Volvo to Revamp European Truck Manufacturing to Reduce Costs

Volvo AB (VOLVB), the world’s second-largest truckmaker, will revamp its European manufacturing operations over the next two years as part of a wider push to cut costs and boost efficiency.

Volvo will move cab trim operations within Sweden from Umeaa to Gothenburg and production of medium-duty trucks will be concentrated at its French factory in Blainville, the Gothenburg-based company said in a statement today. About 900 employees, of whom 700 are based in Sweden, currently work in the operations to be relocated and details of staffing cutbacks are to be negotiated with trade unions.

“Today’s European industrial structure for truck manufacturing is partly the result of acquisitions, and we now intend to use the various plants in an optimal way,” Chief Executive Officer Olof Persson said in the statement. “This will generate more efficient truck manufacturing operations, which will improve our potential to compete successfully in global markets.”

Volvo reiterated today it intends to lower annual spending by 4 billion kronor ($615 million) by the end of the 2015 as part of a broader three-year plan to lift profitability. Persson set a goal when he took over two years ago to put the manufacturer at the top of the heavy-equipment industry in terms of operating margins.

The truckmaker plans to reach the savings target by reducing the number of white-collar workers and improve production efficiencies. The cost-reduction program, outlined in September, will lead to 5 billion kronor in charges, which will mostly be booked in 2014.

Volvo’s second-quarter earnings and sales beat analysts’ estimates as new models helped mitigate the effects of a recession in Europe and currency shifts.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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