Volvo plans cost cuts to try and stem its losses

VOLVO Cars said yesterday it aimed to break even this year, banking on a pick-up in China and cost cuts to turn around a first-half loss.

It is seeking to take on larger global luxury brands such as BMW, Daimler’s Mercedes and Volkswagen’s Audi and win a market share big enough to foot the bill for the vast investments needed to develop new vehicles.

The operating loss at Volvo, wholly owned by China’s Zhejiang Geely Holding, was 577m Swedish crowns (£55m) for the first half of the year, compared with a 349m in the same period last year.

But Volvo chief executive Hakan Samuelsson said the company had “realistic possibilities” to break even this year, forecasting higher volumes and margins for the group in the second half.

“Growth is expected in China, whereas the European market is expected to continue to be challenging,” Samuelsson said in a statement, adding the firm was implementing a cost-cutting programme.

This sentiment was echoed yesterday by ratings agency Moody’s, which predicted that global car sales will grow 4.8 per cent this year, driven by China, but European manufacturers will nevertheless lose a combined $6.6bn.

Volvo is gearing up for production at several plants in China over the coming quarters to serve what it labels its second home market.

In the year to the end of August, Volvo sold a total of 269,765 cars, down slightly on 2012.

Meanwhile American manufacturer Chrysler reported a 12 per cent gain in US August car sales and predicted that the industry will continue on its hot streak as it heads into the fall selling season, when new models are introduced.

Chrysler said that it expects a seasonally adjusted sales rate for August of 16.1m vehicles, including medium and heavy trucks, in line with forecasts.

And Ford logged a 12 per cent rise in monthly sales, posting its best August since 2006.