Volvo, the Swedish vehicle manufacturer, on Wednesday reported a 28 per cent fall in first-half profits as it revealed the full extent of problems in its US truck operations. Pre-tax profits tumbled from SKr5.33 billion at the same stage last year to SKr3.86 billion ($584 million) as the sudden reversal in earnings in the truck division "� the main engine of Volvo profits for the past two years "� compounded weak results from the flagship car division.
The fall would have been even greater but for a SKr1.5 billion one-time charge incurred in the first half last year.
The main blame was placed on a slump in performance by Volvo GM Heavy Truck, the US operation in which General Motors has a 13 per cent share. The company's North American sales fell 31 per cent and its market share slipped from 11.5 per cent to 9.5 per cent.
Losses from the US "� combined with weak results from South America "� led to a collapse in Volvo's truck division operating profits from SKr2.9 billion in the first half of last year to SKr1 billion. In the second quarter, the division posted earnings of SKr347 million, compared with SKr1.4 billion in the same period a year ago.
The reversal eclipsed a minor recovery in Volvo's car division, which returned to a small profit in the second quarter after two successive quarters in the red. But the surplus of SKr338 million was still well down on the SKr650 million profit made in the second quarter of last year.
Volvo moved to stem the US losses earlier this month by removing the head of US operations and the chief financial officer at Volvo GM. Karl-Erling Trogen, head of Volvo's truck operations, has taken personal control until a new chief is appointed. Trogen said on Wednesday some of the losses were due to heavy costs associated with the introduction of a truck on to the US market later this year. However, he acknowledged that there had been a serious slip-up in the sales operation, which had underperformed in a market that had not proved as weak as Volvo had anticipated earlier in the year. ''We will cut the losses in the US operations during the rest of 1996 but I do not expect we will be back to break-even until the first half of 1997,'' Trogen said.
Volvo's total truck sales worldwide fell in the first half from 38,340 units to 33,240, a fall of 13 per cent. The numbers were bolstered by an increase of sales of 13 per cent in Europe, where Volvo said it increased its market share to 16.3 per cent.
Volvo's car sales, meanwhile, fell 12 per cent from 198,790 vehicles to 174,570. One reason was a series of delays in introducing Volvo's new medium-sized S40 and V40 model.
However, Volvo said it would reach its target of producing 65,000 of the new cars this year. Volvo said it had made a capital gain of SKr7.8 billion from its sale last month of a 10 per cent stake in Pharmacia & Upjohn, the pharmaceuticals group, which would be included in the third-quarter result.
