Göteborg, Sweden – Volvo has signed an agreement with unions in Sweden that will freeze salaries and enact other cost-cutting methods. The automaker said that the agreement covers both white- and blue-collar workers, and will probably mean that the company can avoid further layoffs.

“We are in an extreme situation with a continuing weak global market for new cars, especially in the U.S. and Sweden, and we need to take action to further reduce our costs,” said Stephen Odell, president and CEO of Volvo Car Corporation.

The measures outlined are expected to achieve a savings equivalent to US$50 million in 2009. The company will also reduce production volumes at its plants in Gent and Torslanda.

The agreement, valid from April 1 to December 31, 2009, includes postponement of salary revision until January 2010 for all employees; reduction in work time compensation to approximately 1.5 hours per week for all employees; and a salary reduction of five per cent for the company’s 40 highest-ranked managers, including the executive management team. As well, no bonuses will be paid to any employees in 2009 and 2010, including managers, and production employees will be laid off for 45 days during 2009, with a 15 per cent salary reduction for each of the layoff days.

“This is a unique agreement,” Odell said. “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.”

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