Volvo Cars has seen better days. The new, returning boss sees no other option than a savings plan of 12 billion kroner. Layoffs will be necessary.
Volvo Cars is facing major cost savings. A total of 18 billion Swedish kronor, equivalent to 12.2 billion Danish kronor, will be found in cuts.
This comes after a disappointing quarterly report. Volvo's profits fell significantly. Therefore, CEO Håkan Samuelsson is now implementing a comprehensive savings plan. Layoffs cannot be ruled out as part of the plan.
Reuters writes.
The profit in the first quarter came to 1.9 billion Swedish kronor. This corresponds to approximately 1.3 billion Danish kronor.
The previous year, the profit was significantly higher at 6.8 billion Swedish kronor (approximately 4.6 billion Danish kronor).
The profit margin per car was more than halved during the same period. This means that Volvo can look back on figures that are far from meeting expectations.
Volvo's sales also fell in the quarter. Revenue fell by 12 percent. It ended at approximately 56.4 billion Danish kroner.
The operating profit for the core business left a margin of just 2.3 percent. The profit after financial expenses and tax amounted to approximately 663 million kroner.
Volvo's savings plan: Direct costs and investments are cut
Volvo itself points to several reasons for the decline. The current global turmoil is cited as a factor. A generally challenging market for the automotive industry is also negatively affecting the result.
In addition, the result is affected by a stronger Swedish krone, which makes Volvo's products more expensive abroad.
The major savings plan is to free up 18 billion Swedish kronor (approximately 12.2 billion DKK). The plan includes savings of 5.4 billion DKK on direct costs.
The remaining 6.8 billion kroner must be found by cutting investments and 'other initiatives' from the business.
The savings will affect employees. Håkan Samuelsson warns of layoffs. However, the exact extent has not yet been announced.
"As part of the action plan, there will be layoffs in our operations around the world," writes Håkan Samuelsson.
– But we will return with more details as soon as possible, he adds.
Focus on electric cars and new markets despite the crisis
Håkan Samuelsson took office as CEO a month ago, when Volvo out of the blue chose the man who would replace him in the position.
He has since been working on a plan to reverse the trend.
– In recent weeks, I have been working together with the management team and other colleagues, explains Samuelsson.
– We have developed a plan to make the company stronger and more resilient, he says.
Despite the economic challenges, Volvo is sticking to its goal of producing only electric cars in the long term. Plug-in hybrids will continue to be sold as a transitional solution.
To withstand the crisis, Volvo will now turn its attention to China and the United States. Sales in China have fallen significantly. In the United States, Volvo is affected by new tariffs.
Volvo plans to introduce its first extended-range plug-in hybrid in China soon, while also restructuring its operations in the US.
The US boss, Mike Cottone, has been fired and Luis Rezende will take over. Volvo also reiterates that it is considering moving production to the US, where there is spare capacity.
"We have made great progress in electrification in recent years," says Håkan Samuelsson.
– We must continue on the path we have chosen; with the right products, a competitive cost structure and strengthened resilience.
Volvo is not the only one that needs to save itself from a crisis. In general, the automotive industry is full of red numbers at the moment. Also here in Denmark, where millions are pouring out of several accounts. Read more about it here .
