UPDATE 2-Struggling carmaker Volvo plans more cost cuts

Wed Feb 20, 2013 11:23am EST

* To develop technology with Chinese owner Geely

* Will keep brands separate

* Volvo biggest Chinese overseas auto investment

By Patrick Lannin and Norihiko Shirouzu

STOCKHOLM/BEIJING, Feb 20 (Reuters) - Chinese car group Geely's struggling Swedish brand Volvo is to cut 1,000 more jobs and save more than $200 million to reach breakeven this year after sales and Chinese growth have lagged.

Volvo, whose performance has been patchy since being bought for $1.8 billion from Ford Motor in 2010, also said it and Geely were to launch a research and development centre, one of their most ambitious joint plans so far.

Volvo, based in Gothenburg, last year cut the number of temporary contract staff on the workfloor. The new cuts will be on the consultant and white-collar side, chief executive Hakan Samuelsson said on Wednesday.

"One has to adapt to reality. We have done that on the factory floor side, now we have to do it on the white-collar side," he told SVT public television.

Spokesman Per-Ake Froberg said Volvo expected to cut about 750 consultant jobs and make the other reductions by voluntary moves from permanent staff, such as early retirement.

"We plan to save 1.5 billion crowns ($237.2 million) during the course of the year to reach a goal of breakeven," he added.

Last year, Volvo cut about 900 jobs. The company has around 22,000 permanent staff, the bulk, about 14,000, in Sweden and nearly 4,000 in Belgium.

FLAGGING SALES

Sales rose in 2011, but recession in Europe and slowing sales in China pushed 2012 sales down to 421,951 cars from 2011's 449,255 and caused a first-half loss.

Volvo aims to spend about $11 billion to reach 800,000 in sales by 2020 and boost China to 200,000 from only 41,000 last year, itself a drop of 10.9 percent. The U.S. market remained the single biggest at 67,273 last year, up 1.2 percent.

Aside from falling sales, internal disagreements led to the ouster of the chief executive last year and to Samuelsson's appointment.

The joint research and development centre planned by the two companies is part of Geely's efforts to get as much benefit as possible from its ownership of the Volvo brand and make savings.

Geely chairman Li Shufu said the centre would help Geely improve the quality of its cars.

"However, the sharing of knowledge and technology has to be done without jeopardising brand integrity and individual product development," Li said in a statement.

Geely is stronger in the mass segment in China, while the Volvo brand is aimed at the premium market.

The new R&D centre will employ about 200 full-time engineers from Sweden and China and develop a new modular architecture and components for new cars in the compact car class.

Volvo also expects a new plant in Chengdu in China, aimed at being a key part of the expansion plan, to be up and running in the second half of 2013.