Volvo Cars issue ultimatum to suppliers for 20% price cut

Volvo Cars has issued an ultimatum to its Swedish suppliers, telling them they would have to slash prices by a fifth by 2015, Swedish economic newspaper Dagens Industri said Friday.

Axel Maschka, the purchasing director for the firm, "told about 400 representatives of sub-contractors active in Sweden that lowering prices by 20 percent is the condition for them to participate in the expansion launched by Volvo to manufacture 800,000 vehicles in 2020".

Volvo sold 449,000 vehicles in 2011, including half of which were sold in Europe.

The loss-making carmaker, which was acquired by Chinese firm Geely from Ford in 2010, wants to quadruple sales in China to 200,000 vehicles a year from 47,000 sold in 2011.

Volvo has been struggling to improve demand, and announced in early September that it lost 254 million krona (30 million euros) in the first half.

Maschka did not confirm his ultimatum to Dagens Industri but said he hoped to increase the company's supply from China in order to meet the 2020 sales target.

"We are planning to buy about 25 percent from Chinese suppliers. We will reinforce our cooperation with Geely over our purchases in China," he said.