Volvo to cut costs by $1.9bn as earnings drop
Sweden-based Volvo Cars launched cost cuts of 18-billion Swedish crowns ($1.87bn or R34,701,964,000) on Tuesday as its operating profit fell heavily amid difficult market conditions for the automotive industry.
Operating profit at the company, majority-owned by China's Geely, was 1.9bn Swedish crowns (R3,661,982,100) for the January-March period against a year earlier 4.7bn crowns (R9,060,580,100).
The cost cuts, part of a new "cost and cash action plan", will include layoffs and a larger decrease in investment than earlier expected, the company said, adding it had withdrawn its financial guidance for the next two years.
The company's share price fell to record low levels in recent months as it grappled with mounting tariff pressures, the continued slowdown in electric vehicle demand and global uncertainty.
In a first sign Volvo was taking steps to address the situation, the carmaker made an unexpected management shake-up this month by axing CEO Jim Rowan and bringing back former CEO Hakan Samuelsson, and weeks later also replacing its CFO.
"Given the turbulence in the market, we need to further improve our cash flow generation and lower our costs," Samuelsson said on Tuesday.
"While we l have a lot to do, our direction going forward is focused on three areas: profitability, electrification and regionalisation," he said.
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