The Wrocław plant has four times the production capacity of Volvo's facility in Sweden Courtesy of Volvo

Automotive company Volvo plans to close its bus manufacturing facility in Säffle, Sweden and concentrate production at its main plant in Wrocław, western Poland.

Volvo says its decision to increase bus production in Poland comes as a result of low demand and strong competition in Europe. Production in Säffle will cease at the end of June 2013, provided that negotiations with unions are completed in time.

The move will affect 330 permanent employees and some 60 consultants.

“The demand for new buses in Europe has dropped steadily over the past few years, paralleled by considerable pressure on prices, particularly in the Nordic markets,” Hakan Karlsson, president of Volvo Bus Corporation, said in a statement.

“By concentrating the production of complete buses in one single plant, we can reduce our costs and thus reverse our negative profitability trend,” he added.

Volvo Buses predicts that volume growth in Europe will remain low in the coming years and that price pressure will continue, the company wrote.

By focusing all production on the much larger plant in Poland, it expects to achieve the economies of scale “that are essential in order to tackle the increasingly tough competition on the market.” The plant in Poland has four times the capacity of the one in Säffle.

Local media report that the plant in Wrocław, which has until this point operated at half capacity, will now see an increase in production volumes, although headcount is not expected to increase from the current level of 1,550. The company could not be reached for comment.

Volvo Group’s operating profit in the fourth quarter of 2012 is expected to take a hit of about 100 million kronor if production is relocated according to schedule.