CORRECT: Sweden's Car Makers Unveil New Cost Cuts

Sweden's two struggling car makers Thursday announced new measures to cut costs in an attempt to reverse spiraling losses, with Saab Automobile AB saying it will lay off nearly one-fifth of its workforce and Volvo Cars freezing salaries and scaling back production.

Saab, which owner General Motors Corp. (GM) has said it wants to offload by 2010, said it was making 750 staff redundant at its Trollhattan plant in western Sweden, out of a total workforce of about 4,100.

Saab, which filed for reconstruction last month, is battling for survival. It's trying to gain the interest of investors so that it can continue operations after GM cuts its ties.

Saab's job cuts may also be necessary in order to get a loan from the European Investment Bank that the company applied for last month. An EIB official told Dow Jones Newswires Tuesday that the bank won't lend Saab any money unless the loan is guaranteed by the Swedish government or possibly a bank, and Sweden has said it won't guarantee the loan until Saab's ownership is straightened out and it presents a solid business plan.

Volvo Cars, which owner Ford Motor Co. (F) is trying to sell, Thursday said it had signed a deal with unions to lower personnel costs in order to avoid more layoffs.

The measures, which include freezing salaries for all employees until January, 2010, should save the struggling company close to 500 million Swedish kronor ($56.7 million), it said.

"We are in an extreme situation with a continually weakening global market for new cars, especially in the U.S. and Sweden, and we need to take action to further reduce our costs," Volvo Cars Chief Executive Stephen Odell said in a statement.

Other savings measures include a 5% pay cut for Volvo's 40 highest ranked managers starting April 1 and through 2009, the freezing of bonuses for 2009 and 2010, and cut-back in production.

Volvo in recent months has cut about 6,000 workers worldwide, including more than 3,000 in Sweden.

"This agreement we all believe is a good model to secure our business and avoid further employee separations at the present time," Odell said.

Volvo Cars' announcement came on the same day as the EIB is scheduled to rule on its application for a EUR500 million loan. Volvo Cars is expected to get approval for a EUR200 million loan this year, though the payout is contingent upon Sweden guaranteeing the loan.

As of Wednesday, Volvo Cars and the Swedish government were still negotiating the final details of that guarantee.

Company Web site: www.volvocars.com; www.saab.com

 
   -By Ola Kinnander and Ian Edmondson, Dow Jones Newswires; [phone]; [e-mail]