World No.2 truck maker Volvo will increase its job cuts to 4,400, more than double its original plan, after currency effects and the cost of launching new models muted a rise in quarterly earnings.
But Volvo, Sweden's biggest private sector employer, also unveiled a stronger-than-expected order intake in the fourth quarter on growth in North America, sending shares more than 4 percent higher by 0800 GMT to outperform the broader market in Stockholm .
"The order intake for trucks was the main positive surprise," Swedish bank Handelsbanken said in research note.
Volvo, vying with Germany's Daimler to be market leader, posted fourth-quarter operating earnings excluding restructuring charges of 3.08 billion crowns ($471.65 million) from 2.19 billion a year earlier, below a forecast 3.80 billion in a Reuters poll of analysts.
Sweden's top company by sales, whose profitability has traditionally lagged rivals such as Scania and U.S. group Paccar, is in the second year of a vast scheme to boost profit margins, in part by cutting staff.
Volvo, which employs about 115,000 workers, said the reduction of jobs and consultants unveiled on Thursday was an expansion of a plan to cut 2,000 positions announced last year and it would involve staff in its trucks business and in areas such as sales and marketing.
"The personnel reductions will begin immediately and a majority will be implemented during 2014," Chief Executive Olof Persson said in a statement.
Over the past year, Volvo's earnings have been hit by the cost of launching and bringing into production new truck models in the group's biggest ever overhaul of its range.
"We have a further couple of quarters before we are through the industrialisation of the new generation of trucks and the phase-out of the old generations," Persson said.
TIME TO DELIVER
Gothenburg-based Volvo set a target in 2012 to raise its operating margin by 3 percentage points by the end of 2015.
The efforts so far have had little impact on the bottom line and pressure is building on Volvo, which also makes construction equipment, buses and engines, to produce a higher rate of profitability than the 2.9 percent margin in 2013.
By contrast, Scania last week posted a 10.1 percent margin.
Christer Gardell, managing partner of activist fund Cevian and Volvo's second biggest owner by votes, told a newspaper last month the company needed to stop making excuses and start delivering.
But looking ahead, several factors may benefit Volvo.
After its launch of new truck ranges last year, 2014 should