Page 151 - Socially-responsible-restructuring-Effective-strategies-for-supporting-redundant-workers

Socially responsible restructuring
Effective strategies for supporting redundant workers

Volvo Group, as one of the largest manufacturers of commercial vehicles in
the world, decided to sell its automobile manufacturing activities in 1998 to focus
its efforts on the market for commercial vehicles. In 1999, VCC was sold to Ford
Motor Company, which saw advantages in acquiring a profitable prestige
medium-sized European automobile manufacturer. The Volvo trademark is thus
currently used by two separate companies: the Volvo Group (manufacturer of
commercial vehicles) and Volvo Cars. The case study description focuses on the
latter.

6.12.2. Restructuring and job losses
2008 was a very challenging year for the entire car industry following the impact
of the global financial crisis and resulting economic turmoil. Volvo Cars global
sales volumes fell by 18.3%. The decline in sales in the US, Volvo’s largest
single market, was particularly difficult for the firm. The economic fluctuations
created a very uncertain situation for the company and the downturn in the car
industry was more drastic than expected.
Earlier adjustment strategies had been based on voluntary schemes such as
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early retirement and educational offers ( ). This time, however, the situation was
more dramatic and so were the consequences. In response to economic
developments, Volvo decided to cancel the third shift in the Torslanda plant to
match production volumes to reduced order levels. All departments had to cut
costs to manoeuvre the company out of the economic downturn. Savings could
be obtained in several ways, but dismissals of part of the workforce were
considered unavoidable. For the whole company, the cost-cutting process
resulted in a notice of dismissal concerning 6 000 employees globally, with a
number eventually maintained or re-employed. As of mid-October 2009, VCC had
19 600 employees globally, as opposed to about 24 600 in June 2008.
The adjustment strategy, known as ‘right-sizing’, was based on the following
principles:
(a) a well-functioning company;
(b) optimising balance between the commercial and industrial parts of the
enterprise;
(c) maintaining knowledge in all industrial functions;
(d) competitive products;
(e) keeping key competences within the company.
The first notice came in June 2008 and mentioned 1 200 employees in
different VCC locations. A key aspect of the reorganisation was to redefine and

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( ) Volvo had experience of giving notices of dismissal in previous ‘crisis periods’, but this was
several years ago and on a much smaller scale than during the 2008-09 restructuring process.

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