Detroit Carmakers Cutting Foreign Workforces and Salaries

By: Associated Press
By: Associated Press

Car makers Saab and Volvo on Thursday announced new cost cuts as the Detroit-owned units struggle for survival amid the global crisis in the auto industry.

Saab, which is owned by General Motors. Corp., gave notice to 750 employees at its main production plant in Sweden, while Ford-owned Volvo said it would cut staff salaries to save 500 million kronor ($57 million) in 2009.

"We are in an extreme situation with a continuously weak market, primarily in the U.S. and in Sweden and we need to lower our costs further," Volvo Cars Chief Executive Stephen Odell said in a statement.

Saab went into bankruptcy protection on Feb. 20 in an effort by GM to spin off or sell the unit. The danger of a collapse still hovers over the ailing brand because neither GM nor the Swedish government appears ready to provide enough money to keep it going as a freestanding entity.

While Volvo is better off, it too is struggling against a weak U.S. dollar and declining demand. Ford last year said it intends to spin off or sell the company.

Goteborg-based Volvo cut around 6,000 jobs in 2008 and now employs around 20,000 people worldwide, while Saab has around 4,500 workers.

Volvo said Thursday's agreement includes stops in production for 45 days in 2009, which will result in monthly salary cuts of up to 5 percent for workers.

Additionally, 40 leading executives will cut their salaries by 5 percent until December and all staff will lose their right to seven days a year of compensation leave.

"We are in a unique situation and need to take extraordinary measures," Odell said. "We believe this agreement is a good model to secure our operation and avoid new layoffs."

The Swedish government in December presented a 28 billion kronor ($3.4 billion) support package for the auto industry, but has insisted it won't buy Volvo or Saab from their U.S. owners.

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