Trump tariffs force Volvo Cars to drop guidance, launch cost cuts

By Marie Mannes

STOCKHOLM (Reuters) -Volvo Cars announced 18 billion Swedish crowns ($1.87 billion) in cost cuts and a restructuring of its U.S. operations on Tuesday and withdrew its earnings forecast for the next two years, sending shares down 10%. 

The group, one of the most exposed European automakers to U.S. tariffs as most of the cars it sells there are imported from Europe, said the trade measures had hit its first-quarter operating profit, which fell 60% to 1.9 billion crowns.

Its shares have hit record lows as it grapples with mounting tariff pressure, a continued slowdown in electric vehicle demand, and global uncertainty.

Volvo's "cost and cash action plan" will include layoffs and deeper cuts in investment than previously expected, the company said, with the majority of its effects expected in 2026.

It did not specify where jobs would be cut, but CEO Hakan Samuelsson - who led Volvo for a decade, and was unexpectedly brought back after former CEO Jim Rowan was axed - said white-collar jobs would be affected as the carmaker streamlines its organisation.

"We need to be more efficient in our white-collar areas, need to slim down the organisation," Samuelsson told Reuters. "(We need to) work smarter, and that of course will lead to a reduction of personnel."

Volvo also replaced its CFO last week.

Samuelsson will lean on owner Geely for at least 3 billion crowns of the action plan, including sharing material costs and using more of its suppliers.

"It would be a waste not to be utilising these synergies that are really unique for our company," he said. 

Volvo's U.S. operations will now have a new head, and the automaker will create a new region called the Americas.

Samuelsson said the era of "being a global company", having global products and shipping cars back and forth over the borders, "seems to be gone". "Let's create stronger, more autonomous regions in China and in the U.S.," he said.

That would include China and the U.S. potentially having unique models outside Volvo's global lineup.

"People have different tastes and preferences in the region, so I think you need to accept that," he said.

Samuelsson reiterated a plan to expand production at Volvo's Charleston, South Carolina factory, adding a new model alongside the electric EX90 currently made there. 

He said the new vehicle would most likely be a plug-in hybrid mid-sized SUV, a popular option with U.S. consumers.

U.S. deliveries of the more affordable EX30 EV, imported from Europe, are due to start soon. But even the U.S.-made EX90 is still heavily hit by the tariffs, as most of its components are European-made.

Samuelsson said he was hopeful a solution can be reached soon. "I'm a bit optimistic that there will probably be a deal so we can start up trade between U.S. and Europe," he said.

In the meantime, Samuelsson said Volvo will stick to its electrification strategy because of the global shift to EVs outside the U.S.

"There is no way out of this," he said.

($1 = 9.6177 Swedish crowns)

(Reporting by Marie Mannes and Nick Carey; Additional reporting by Alessandro Parodi and Anna Chaberska; Editing by Terje Solsvik, Tomasz Janowski and Jan Harvey)