Stockholm - China-owned Volvo Cars on Wednesday announced it would cut around 1 000 positions but would also set up a research and development centre in western Sweden.

“Most of the cuts will affect hired consultants, roughly 750,” spokesperson Per-Ake Froberg told reporters.

The firm also planned voluntary reductions affecting white-collar workers. Volvo Cars has about 22 500 employees.

The job cuts are part of a savings plan totalling 1.5 billion kronor to reach break-even this year.

Sales in 2012 dropped 6.1 percent year-on-year to 421 900 cars.

Earlier, the carmaker's Chinese owner Geely Holding said it would set up a research and development centre in western Sweden, aimed at developing components and a new modular architecture for the next generation of compact cars to be made by Volvo and Geely, its Chinese brand.

The centre in Gothenburg was to employ about 200 engineers and be fully operational at the end of 2013, Mats Fagerhag, chief executive of the new centre, said during a telephone conference.

Gothenburg is an “excellent base due to the existing automotive experts in this area and access to highly experienced engineers”, he said.

Volvo Cars was to have the lead role due to its “long experience and high level of technical development”, Fagerhag said.

Modular architecture is sort of “like a box of Lego bricks where we develop different components and systems deriving into different platforms and systems that are more or less tailor-made”, he said.

Volvo would remain a premium brand, while Geely is a volume brand.

Carl-Peter Forster, former head of the European division of General Motors who recently joined the board of Volvo Cars, said the cooperation aimed at creating synergies “yet to maintain the brand integrity”.

Main savings were likely on materials, Forster said. Geely could also raise its quality and technology through the co-operation.

No estimate was given for the investment.

China-based Zhejiang Geely Holding Group in 2010 took over ownership of the Swedish carmaker from US automotive giant Ford. - Sapa-dpa