Swedish car manufacturer Volvo Cars is reducing its global workforce as Chinese automotive behemoth and 78% controlling shareholder Zhejiang Geely makes drastic cuts across its automotive brands.
As part of its recently launched ‘cost and cash action plan’ Volvo has announced an 18 million SEK (US$1.89 billion) plan to cut costs, following a sharp fall in profits.
Tariff bite
The decision also comes as U.S. President Donald Trump’s tariffs create unrest in the automotive industry, with the EU facing 25% import tariffs on autos, steel and aluminium and reciprocal tariffs on other goods.
Volvo's largest stakeholder's Geely Automotive brand reported earnings lossesfor Q1 as it battles for market share within the highly competive domestic EV market.
To make things worse, over a decade of global expansion that began with the acquisition of Sweden's Volvo in 2010, Geely's billionaire owner Li Shufu is hemorrhaging at several of his brands that were already - on purpose - running at a loss.
Tariffs have made the situation worse. Its New York-listed brands Polestar and Lotus have effectively been reduced to penny stocks as the U.S.-China trade war ensues.
Zhejiang Geely also owns Zeekr and Lynk & Co, and has a significant stake in Mercedes-Benz.
To combat the losses, Li signalled cost-cutting across his businesses, releasing a document in March called the ‘Taizhou Declaration’ - a taoist call for “consolidation, synergies and savings” to eliminate redundancies across the group.
Unfortunately, it seems to failed to stop jobs going at Volvo.
It's estimated that around 3,000 positions will be cut, including consultants at Volvo's operations around the world.
The reductions will mainly affect office-based positions in Sweden and represent around 15% of the total office-based workforce globally.
“The actions announced today have been difficult decisions, but they are important steps as we build a stronger and even more resilient Volvo Cars,” Volvo Cars president and CEO, Håkan Samuelsson said.
“The automotive industry is in the middle of a challenging period. To address this, we must improve our cash flow generation and structurally lower our costs.”
At the time of writing, Volvo (STO: VOLV-B) stocks traded at 270.60 SEK, up 2.11% from the previous close. Market capitalisation of the company is 550.43 billion SEK.
