2nd UPDATE: Sweden's Car Makers Unveil New Cost Cuts
March 12 2009 - 9:54AM
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 bankruptcy protection 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. 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 also 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, should save the struggling company close to 500
million Swedish kronor ($56.7 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
scrapping of bonuses for 2009 and 2010, and cutback in production
in Gent, Belgium, and Torslanda, Sweden, plants to meet lower
demand.
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 as the EIB approved a EUR200
million loan to Volvo Cars for research into lowering emissions.
Volvo had applied for EUR500 million and 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