Volvo AB’s second-quarter net profit rose 28% as the Sweden-based truck maker’s sales growth in Eastern Europe, South America and Asia offset a slowdown in Western Europe and the U.S.

Volvo said net profit rose to 5.13 billion Swedish kronor ($855.7 million), compared with four billion kronor a year earlier. Revenue increased 13% to 80.43 billion kronor from 71.45 billion kronor.

However, Volvo, the world’s second-largest truck maker by sales after Daimler AG, warned that truck demand is weakening in Europe, its biggest market, even though demand in Eastern Europe remains strong.

“In Europe, the trend that we noticed in the first quarter, toward increased caution among our customers and in certain markets, strengthened — which was reflected in order bookings in the truck operations,” Chief Executive Leif Johansson said. “However, demand for long-distance transport remains high, but there is a weakening in construction transport and construction equipment.”

European truck sales rose 7% to 30.05 billion kronor, but orders fell 54% from a year earlier to 21,948 trucks — hurt by increased uncertainty about the economy, high fuel prices and a slowdown in the construction industry.

In North America, truck sales rose 14% to 6.94 billion kronor, while in Asia they gained 54% to 8.17 billion kronor. Demand for heavy trucks in North America is also slowing because of the weak economy, soaring fuel prices and the weakening housing-construction sector, Volvo said.

Last month, Caterpillar Inc. of Peoria, Ill., said it will stop supplying heavy-duty truck engines in North America by 2010, instead entering a partnership with Navistar International Corp. to make engines for trucks used in areas such as road construction.

In a conference call with reporters, Mr. Johansson said Caterpillar’s exit from this market improves the picture for Volvo trucks in the U.S. “From our point of view, I don’t think we can say it’s anything but good news,” he said. “It means that the marketplace looks a little more positive than before.” Construction equipment, the company’s second-largest unit, saw an 18% rise in revenue to 16.73 billion kronor. Demand for heavy, compact and road-machinery equipment softened in Europe and North America but was strong in other markets.

Rising raw-materials costs have hurt the construction-equipment unit more than other divisions, Mr. Johansson said. “We need to offset that with price increases,” he added.

Volvo’s stock price fell 2.3% to 73.50 kronor Wednesday.

Daimler is scheduled to release quarterly earnings Thursday. Scania AB is due to report results Friday.

Union says slashing output of pick ups and SUVs will eliminate 300 jobs

The storm battering Detroit intensified yesterday with Ford Motor Co. offering a bleak sales outlook and its second major production cut in less than a month, which will wipe out 300 jobs at its Canadian operations.

Ford said it will delay introduction of a new generation of its F-series pickup by two months, cut production of trucks and truck-based sport utility vehicles even further than it announced less than a month ago and will have difficulty meeting its previous target of breaking even on a company-wide basis next year.

It also reiterated earlier plans to boost output of smaller cars and crossover utilities, including the CUVs made in Oakville, Ont.

“We view the move to smaller, more fuel-efficient vehicles as permanent and we are responding to customer demand,” Ford president Alan Mulally said in a statement.

Union officials said slashing output of trucks and SUVs means 300 jobs will be lost at the company’s Windsor, Ont., engine facility, which puts together V-8 and V-10 engines for pickups and SUVs.

There are about 2,500 Canadian Auto Workers members now at Ford’s engine plants and joint ventures in the city and 738 on layoff, Mike Vince, president of local 200 in Windsor, said yesterday.

The crisis in Detroit is spilling over to parts makers in Canada as well, with Magna International Inc. announcing this week that it will slash 400 jobs or one-quarter of the work force at a plant in St. Thomas, Ont., that makes frames for GM’s pickups. GM revealed in turn that it is delaying development of its next generation of pickup trucks to focus more of its resources on cars and other vehicles that use less gas.

Magna’s U.S. plants will take a hit with the Ford announcement because the parts giant makes many components for heavy-duty pickups assembled at one Ford plant in Kentucky and frames for the Explorer SUV built at another plant in that state. Output is being throttled back at both plants. It will trim a shift of Explorer production and cut the assembly line speed at the pickup plant.

Previous cuts by the Detroit Three are one of the causes of parts sector employment in Canada plunging by more than 20,000 jobs to 81,676 workers last month from a peak reached in 2001, industry analyst Dennis DesRosiers said in a report yesterday.

The parts sector will not disappear, said Mr. DesRosiers, president of DesRosiers Automotive Consultants Inc.

“The remaining parts sector should be able to recover as the cyclical downturn in the industry recovers,” Mr. DesRosiers said.

The Ford announcement capped a brutal week for the Detroit Three that included forecasts by several Wall Street analysts and the chairman of Chrysler LLC that sales in the U.S. market will plunge to their lowest level this month in more than a decade.

Underlining the growing danger to Detroit was Ford’s new statement that its perennially profitable credit arm will report a pretax loss this year and will not pay a dividend to its parent company.

Regulator filings show Ford Motor Credit Co. has posted a profit annually since 1989, which is as far back as Securities and Exchange Commission documents go.

Two influential U.S. ratings agencies added to the pressure, with Standard & Poor’s Corp. placing ratings for all three companies on credit watch with negative implications and Moody’s Investors Service Inc. cutting Ford’s outlook to negative from stable.

Both rating agencies are worried about the cash drain the severe slump in truck and SUV sales is causing.

“We have renewed concerns about all three auto makers’ future cash outflows in light of the prospects for U.S. sales for the rest of 2008 and into 2009,” said Standard & Poor’s credit analyst Robert Schulz.

Deteriorating fundamentals could reduce liquidity to undesirable levels by the second half of next year, Standard & Poor’s added.

As Ford delays the launch of the new Ford F-150 pickup, 260 UAW members who weld that truck’s frame in Elizabethtown will be out of a job by Sunday. The mass layoff leaves just one shift of 475 workers who will still earn an average of $15 per hour at the plant a half-hour drive south of Louisville.

Some of the workers to be laid off at Dana include assembly line and skilled trade hands hired in January, UAW Local 3047 recording secretary Wayne Kolley said Tuesday. But then gas hit $4 a gallon, truck sales plummeted, and Ford announced drastic action to temporarily close or take its F-150 plants down to just one shift through the third quarter.

“We were having a hard time finding people to work back in January. It turned around rather quickly,” Kolley said Wednesday. “Now we see the writing on the wall. This is an indefinite layoff, unless business picks up and the economy gets better.”

Dana Corp., based in Toledo, Ohio, just emerged from bankruptcy court protection late last year. From her office in Maumee, a suburb of Toledo, Dana spokeswoman Jamie Bibbs said the auto parts supplier is trimming production to cope with lurching change in the auto industry.

“We are adjusting our production for the market,” Bibbs said.

Dana’s contract with UAW Local 3047 grants workers paid health insurance for three months following the layoff, Kolley said. Unemployment benefits, he estimated, will provide workers with about $400 a week.

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