High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/492c8998-fee1-11e0-9769-00144feabdc0.html#ixzz1c1oWuNlf Volvo to cut production in Europe and Brazil

Volvo said it planned to cut production in Europe and Brazil and forecast flat global demand for trucks in 2012, adding to the uncertainty clouding the outlook for industry.

The Swedish truckmaker, one of the global industry’s largest, on Tuesday said it expected the European and Brazilian markets to contract by 10 per cent next year and that it would trim output accordingly. “We need to make sure we align our production in accordance with our call on the market,” Olof Persson, Volvo’s chief executive, told the Financial Times.

Mr Persson said that the move would mean that about 400 to 450 temporary employees’ contracts in Sweden would not be renewed. He said that in Brazil, Volvo would use “other means” than reducing temporary staff to match its output with market demand.

The group also trimmed its sales forecast for heavy-duty trucks in North America this year to 210,000, from 230,000 to 240,000 previously, but said it had no plans to adjust production there.

Volvo said that it expected truck sales to grow by 20 per cent in North America, where many companies are upgrading their truck fleets, and by the same amount in Japan where demand is high because of reconstruction after the earthquake and tsunami.

Mr Persson said that Volvo’s regional forecasts added up to a “flat market” globally in 2012. The shares fell slightly to Skr78.45.

Volvo is Europe’s second-largest truckmaker by unit sales after Germany’s Daimler. In addition to its own brand, Volvo also owns Renault trucks, Mack Trucks and UD Trucks, and produces construction equipment and diesel engines.

The company forecast slower than previously expected growth for China’s construction equipment market of zero to 10 per cent – a figure Mr Persson described as “very moderate but still growth”.

Volvo made the forecasts as it reported net profit of SKr3.89bn ($594m) for the quarter to end-September, up 36 per cent from SKr2.85bn a year ago.

Volvo’s warning on slower markets is the second to come from the heavy trucks sector, an indicator of broader demand for capital goods. Rival Swedish truckmaker Scania is cutting production by 10 to 15 per cent from next month to avoid overstocking amid slowing demand.

Volvo suffered the worst crisis in its history starting in late 2008, when its orders collapsed by more than 50 per cent over six months. The company went on to cut more than one-fifth of its workforce, or almost 22,000 jobs.

Mr Persson said that Volvo was now better placed to withstand a fresh downturn in orders than three years ago. With about 19,000 of its employees globally on short-term assignments or consultancies, “we have more flexibility,” he said. Volvo also had a much lower level of inventory.