Volvo Plans to Make Production Cuts in Europe image

Volvo announces production cuts in Europe due to low demand for new cars in this region.

Volvo joins other auto makers such as Fiat, GM and Ford, who saw themselves forced to cut production due to the European debt crisis which cut the economic growth and demand for new cars. Although the market is already suffering from chronic overcapacity, the governments and labor unions strongly oppose permanent closure of plants in the region. The European Union car market is expected to decrease 8% this year, the lowest level sine 1990.

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. Volvo plans to reduce production globally, due to slow growth in foreign markets too. Although Volvo declined to comment, its plans match those of BMW which earlier this month announced a tough second half in the global auto sector, despite the fact that the demand for luxury cars is still strong.

Ford, Fiat and GM are all struggling to keep open their European plants, operating at 70%-80% capacity to cover their costs.