Volvo loses £1bn value as shares plunge after job cuts
Car shares fell 26% in early trading after the Swedish automaker announced 2,500 job cuts and a new cost-saving push. Chief Executive Hakan Samuelsson said…
STOCKHOLM — Volvo loses £1bn value as the automaker’s shares plunged after it announced another 2,500 job cuts, pointing to weak sales in China and mounting pressure in key markets. The Stockholm-listed shares fell 26% in early trading.
The cuts form part of an expanded turnaround plan intended to reduce costs and improve cash flow. Volvo Car said the operating environment remained tough and that more short-term action was needed, despite its view that the company’s long-term strategy remained on track.
The impact will reach beyond the share price. Volvo plans to cut costs by about $504.5 million through the job reductions, with 2,000 of the affected positions based in Sweden. The company said it would rely mainly on ending consultant contracts, natural attrition and targeted exit packages for employees.
“With severely challenged volumes, we need to reinforce our turnaround plan with additional decisive actions, lowering our break-even point and improving cash flows to make us more resilient,” Chief Executive Officer Hakan Samuelsson said.
China sales deepen the pressure
Volvo said revenues in China had fallen by almost 50% compared with last year. Samuelsson described the market for established premium brands there as being in severe decline, while a surge in domestic model launches and a prolonged price war have intensified competition.
“The weak performance in the U.S. and China means that half our business was not contributing to profitability,” Samuelsson said. The company also cited tariffs, the end of government incentives for new electric and hybrid vehicles, weak consumer sentiment and stronger competition in the U.S. SUV segment.
Volvo warned earlier this month that difficulties in China and the United States had led to lower-than-expected third-quarter sales and a weaker outlook. It scrapped its full-year guidance after that warning. The company said China would remain tough over the next two years, requiring further efforts to improve cost efficiency.
The new savings are on top of earlier measures. Volvo completed a $1.82 billion cost-saving plan last year, which included 3,000 job cuts, and said earlier this year it had made additional savings under a separate $504.5 million cost-cutting plan.
Production changes and new models
The turnaround also includes greater use of shared suppliers with Geely and a more efficient production structure focused on five dedicated Volvo plants globally. Volvo and Geely are exploring the possibility of producing other brands at factories in Chengdu and Ghent.
Volvo expects the full financial effects of the latest measures by the end of 2027. By then, it said, overall indirect spending will be almost 25% below 2024 levels.
The automaker has also set out plans for 13 new model launches by the end of the decade, with the aim of doubling its market share. Three models are due to be revealed in 2027: one for Europe and two tailored to China. The company said it is working on a portfolio for Europe, the United States and China, alongside more localized production.
Volvo cautioned that the financial contribution from its EX60 model will be delayed because the production ramp-up is taking longer than planned. The vehicle has more than 50,000 orders in Europe, according to the company.
Source: finance.yahoo.com
