Swedish carmaker Volvo Car AB has announced a major cost-cutting move to protect its profits. The company will cut 3,000 jobs, which is about 7 per cent of its global workforce.
Out of these, 1,000 are external consultants. Volvo currently has around 43,800 employees, more than half of whom are based in Sweden.
The company had to take this step because its operating income dropped by 60 per cent in the first quarter of the year. After this major fall in profit, CEO Håkan Samuelsson launched an efficiency program worth 18 billion Swedish kronor to improve operations and reduce costs.
Volvo will also have to bear a restructuring cost of 1.5 billion kronor (about USD 140 million). This cost will impact the company’s results for the second quarter.
Volvo is also facing problems due to falling demand for electric vehicles and rising global trade barriers. The company’s stock has dropped by about 25 per cent this year, although it recently saw a 4.9 per cent rise in the Stockholm stock exchange.
Some people suspect that Volvo’s Chinese parent company might be trying to shift research and development (R&D) jobs to China. However, CEO Samuelsson denied these claims. He said that the job cuts are only meant to control expenses and stabilize the company.
He also explained that these changes are necessary to make the company stronger and more efficient in the current tough market conditions.
