Volvo made a first half net loss after sales suffered due to the euro zone crisis, but said its growth plans remain on track.
The former Ford unit, now owned by China’s Zhejiang Geely, aims to increase sales to 800,000 by 2020 from just over 400,000, including growth in China, where it also plans to build two factories.
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Chief executive Stefan Jacoby said sales this year have been hit by weakness in the euro zone. “The markets are not what we originally planned. The crisis in southern Europe is spreading to the north.”
Sales for the first half fell 4% to 221,309 cars year-on-year. Earnings before interest and tax slumped to SR39m crowns ($35.6m) from SKR1.53bn, a net loss of SKR254m following a profit of SKR1.21bn in the first half of 2011.
Sales worsened for the January to August period, down 5.2% with southern Europe and home market Sweden struggling.
Jacoby said that Volvo will reduce production at its Swedish plant to 50 cars an hour from 57 and that 285 temporary staff would not have their contracts renewed.
The company said it will continue to invest in its transformation programme, which includes the new factories in China and the launch of an all-new version of its V40 model.
Jacoby said that Volvo has been forced to offer incentives in a bid to boost sales although not to the same extent as other manufacturers. He added that the company was suffering from the strength of the Swedish crown, which affects revenues from foreign currency sales.
Despite the earnings loss, Jacoby said the company had a strong enough balance sheet, as well as financing commitments, to carry through the group’s plans through what it calls the transition years of 2012 and 2013, when it expects the first Volvo to roll out of a Chinese plant in Chengdu.
He also confirmed reports that the company is exploring the possibility of building a small car with another manufacturer but no decisions have been made yet.
