Volvo Cars shares plunged after the Swedish automaker swung to a third-quarter operating loss and announced a plan to cut jobs. The company pointed to worsening conditions in China and the U.S.
Volvo Cars said Friday it plans to cut 2,500 jobs after a sharp decline in its Chinese market weighed on third-quarter earnings. Its shares were last down 31%.
The Swedish automaker reported an operating loss of 5.6 billion Swedish Kronor ($563.7 million) in the third quarter, down from an operating profit of 6.4 billion Swedish Kronor in the previous period. Meanwhile, revenue was SEK 66.9 billion versus SEK 86.4 billion a year earlier, and 10% below the consensus estimates.
China and U.S. markets weigh on results
In China, revenue fell almost 50% year-on-year as premium brands faced fierce competition from new Chinese rivals, which also put severe pressure on pricing. In the U.S., the company cited negative effects from tariffs and fewer customer incentives to buy electric cars, which pressured profit margins.
Jefferies analysts attributed the revenue miss to weak wholesale volumes. Free cash flow was negative SEK 8.9 billion versus negative SEK 4.3 billion a year earlier, with China and the United States weighing on cash flow.
Job cuts target SEK 5 billion in costs
Volvo Cars is looking to cut 5 billion Swedish Kronor in costs by eliminating 2,500 jobs globally, with 2,000 of those jobs based in Sweden. The reductions will come through ending consultant contracts, natural attrition and targeted exit packages, and the full effect will arrive by the end of 2027.
With volumes severely challenged, CEO Håkan Samuelsson said the company must reinforce its turnaround plan with "additional decisive actions" in the short term.
Sources: CNBC, Investing.com
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