How Volvo's Job Cuts Reflect the Future of the Automotive Industry

The 2020s have been labeled as an unprecedented decade for the automotive industry, as CASE technologies transform vehicle development and business models, as well as how consumers engage with cars.

Mack Trucks, part of Volvo Group, plans on eliminating 450 salaried jobs at its North Carolina headquarters by cutting functions that support multiple businesses.

How Volvo’s Job Cuts Reflect the Future of the Automotive Industry

Volvo Cars of Sweden's announcement that it plans to let go of 1,300 white-collar workers is an unfortunate setback, both for employees and their families. Losing one's job can be stressful and take time for adjust to a new financial situation; additionally, employees impacted may reduce spending which has an adverse effect on local businesses as well as the overall economy.

Volvo job cuts highlight the uncertainty facing the automotive industry as it transitions towards electric vehicles (EVs). Demand in an industry where demand has fallen off is forcing manufacturers to reduce costs in order to remain profitable, leading many companies to redesign production and sourcing strategies in line with this emerging business model.

While some companies may be cutting staffing levels, others are increasing investment in their electric vehicle operations. Volvo is investing heavily in new EVs and subscription services while working closely with Vitesco Technologies on developing an in-house powertrain platform for their EVs - this will allow Volvo to improve the performance of hybrid-combustion vehicles while simultaneously lowering development costs.

Mack Trucks, owned by Volvo Group, has decided not to reduce production jobs at its North American factory in Pennsylvania. Mack had anticipated sales would drop 30% year-on-year compared with 2019, yet due to COVID-19 this decline may accelerate even further, according to an Allentown Morning Call newspaper spokesman for Mack.

WM Motor, founded and funded by Baidu tech giant and led by former Volvo executive Shen Hui, has fallen prey to China's increasingly volatile electric-vehicle (EV) market. Shen Hui, its founder and chief executive officer has informed employees via a letter written to employees that costs must be cut in order for WM Motor to survive; salaries have already been cut while restructuring of management team has taken place as part of these cuts; production capacity reduction and asset sales may help the firm save money while increasing cash flow while saving on labor investments while increasing cash flows overall.

The Company’s Strategy

The automotive industry is currently facing many challenges, from supply chain disruptions and rising raw material costs, to rising competition. Carmakers have sought ways to remain profitable while adapting to this ever-evolving economic environment, with Volvo taking steps such as job cuts as part of its adaptation strategy aimed at cutting costs while shifting towards electric vehicles while expanding service contracts thereby increasing revenue streams.

Volvo's strategy is to offer customers safe, comfortable, and sustainable modes of transportation. They produce cars, trucks, marine vessels and related products while offering various services like repair and maintenance as well as financing options for customers. Their main revenue stream comes from sales of vehicles and service contracts.

Volvo has met these challenges head on and managed to keep its market share and profits intact while significantly reducing CO2 emissions per shipped volume by 18% since 2010. This represents an extraordinary achievement and underscores Volvo Group's dedication to sustainability.

Alongside its efforts to reduce its carbon footprint, the company is investing in digitalization and new business models. Their goal is to develop solutions that are 100% safe, fossil-free and more productive; car sharing services as well as robot-assisted delivery are being introduced by them; self-driving cars should hit the market within three years.

The company's CEO announced that cost-cutting measures will be implemented globally within months, targeting white collar workers but not production line jobs. They remain committed to offering high quality products and customer support that are integral to its success.

Volvo will focus on its brand, products, and innovations as it cuts spending on events and advertising; for instance it will reduce its presence at motor shows so as to not compete for press attention with other car brands; instead they will choose a smaller number of shows each year.

The Company’s Business Model

Volvo, owned by Geely Holding of China since 1999, is taking the initiative in switching over to electric vehicles by transitioning all models featuring internal combustion engines by 2030 - this significant move may push other companies in their sector towards similar transition.

Volvo has also taken steps to establish direct-to-consumer services, including ride sharing programs and digital maintenance and repair services, in order to engage directly with its customers while creating recurring revenue streams and ensure its profitability as it transitions toward electric cars.

Volvo's manufacturing processes are also receiving upgrades. The company is upgrading its factories in Torslanda, Sweden so as to produce battery-powered vehicles more efficiently. At one of these facilities there will be an innovative "mega casting" process used to cast larger aluminum pieces which will then be assembled into floor structures of cars for reduced weight, cost and improved performance.

Volvo is also focused on its design and engineering abilities to produce innovative, cutting-edge products, such as its new XC90 SUV with its lower hood and optimized roof to increase interior space and range, an electric motor at the front for power delivery, as well as an electric rear drive system to provide additional power when needed - trends which many automakers are following to enhance driving experiences and extend EV range.

Volvo is well known for its groundbreaking technologies and safety features. Indeed, Volvo has set an ambitious goal of having zero fatalities or serious injuries caused by their vehicles by 2050; an undertaking which has encouraged researchers and designers to continue creating safer cars.

While Volvo has made significant strides forward with their transformation efforts, the company still faces numerous weaknesses. One such weakness is their narrow focus in only certain sectors, which may limit their ability to capture market share elsewhere and expose them to economic fluctuations more readily. Furthermore, their complex ownership structure may impede quick decision-making processes and long-term growth plans.

The Company’s Leadership

Volvo is an iconic Swedish car manufacturer known for its classic cars like the Duett estate and innovation like creating three-point safety belts that helped save one million lives. Today, they operate worldwide production facilities owned by Chinese firm Zhejiang Geely Holding Group that focus on new business models and all-electric vehicles.

Last week, Volvo revealed plans to lay off 1,300 employees - or approximately 6% of its local workforce - due to the need to transition its focus toward electric vehicles. The announcement came just hours before an employee protest meeting at which workers demonstrated against these cuts by sending letters directly to those responsible.

However, the company also noted that demand has decreased significantly due to the coronavirus pandemic and therefore profits have suffered, necessitating it to cut costs in order to stay profitable.

The company stated that these reductions would affect staffing in non-focus areas such as combustion engine production and testing; however, manufacturing operations will remain unaffected by these layoffs.

Though Volvo is cutting jobs, they plan to increase production capacity of battery-powered vehicles over time. Over the next several years they aim to double global production of all-electric cars globally.

An integral component of Volvo's plan for China involves building a production facility for all-electric Volvo vehicles outside Europe - with capacity for producing 100,000 vehicles each year.

Volvo is not only expanding its production capacities but also working to enhance customer experiences. To do this, they will open a dedicated customer center in Shanghai where customers will have the chance to test drive all-electric vehicles as well as buy or lease them.

Volvo Trucks is investing heavily in its leadership team. To do so, they have introduced the Volvo Trucks Leadership Development program to train future leaders and advance them to management positions. Participants in this training attend training sessions focused on practical exercises on the shop floor where they study how value is created in specific processes.