Volvo Car eyes $1.87 billion in cost cuts to protect profits

Volvo Car AB is cutting 18 billion Swedish kronor ($1.87 billion) in costs to counter tepid demand and trade tensions weighing on the auto industry. The measures will lead to job reductions, the manufacturer said Tuesday. Volvo also withdrew its financial guidance for this year and next due to the uncertainty sparked by President Donald Trump’s tariffs, in a major restructuring under new Chief Executive Officer Hakan Samuelsson.

The duties are “disturbing a global company massively," Samuelsson said in an interview with Bloomberg Television.

The CEO’s plan is meant to stabilise Volvo after an extended period of disappointing sales and model delays. Samuelsson, 74, began his second stint at the helm of one of Europe’s most recognisable auto brands this month as the industry contends with the duties and muted demand for electric vehicles.

Samuelsson has already replaced his chief financial officer and sharpened the company’s return-to-office policy. He now wants to prioritise Volvo’s business in the US and China to offer customers better products there. The company will soon reveal its first extended-range plug-in hybrid for the Asian market, it said.

“Shifting to a localized model will take time," Bernstein analysts led by Harry Martin said in a note. “The pain is real and here to stay."

The carmaker’s shares fell as much as 11% in Stockholm. The stock is down around 31% this year.

Brought back by billionaire Geely chairman Li Shufu after leading Volvo for a decade until 2022, Samuelsson has flagged the need to lower expenses and produce more in the US because of the auto duties. The company still exports a significant share of vehicles from Europe to the US.

Volvo will pass on some of the tariff costs to consumers while absorbing others, the CEO told Bloomberg TV. The company needs to bolster output at its factory in South Carolina and is looking into adding a “conventional or hybrid" car to the production lineup there, he added.

Volvo’s restructuring includes reducing material expenses by 3 billion kronor and white-collar personnel costs by 5 billion kronor, while lowering investments and inventories for another 10 billion kronor in reductions, the CEO said. The majority of the effects from the plan will be realised next year.

The manufacturer also reported first-quarter revenue and operating income that missed analyst estimates. Volvo has lost two-thirds of its value since its 2021 IPO and has become a target for short sellers.

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