The Volvo Group this week said it will combine a number of actions into a group-wide efficiency program that encompasses both reduction of white-collar employees and consultants, and efficiency enhancements in the global industrial system.
These actions come as the group implements its three-year strategies designed to enhance efficiency and competitiveness.
Volvo estimates that the program will entail restructuring costs totaling approximately SEK 5 billion (about U.S. $781.7 million), whereof approximately SEK 0.5 billion (U.S. $78.2 million) is expected to have no impact on cash flow. The majority of the restructuring charges are expected to impact operating income during 2014.
Savings are expected to amount to approximately SEK 4 billion (U.S. $625.3 million) annually, and will generate results gradually in 2014, with full effect achieved by the end of 2015.
The new strategies that were established for the Group’s trucks business and other business areas last year apply to the 2013–2015 period. Since January this year, extensive work has been ongoing to identify the measures required to rationalize and enhance the efficiency of the operations within the framework of the strategies. In conjunction with the interim report for the second quarter of 2013, Volvo Group announced that during the quarters ahead, it would be entering a phase in which these measures would begin to be executed.
The identified actions cover a large number of operations and areas, whereof a majority lies within the truck business area. The actions will be announced continuously as they are implemented.
“We are currently combining these actions into a comprehensive program, in order to provide an improved overview of both the effects and the implementation schedule of our extensive and comprehensive strategy,” said Olof Persson, CEO of the Volvo Group.
The changes will be subject to union negotiations as and when required in effected locations.
The Volvo Group will provide continuous quarterly updates on costs that were incurred in the preceding quarter, attributable to the comprehensive efficiency program.
Volvo Group is a leading manufacturer of trucks, buses and construction equipment, marine and industrial engines and aerospace components.