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Volvo is laying off 2000 of its Swedish staff and cancelling 500 consultancy contracts, the company has announced.
The job losses are part of a cost-cutting move that will fuel speculation that Ford is poised to sell the company.
Most of the Volvo employees made redundant will be white-collar workers, but 600 blue-collar workers on the third shift at Volvo's Torslanda plant (where the V70 and XC90 are built) will also lose their jobs, along with a further 300 people worldwide.
Volvo gave the Swedish government official notice of its plans today and intends to restructure its workforce before the end of the year.
"Volvo Cars is implementing a cost-reduction programme which is estimated to reduce the total cost level by about $700 million," said Volvo.
"This is an unfortunate but necessary action if we are to achieve a better financial position," said chief executive Fredrik Arp, citing the declining US market as a key reason for the cut-backs.
Reports suggest that Ford has entered into preliminary negotiations with a Chinese company, believed to be Shanghai Automotive Industry Corporation (SAIC), that is interested in buying the ailing car maker, and a Russian investor is also believed to want Ford's luxury wing.
Industry rumours have suggested that BMW and Mazda are other potentially interested parties. But a Ford spokesman said: "We are focused on improving Volvo's business results."
However, Ford's new major shareholder Kirk Kerkorian, who now has a 6.49 percent stake in the company, recently indicated that he would like to see the cash-strapped US giant part ways with Volvo.
Will Powell
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