Volvo doubles job cuts to 4,400

World's No 2 lorry-maker and Sweden's biggest private sector employer expands cuts in second year of scheme to boost profit margins

Volvo, which employs about 115,000 workers, said the reduction of jobs and consultants was an expansion of a plan to cut 2,000 positions announced last yea. Photograph: Jason Szenes/EPA

The world's No 2 lorry-maker Volvo will increase its job cuts to 4,400, more than double its original plan, after currency effects and the cost of launching new models muted a rise in quarterly earnings.

But Sweden's biggest private sector employer also unveiled a stronger-than-expected order intake in the fourth quarter on growth in North America.

"The order intake for trucks was the main positive surprise," Swedish bank Handelsbanken said in a research note.

Volvo, vying with Germany's Daimler to be market leader, posted fourth-quarter operating earnings excluding restructuring charges of SEK3.08bn (£289m) from SEK2.19bn a year earlier, below a forecast SEK3.8bn in a Reuters poll of analysts.

Sweden's top company by sales, whose profitability has traditionally lagged behind rivals such as Scania and US group Paccar, is in the second year of a vast scheme to boost profit margins, in part by cutting staff.

Volvo, which employs about 115,000 workers, said the reduction of jobs and consultants unveiled on Thursday was an expansion of a plan to cut 2,000 positions announced last year and it would involve staff in its lorries business and in areas such as sales and marketing.

"The personnel reductions will begin immediately and a majority will be implemented during 2014," chief executive Olof Persson said in a statement.

Over the past year, Volvo's earnings have been hit by the cost of launching and bringing into production new lorry models in the group's biggest ever overhaul of its range.

"We have a further couple of quarters before we are through the industrialisation of the new generation of trucks and the phase-out of the old generations," Persson said.

Gothenburg-based Volvo set a target in 2012 to raise its operating margin by three percentage points by the end of 2015.

The efforts so far have had little impact on the bottom line and pressure is building on Volvo, which also makes construction equipment, buses and engines, to produce a higher rate of profitability than the 2.9% margin in 2013.

By contrast, Scania last week posted a 10.1% margin.

Christer Gardell, managing partner of activist fund Cevian and Volvo's second biggest owner by votes, told a newspaper last month the company needed to stop making excuses and start delivering.

But looking ahead, several factors may benefit Volvo.

After its launch of new lorry ranges last year, 2014 should see the brand-new models underpin growth while costs for research and development, a lower headcount and streamlining of its network of workshops should bolster profitability.

Order bookings of its lorries in the fourth quarter held up better than expected as demand in North America made up for a slowdown in Europeafter new emission rules came into force.

Volvo, which makes heavy-duty lorries under the Renault, Mack and UD brands as well as its own name, said order intake of its trucks rose 12% year-on-year in the fourth quarter, topping the 1% decline seen by analysts.

The company also left unchanged its forecasts for lorry markets this year, implying a slight decline in Europe and modest growth in North America and Brazil.

The view was roughly in line with that of Daimler, which reported separately on Thursday, though it expected a slightly slower development in Brazil and the potential for somewhat stronger growth in North America