UPDATE: Sweden's Car Makers Unveil New Cost Cuts
12 March 2009 - 10:03PM
Dow Jones News
Sweden's two struggling car makers Thursday announced new
measures to cut costs in an attempt to reverse spiraling losses,
with Saab Automobile AB saying it will lay off nearly one-fifth of
its workforce and Volvo Cars freezing salaries and scaling back
production.
Saab, which owner General Motors Corp. (GM) has said it wants to
offload by 2010, said it was making 750 staff redundant at its
Trollhattan plant in western Sweden, out of a total workforce of
about 4,100.
Saab, which filed for reconstruction last month, is battling for
survival. It's trying to gain the interest of investors so that it
can continue operations after GM cuts its ties.
Saab's job cuts may also be necessary in order to get a loan
from the European Investment Bank that the company applied for last
month. An EIB official told Dow Jones Newswires Tuesday that the
bank won't lend Saab any money unless the loan is guaranteed by the
Swedish government or possibly a bank, and Sweden has said it won't
guarantee the loan until Saab's ownership is straightened out and
it presents a solid business plan.
Volvo Cars, which owner Ford Motor Co. (F) is trying to sell,
Thursday said it had signed a deal with unions to lower personnel
costs in order to avoid more layoffs.
The measures, which include freezing salaries for all employees
until January, 2010, should save the struggling company close to
500 million Swedish kronor ($113 million), it said.
"We are in an extreme situation with a continually weakening
global market for new cars, especially in the U.S. and Sweden, and
we need to take action to further reduce our costs," Volvo Cars
Chief Executive Stephen Odell said in a statement.
Other savings measures include a 5% pay cut for Volvo's 40
highest ranked managers starting April 1 and through 2009, the
freezing of bonuses for 2009 and 2010, and cut-back in
production.
Volvo in recent months has cut about 6,000 workers worldwide,
including more than 3,000 in Sweden.
"This agreement we all believe is a good model to secure our
business and avoid further employee separations at the present
time," Odell said.
Volvo Cars' announcement came on the same day as the EIB is
scheduled to rule on its application for a EUR500 million loan.
Volvo Cars is expected to get approval for a EUR200 million loan
this year, though the payout is contingent upon Sweden guaranteeing
the loan.
As of Wednesday, Volvo Cars and the Swedish government were
still negotiating the final details of that guarantee.
Company Web site: www.volvocars.com; www.saab.com
-By Ola Kinnander and Ian Edmondson, Dow Jones Newswires; +46-8-5451-3097; ola.kinnander@dowjones.com