Volvo Car's Operating Earnings Plummet 84%

Volvo Car Corp. posted operating income of 239 million kronor (€28 million) in the first half of this year compared with 1.5 billion kronor (€181 million) in the same period of 2011.

The company swung to a net loss of 254 million kronor (€30 million) from a 1.2 billion-kronor (€142 million) profit a year earlier.

Volvo, a unit of Zhejiang Geely Holding Group Co., generated 65.3 billion kronor (€7.7 billion) in revenue from January through June, up 4% year over year. The Swedish brand's sales slipped 4% to 221,300 vehicles.

CEO Stephan Jacoby tells The Wall Street Journal it will be difficult for Volvo to make a profit this year. He confirms the company will slow the line speed 12% at its main plant in Gothenburg, Sweden, and shed 300 contract workers in response to weak sales. He says there are no plans to eliminate permanent jobs.

Jacoby tells reporters that despite a cash outflow of 2.3 billion kronor (€272 million) in the first half, Volvo remains committed to its five-year, $11 billion (€8.8 billion) investment plan. In April the company outlined a program to develop new vehicles, powertrain and technology and erect three factories in China.

Cutting such spending can "destroy the future" of a carmaker, he says, citing the example of bankrupt Swedish rival Saab Automobile.