Volvo initiates measure to enhance competivineness

VOLVO INITIATES MEASURE TO ENHANCE COMPETITIVENESS Volvo has decided to initiate measures to strengthen competitiveness and to increased the Group's profitability level. Efforts to improve internal efficiency are being intensified. As part of the effort, a review of the Group's cost level and personnel situation have been undertaken. The review shows a need to reduce Volvo's current personnel level by 5,300 persons and more than 700 consultants. Of the number of employees 3,100 are salaried employees and 2,200 wage-earners. A total of 2,600 are employed in Volvo's operations in Sweden and 2,700 in operations abroad. In autumn 1997, Volvo adopted an action plan for the Group's operations in the years immediately ahead. The plan involved a heavy focus on growth, product renewal and internal efficiency. "To date, product renewal and the global growth strategy have been implemented successfully and at a rapid pace, but there is still much work remaining in order for us to be able to attain our profitability goal. Consequently, efforts are now being turned toward improving the Group's internal efficiency," says Leif Johansson, President and CEO of Volvo. Efficiency in Volvo's industrial structure must be further increased. Non-core and non-competitive operations are the target of measures such as downsizing, coordination, cooperation with an external partner, divestment or termination. In line with the strategy, Volvo has implemented a number of changes in the Group's structure in recent years: Volvo Buses has decided to close three production units in Europe and concentrate manufacturing to Volvo's plant in Poland. Volvo Construction Equipment has divested the majority of its holding in U.S.- based Euclid and is reducing its involvement in rigid haulers. Operations for press mechanization and assembly technology at Volvo in Olofström have been transferred to a new company, with ABB as the majority owner. Volvo Cars has decided to close its assembly plant in Halifax, Canada. Volvo Cars' wheel assembly plant in Kungälv has been divested. Volvo has signed a cooperation agreement with the German diesel engine manufacturer Deutz covering joint development of small and midsize diesel engines. Volvo Trucks' rear-axle plant in Lindesberg has been divested. Volvo Construction Equipment has acquired Samsung´s construction equipment division which means a significant potential for rationalization In addition to these measures, the implemented review of the Group's current cost level illustrates the necessity of sharply reducing costs. Among other measures, this means that the number of positions in the Group must be reduced. This review will now be followed by specific measures within Volvo's business areas. The result of this work will be announced successively in the near future. "We will be forced to issue notices of termination. This is a very painful process and we will make every effort to mitigate the effects for those concerned in accordance with normal practice in each country. The Group's earnings capacity is insufficient and we must now take actions to ensures Volvo's long-term competitiveness," says CEO Leif Johansson. The Volvo Group estimates that it needs to downsize by 5,300 employees, of whom 3,100 are salaried employees and 2,200 are wage-earners. Volvo will also downsize the number of consultants more than 700. The reduction in employees is distributed among Volvo's business areas as follows: Volvo Cars 1,900 Volvo Trucks 1,000 Volvo Buses 900 Volvo Construction Equipment 900 Volvo Aero 80 Volvo Penta 100 Other operations 420 A total of 2,600 of these persons are employed in Volvo's operations in Sweden and 1,100 in operations in Göteborg. At Volvo's operations in the rest of Europe, the personnel reduction is estimated at 1,100 persons, in North America 1,000 persons and 600 in the rest of the world. The main part of the measures are expected to be implemented by mid-year 1999. Fully implemented the measures are estimated to represent reduced costs for Volvo totaling up to SEK 3 billion. "In my opinion, as a result of these measures, it will be necessary to establish a reserve for restructuring costs in Volvo's accounts for the fourth quarter this year", Leif Johansson says. "The size of this reserve will be determined during December this year". "The announced measures will be the result of further structural changes within the Group, but does not include the continuous adjustments to the business climate within Volvo's different business areas, Leif Johansson says. November 30, 1998 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1998/11/30/19981130BIT00020/bit0001.doc http://www.bit.se/bitonline/1998/11/30/19981130BIT00020/bit0002.pdf