuts

Volvo, the Swedish carmaker, is expected to announce that it is cutting production by about 5 per cent as it reacts to a slump in sales.

The Swedish premium brand, which is owned by Ford Motor, is likely to detail the cutbacks, and accompanying job losses, next week, three people familiar with the carmaker’s plans said on Thursday.

Volvo is expected to say it is cutting its production by about 20,000 vehicles to account for slower sales this year. The carmaker is expected to sell 400,000 vehicles this year, a fall of more than 12 per cent on 2007 when it sold 457,000 units.

Volvo had already announced that it was eliminating the third shift at its main plant in Torslanda, outside Gothenburg, in December at the cost of about 700 jobs.

This shift cut might now take place as soon as October, and Volvo may also announce further job cuts, two people familiar with its plans said. The plant makes large vehicles whose sales have been hurt by the slowing economy, including the S80 executive car and XC90 crossover.

Volvo employs about 25,000 people worldwide and in June said it was cutting 2,000 jobs as part of a cost reduction programme aimed at saving SKr4bn. ($586m).

Volvo declined to comment on any further cuts, but said: “We are looking into the production schedule and lines in connection with the third shift, which we will discontinue.”

Volvo has already told some of its suppliers that it will be cutting back business this year. One of them, International Automotive Components, last week said it was cutting about 16 per cent of its 1,700 staff in Sweden because of a decline in orders. IAC’s main Swedish customers are Volvo and Saab, owned by General Motors, Ford’s struggling Detroit rival. Sweden’s car supply industry this year has so far seen a decline in orders of 20 to 25 per cent.

Volvo’s sales in the US, its biggest market, have dropped 23 per cent so far this year to about 56,000 vehicles and slumped 49 per cent in August alone to 4,669 units, according to Autodata, the market research group.

Volvo does not manufacture cars in the US and has been hit harder by the economic slowdown this year than other European marques such as BMW and Daimler’s Mercedes-Benz that do have US plants.

The ongoing pain at Volvo will add to the demands on Ford. The Swedish carmaker is Ford’s last wholly-owned overseas brand after its sale of Jaguar, Land Rover and Aston Martin.

Last week Volvo said Fredrik Arp, its chief executive, was stepping down. He will be replaced by Stephen Odell, a 28-year veteran of Ford and Mazda.

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