Volvo says needs more cost cuts, not capital

World No.2 truck maker Volvo AB said on Wednesday more cost cuts were needed to weather a plunge in demand due to the global downturn, but it saw no need to raise fresh capital.

The Swedish truck maker is in the midst of shedding thousands of jobs to adjust to the weaker market for heavy-duty trucks across all the company's major markets.

"There is, however, a need for further cost cuts and we must expect the coming quarters to be really difficult, dominated by a shift to a new lower cost level," Chief Executive Leif Johansson told the company's annual shareholders meeting.

"When we look ahead, some tough quarters await with an adaptation to a much lower demand, which will affect results." 

Johansson said Volvo was in talks with unions on measures to cut costs by reducing pay and working hours.

A similar deal was struck in March between Ford Motor Co-owned (F.N: Quote, Profile, Research) Volvo Car Corp and unions on lower staff costs aimed at helping avoid more job cuts at the struggling automaker.

"It is very natural that we would have this kind of discussion when we are in this kind of situation," Johansson told reporters.

He declined to comment on when a deal might happen.

The truck maker, which manufactures heavy-duty trucks under the Renault, Mack, Nissan Diesel and Eicher brands, as well as its own name, has already announced nearly 2,000 job cuts at its Swedish operations this year as it adjusts to weaker markets.

NO CAPITAL NEED

Plunging demand and the resulting overcapacity led the Swedish company to report a pretax loss in the final quarter of last year and many analysts see the company staying in the red throughout this year.

Asked at the company's annual shareholders meeting whether Volvo would need more capital, Chairman Finn Johnsson said: "Not with the knowledge we have today, no."

Johansson said that group's financing needs were very limited, with only small amounts of loans maturing in the coming years, and that it had already refinanced the 15 billion crowns ($1.81 billion) of loans due this year.

Renault Chief Finance Officer Thierry Moulonguet, speaking to Reuters on the sidelines of the shareholders meeting, repeated the French carmaker remained committed to its Volvo stake over the long term.

"It is clear that Renault's stake in Volvo is one of our most valuable assets and that we a very confident in the future of Volvo and its ability to weather the present economic crisis," Moulonguet said.

"From the beginning we viewed our stake in Volvo as a long- term holding and we have not changed our mind."

Last month, a Swedish business weekly, citing unidentified sources, reported Renault approached Investor AB (INVEb.ST: Quote, Profile, Research) on selling its Volvo stake to the holding company, the investment vehicle of the powerful Wallenberg business family.

The report was later denied by Renault.

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