RPT-UPDATE 1-Volvo Cars aims to break even, without one-off gains

Fri May 3, 2013 9:18am EDT

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By Niklas Pollard and Sven Nordenstam

STOCKHOLM May 3 (Reuters) - Chinese-owned Volvo Cars said on Friday it could reach break even on an operating level this year without help from one-off gains that alone kept the carmaker in the black in 2012.

Languishing sales in China and Europe took a heavy toll on the car industry in 2012, sending Volvo's operating profit plummeting to 18 million Swedish crowns ($2.76 million).

A sale of Volvo technology to parent Zhejiang Geely Holding Group Co. kept the company profitable at an operating level last year, following a profit of 2.0 billion in 2011.

"The ambition is to reach break even this year on an operative basis - by selling cars," Volvo Chief Executive Hakan Samuelsson said at a news conference.

Volvo, based in Gothenburg in western Sweden, said the Chinese and U.S. markets would grow this year but was cautious about demand in Europe - its biggest market.

"It is likely that the challenging economic environment will continue to affect the European car market," the company said.

It could still take another year or two before it reaches break even on a net level. Its net loss for the year was 480 million crowns, compared with a 1 billion crown profit in 2011.

Volvo is seeking to cut costs, while it also needs to fund development of new car models to secure its future in the highly competitive auto industry.

The carmaker cut hundreds of temporary contracts in its production last year and in February unveiled plans to shed 1,000 more jobs on the consultant and white-collar side in a bid to lower costs.

Volvo, wholly owned by China's Zhejiang Geely Holding Group Co. since 2010, said sales were 124.5 billion crowns in the full year against 125.7 billion the previous year. Sales fell in both Europe and China, while they rose slightly in the United States.

Volvo, whose owner is also the parent of Hong Kong-listed Geely Automobile Holdings Ltd., has been aiming for rapid growth in China to underpin a target of reaching sales of 800,000 cars by 2020, but so far progress there has been slow.

Sales in what the group labels its second home market slumped more than 10 percent last year, though cheating by car dealers seeking to win cash rebates meant sales were inflated in 2011 and under-reported in 2012.

Volvo, bought from Ford Motor in a $1.8 billion deal, aims to sell 200,000 cars in China by 2020, almost five times its current sales, and expects a new plant in Chengdua, in central China, to be up and running in the second half of 2013.

($1 = 6.5245 Swedish crowns) (Additional reporting by Mia Shanley; Editing by Alistair Scrutton)