Volvo Car Corporation avoid redundancies by reducing personnel costs

Volvo Car Corporation have signed a unique agreement with local Swedish unions (March 12th 2009) which will allow the company to avoid further employee redundancies. The agreement means that all employees - both white and blue collar - will contribute to lowering personnel costs in the company during 2009 through initiatives such as postponing salary revisions. The cost savings also include the company's top management.

"We are in an extreme situation with a continuing weak global market for new cars, especially in the US and Sweden. We need to take action to further reduce our costs," says Stephen Odell, President and CEO of Volvo Car Corporation.

After last autumn's cost reductions, Volvo Car Corporation has reached an acceptable balance and is now taking further measures to retain competence in the company and to enable maximum efficiency for when the market situation begins to improve. These measures will provide a saving of close to 500 million SEK (approximately 50 million USD) in 2009. In addition, a reduction of production volumes is planned in both Gent and Torslanda to meet the current market situation.

The agreement, valid from April 1 to December 31 2009, includes the following measures:

• The company's salary revision is postponed until January 2010 for all employees, and corresponds to approximately half of the total saving.
• The so called "Work time compensation" (ATK- arbetstidskompensation) is reduced by approximately 1.5 hours/week for all employees between April 1 to December 31 2009.
• The company's 40 highest ranked managers including the executive management team will reduce their salaries by 5 percent from April 1 to December 31 2009.
• No bonus will be paid to employees (including managers) in 2009 and 2010.
• To handle the decline in order intake, the agreement also contains up to 45 lay off days during 2009 for employees in production. A salary reduction of 15 percent will be made for each of the lay off days. This means a reduction of the monthly salary of up to 5 percent. The number of lay off days varies from each plant in Göteborg, Skövde, Floby and Olofström.

Tomas Ernberg, Managing Director for Volvo Cars Middle East said:"At the end of 2008, Volvo Cars Middle East had cut costs both in terms of fixed marketing and in terms of operational costs. Volvo Cars Middle East has a target to increase sales in 2009 despite the Global Financial crisis and we are taking aligned measures with Sweden in exploring cost savings possibilities and avoiding further employee separations. So far, Volvo Cars Middle East has shown increased performance both in terms of car sales and of increased segment shares in the premium segment. We will continue our efforts to improve business."

With this is unique agreement, Volvo Car Corporation are taking extraordinary measures to improve the competitiveness of their business. This agreement concluded with the local Swedish Unions is a good model to securing business and avoiding further employee separations at the present time.