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Volvo sees sales sharp drop as global slowdown kicks in

Volvo Construction Equipment experienced a dramatic drop in both sales and income as the total world market for heavy, compact and road machinery equipment decreased by 48 per cent in the first quarter of 2009 compared to the same period the year before.

Volvo’s operating loss for the latest quarter was 4.53 billion kronor, significantly worse than the roughly 2.98 billion kronor in red ink that analysts had projected.

Quarterly sales dropped 27 per cent to 56.12 billion kronor but would have more than 40 per cent lower if not for currency fluctuations, financial results showed.

The company said the results were the consequence of the severe downturn in the global market for construction equipment and a negative currency impact. In Europe the total market was down 64 per cent in the first quarter while North America decreased by 48 per cent. China was one bright spot in the market, with demand rising 9 per cent, but this was offset by the rest of Asia sliding by 52 per cent.

Volvo has tried to counteract the affects of the reduction in demand, by making large scale cutbacks in production. This lower output level has resulted in 4,300 employees being given notice since last September. The company also implemented a new function-based organisational structure in the first quarter in order to increase efficiency and speed of execution.

The company expect the outlook for the total market for 2009 to remain very weak. European demand is forecast to decline by up to 50 per cent compared to the full year 2008, North America is likely to drop by between 20 to 25 per cent and demand in the rest of the world is expected to shrink by up to 40 per cent.

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