Volvo announces 4,000 job cuts as global crisis bites

Dubai: Volvo is shedding staff. The Swedish carmaker said yesterday it is terminating the services of 3,300 employees and 700 consultants as part of a plan to cut 6,000 employees and 1,200 consultants.

However, the company clarified that no employees from its Middle East operations would be affected.

"The Swedish Public Employment Service has been informed of additional redundancies affecting around 2,000 blue collar employees and 700 white collar employees in Sweden. Outside Sweden, an additional 600 employees will be made redundant and some 700 contracts with consultants will be terminated," a company statement said yesterday.

On June 25 the company made an announcement hinting at plans to lay off 2,000 staff including 500 consultants. The total redundancy actions now planned account for 6,000 staff worldwide, of which 1,200 are consultants.

"These are difficult times for the car industry in general, including Volvo. These actions are necessary to create a new and sustainable Volvo Car Corporation, a company with more focused operations and structure," said Stephen Odell, president and CEO of Volvo Car Corporation.

Drastic downturn

"The unstable economic environment has resulted in a very unpredictable situation, and the downturn in the global car industry is more drastic than expected," Odell continued.

The notice handed to the Swedish authorities says 2,230 employees at Gothenburg, 410 at Volvo Cars Body Components in Olofstrom and 60 at an engine plant in Skovde/Floby will lose their jobs.

The company is also planning a reduction of 600 people outside Sweden.

Roula Beiruty, marketing manager of Volvo Cars ME, said: "We are aware of the severity of the crisis that the world is facing. Volvo Cars ME is doing the necessary to ensure that no restructuring will take place in the region."

In a press release issued on September 12, Volvo said that approximately 900 blue collar employees would be affected. Given the turbulence in the world economy over the last few weeks, however, it is clear that the company has been forced to consider further cost-saving actions.

The redundancy announcement is likely to have an impact on negotiations with unions for a new organisation which commenced on June 25 since the new developments need to be integrated with the previous plan.

The new organisation is expected to be in place by the end of the year.

Ford may sell Volvo to BMW as part of a drive to raise cash, say senior car-industry sources.

Sources close to Ford and BMW said on Saturday there had been preliminary talks between the two automotive giants, although that was rejected by the companies themselves.

"No talks have taken place," said a BMW spokesman.

BMW and Ford are understood to have held extensive talks two years ago about a collaboration involving Jaguar and Land Rover. Ford later sold the two British car groups to Tata of India.

Ford and its Detroit rivals, GM and Chrysler, are under increasing financial pressure as sales slump and debts mount. GM reports what are expected to be poor third-quarter figures this week, and is intensifying merger talks with Chrysler, which told staff on Friday it may have to lay off one-quarter of its workforce.

Car-industry sources say the pair are pressing for some kind of financial assistance from the US government before they go ahead with the deal.

A Michigan congressional delegation has written to US Treasury Secretary Hank Paulson to use the $700 billion (Dh2.57 trillion) bank bailout package to "protect this critical sector".

In September President George Bush signed off on a $25 billion loan package for the car industry to encourage the sector to develop more fuel-efficient vehicles.

However, it has yet to receive that cash and in the meantime the credit crunch has hit.

- The Times Newspapers Limited 2008