Market Overview

Volvo Group To Cut 4,100 Jobs

Volvo Group To Cut 4,100 Jobs

Sweden's Volvo Group (OTC: VLVLY) is cutting 4,100 white-collar jobs globally in the second half of the year, responding to ongoing impacts of the COVID-19 pandemic. 

"The Corona epidemic and the global measures taken to fight it has led to a market situation impacting our industry severely. The effects are expected to be lower demand going forward and we need to continue to adjust our organization accordingly," Martin Lundstedt, president and CEO of the Volvo Group, said on Tuesday, June 16.

Volvo Group has 104,000 employees in 18 countries and sells trucks, buses and construction equipment in 190 markets. It also sells marine and industrial engines.

Volvo expects negative economic impacts from the coronavirus to play out in the short- and medium-term across its major markets. The parent company of Volvo Trucks North America and Mack Trucks has adjusted operations several times in response to lower demand compared with record retail sales and deliveries in the first half of 2019.

Second Round

"That's a pretty strong move from Volvo. Usually, you see volumes of that magnitude on the production side," Antti Lindstrom, a trucking analyst at IHS Markit, told FreightWaves. "I think it is a little bigger number than what I would have expected at this point. I wouldn't be surprised if there are some other [manufacturer] announcements also."

Major competitors like Daimler Trucks AG earlier cut 10,000 jobs and the smaller Navistar International Corp. (NYSE: NAV) cut 10% of its global workforce, about 1,300 jobs. Those layoffs were announced before the COVID-19 pandemic led manufacturers to suspend nearly all production in April and for most of May.

Volvo is preserving plans for a further shift to advanced technology trucks, including a joint venture with Daimler announced in April to mass-produce hydrogen-powered fuel cell electric trucks and stationary fuel cells as backup power systems for data centers. Volvo is paying 600 million euros (about $675 million) to Daimler to participate.

Both Volvo and Daimler are testing battery-electric Class 8 trucks in California and plan to produce them for sale in late 2021.

Since mid-2019 Volvo has addressed falling demand by flexing its workforce and terminating temporary and consultant contracts. Of the latest workforce reductions, about 1,250 are in Sweden. About 15% of the cuts will be contractors.

"I think the commercial side of the business is going to recover faster than the passenger vehicle side, but we're still looking at a significant economic recession and recovery that's going to take us three to four years," Sam Abuelsamid, principal analyst for Guidehouse Insight, told FreightWaves.

The need for staff reductions would have been higher without various governmental support packages enabling short-term layoffs and other similar measures, Volvo said.

"The Volvo culture will continue to be our guiding star in this work, where we will work as one team together with the unions to make this adjustment in a responsible way," Lundstedt said. 

"With these changes, the Volvo Group will maintain a position of strength, be adapted to the new market situation, and continue to be a leader in the transformation towards sustainable transport and infrastructure solutions." 

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