Volvo car profit unexpectedly rises on cost-cutting success

Volvo Car reported better-than-expected profit in the third quarter as the automaker benefited from the effects of its 18 billion-kronor (S$2.33 billion) cost-saving programme.

Operating income rose to 6.4 billion kronor, the company said on Thursday (Oct 23), well above analysts projections. The operating margin also improved in the period. That’s even as Volvo’s car sales are down 8 per cent this year through September.

“The action plan delivered faster than planned reductions in variable and indirect costs during the quarter,” the company said in a statement. Volvo also posted modest retail sales growth last month.

The results suggest that a restructuring started by chief executive officer Hakan Samuelsson is starting to make an impact. The CEO, who returned to the company in April, is pushing to rebuild Volvo’s profitability with the efficiency programme that includes cutting thousands of jobs.

Like many automakers, Volvo has been hit by US tariffs. Controlled by China’s Zhejiang Geely Holding Group and with production in the Asian country, it’s also had to navigate European Union import levies on Chinese-made EVs. The challenges have prompted Volvo to shift output to factories in Belgium and South Carolina.

“We need to be an American company in producing closer to our customers,” Samuelsson said in an interview with Bloomberg Television. “I’m quite confident about the future of our company.”

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Volvo is betting on new models including the plug-in hybrid XC70 sport utility vehicle to bolster sales. Built at a plant in China’s Taizhou mainly for the local market, the model may be shipped to other markets at a later stage. The manufacturer also plans to unveil the fully electric EX60 – a mid-sized successor to the XC60 – in January. BLOOMBERG