Volvo reported first half operating profit down 84%, due to tough competition and global drop in demand.
In the first six months of the year the automaker reached an operating profit of 239 million Swedish crowns ($35.63 million) down from 1.53 billion operating profit for the same period last year. auto sales also dropped with 4.1% to 221,309 cars.
“The economic uncertainties in most of our markets will remain for the rest of the year and competition is stiff,” CEO Stefan Jacoby said in a statement.
Volvo announced its plans to cut production by 10% and reduce the number of employees by 200-300 people due to the alarming sales decrease. Not long ago the automaker said it aims to reach sales of 800,000 units by 2020, up from the current 400,000. It also plans to reach 200,000 cars sold in China, up from 47,000 sold here in 2011.
Volvo joins other auto makers such as Fiat, GM and Ford, who were forced to cut production due to the European debt crisis which cut the economic growth and demand for new cars. Volvo, which is owned by China’s Zhejiang Geely, plans to reduce production in Sweden, at Gothenburg plant, from 57 units per hour to 52, which means about 300 temporary workers won’t have contracts renewed.