Wednesday, October 16, 2013

Volvo Cuts Aim at Improved Logistics and Lower Truck Production Costs

Staff Reductions Part of European Restructuring Plan
Shipping News Feature

SWEDEN – BELGIUM – FRANCE – Volvo Trucks President Claes Nilsson may well need some of the courage he showed last month, when he stood atop a 15 tonne unit dangling over Gothenburg harbour to demonstrate the strength of the front towing hook on one of the company’s latest models when he pushes through the group’s latest plans which it says will improve logistics and reduce costs per vehicle. Despite overall European truck sales increasing in July, up 20% at 9,959 vehicles and August, a rise of 6% to 7,590 against the 2012 figures, there is to be a major operational shift which will include redundancies.

The intention is to relocate cab trim operations from Umeå to Gothenburg, to concentrate the assembly of heavy duty trucks in Gothenburg to one line, and to concentrate the assembly of medium duty trucks to Blainville, France with the plant in Ghent, Belgium also affected. The company’s truck manufacturing plants in Europe will form a ‘joint system’, whereby each one will be more specialised and optimised for its respective area. By way of this optimising the intention is to attain increased efficiency and the manufacturing cost per truck will decrease. This reduction of manufacturing costs is one of the prime objectives in the Group’s new truck strategy for the period 2013 to 2015.

The heavy duty truck lines in Gothenburg will be cut down to one from the current two and the manufacturing capacity for heavy duty trucks will be balanced with the plant in Ghent, the total capacity of which Volvo says will thereby be better utilised and logistics improved. The assembly of medium duty trucks will be concentrated to the plant in Blainville, as one assembly line is relocated from Ghent to Blainville and this change means that cabs manufactured in Blainville will no longer have to be transported to Ghent.

The plans include staff cutbacks, as well as operational changes and will be subject to trade union consultations. The changes are intended to be made gradually over a period of two years and the number of affected employees depends on several factors, including future manufacturing volumes and the results of the coming trade union discussions. A total of approximately 900 individuals, where of approximately 700 in Sweden, are currently working in the areas of the manufacturing operations that will be relocated.

Overall, the Group-wide efficiency programme is estimated to incur restructuring costs of approximately SEK 5 billion. Most of the restructuring costs are expected to impact operating income in 2014. Annual savings are estimated at SEK 4 billion and will gradually generate results in 2014, to then achieve full effect at year-end 2015. The optimisation of the truck manufacturing in Europe corresponds to a ‘minor part’ of the financial impact of the Group-wide efficiency programme. Olof Persson, Volvo AB’s President and CEO, commented:

“Today’s European industrial structure for truck manufacturing is partly the result of acquisitions and we now intend to use the various plants in an optimal way. This will generate more efficient truck manufacturing operations, which will improve our potential to compete successfully in global markets.”

Photo: Volvo Trucks president Claes Nilsson stands on one of the company’s trucks over the waters of Gothenburg harbour. A video of his escapade can be seen HERE.