Volvo Car Corporation Avoids Notices By Reducing Personnel Costs

GOTHENBURG, SWEDEN – March 13, 2009: Volvo Car Corporation has today signed a unique agreement with the local unions which most probably means that the company can avoid further employee separations. The agreement means that all employees - both white collars and blue collars - will contribute to lowering personnel costs in the company during 2009 through, for example, postponed salary revisions. The cost savings also include the company's top management.

"We are in an extreme situation with a continuing weak global market for new cars, especially in the US and Sweden, and we need to take action to further reduce our costs," says Stephen Odell, President and CEO of Volvo Car Corporation.

After last autumn's cost reductions Volvo Car Corporation has reached an acceptable balance and is now taking further measures to retain competence in the company and to enable maximum efficiency for when the market situation begins to improve. These measures will provide a saving of close to 500 million SEK (approximately 50 million USD) in 2009. In addition, a reduction of production volumes is planned in both Gent and Torslanda to meet the current market situation.

The agreement, valid from April 1 to December 31 2009, includes the following measures:

The company's salary revision is postponed until January 2010 for all employees, and corresponds to approximately half of the total saving.

The so called "Work time compensation" (ATK- arbetstidskompensation) is reduced by approximately 1.5 hours/week for all employees between April 1 to December 31 2009.

The company's 40 highest ranked managers including the executive management team will reduce their salaries by 5 percent from April 1 to December 31 2009.

No bonus will be paid to employees (including managers) in 2009 and 2010.

To handle the decline in order intake, the agreement also contains up to 45 lay off days during 2009 for employees in production. A salary reduction of 15 percent will be made for each of the lay off days. This means a reduction of the monthly salary of up to 5 percent. The number of lay off days varies from each plant in Göteborg, Skövde, Floby and Olofström.

"This is a unique agreement," says Stephen Odell. "We are in a unique situation and need to take extraordinary measures to improve the competitiveness of our business. We have had a good and open dialogue with the unions. This agreement we all believe is a good model to secure our business and avoid further employee separations at the present time," he concludes.