Volvo AB, the world’s second- largest truckmaker, will eliminate about 1,400 jobs at factories in Belgium and Sweden as the financial crisis accelerates a slowdown in European demand for commercial vehicles.

Volvo will initiate other cost-cutting measures in the face of declining sales and higher raw material costs, the Gothenburg, Sweden-based manufacturer said today in a statement. The company has begun talks with unions regarding the job reductions at plants in Gothenburg and Umea in Sweden and in Ghent, Belgium.

“The company’s customers have become more conservative in replacement of vehicles and some are not being granted loans to finance new trucks,” Volvo said. “The negative market development has been accentuated by the recent events in the financial markets resulting in financial uncertainty and credit restrictions.”

European heavy-truck sales dropped 13 percent in August, the biggest plunge in almost a year. Last month’s drop marked the fourth consecutive monthly decline, the worst run since at least 2004, according to the Brussels-based European Automobile Manufacturers’ Association. Ford Motor Co. said today it will shut production of Transit delivery vans at a U.K. plant for 17 days before the end of the year because of weaker demand.

`Confirms’ Downturn

“Volvo’s move is basically confirming that there’s a downturn coming,” said Charlie Dove-Edwin, an analyst at MF Global Securities in London. After a 43 percent fall in the share price this year, “a lot of that bad news is in the price.”

Volvo rose 1.7 percent to 61.50 kronor in Stockholm trading, valuing the truckmaker at 128 billion kronor ($18.4 billion).

“A cost-saving program will be introduced throughout the entire Volvo Trucks organization, and it will include measures to improve efficiency in the commercial operations,” Staffan Jufors, chief executive officer of the division, said in the statement.

Volvo spokesman Stefan Karlsson said that the job cuts wouldn’t result in restructuring costs. He declined to give a figure for the planned savings program, which includes efforts to reduce spending on contractors as well as lower expenses for travel and entertainment.

Fewer Workers

Volvo said the job cuts will affect about 400 temporary employees on the night shift in Ghent. That shift will be eliminated by the end of December, Volvo said. The evening Gothenburg shift will be reduced, leading to job losses for as many as 610 people, while about 370 workers will lose their jobs at the Umea cab plant, which will reduce capacity by April.

Volvo also said it will move motor-grader activities to Shippensburg, Pennsylvania, from Goderich, Ontario, in order to consolidate road machinery operations and reduce exposure to changes in the Canadian dollar. The move, which will affect 500 employees, will result in $45 million in restructuring costs in the third quarter, the company said in a separate statement.

The Swedish company had 103,123 employees as of June 30, 2008, according to data compiled by Bloomberg News. Daimler AG is the world’s largest truckmaker.

Swedish heavy-vehicle maker Volvo Trucks said it planned to cut some 1,400 jobs in its workforce, citing the need to reduce production capacity over “declining demand for trucks in the European market.”

The measures planned for the coming months included cancelling evening shifts and were to affect plants in the Swedish towns of Gothenburg and Umea, and in Ghent in Belgium, Volvo Trucks chief executive Staffan Jufors said in a statement.

Volvo Trucks had some 21,200 employees worldwide at the end of June. It is part of the Volvo Group that does not include the Ford- owned car division.

Volvo said it was also planning to introduce plans to cut other costs in order to tackle surging raw material costs.

The vehicle-maker said “the negative market development has been accentuated by the recent events in the financial markets resulting in financial uncertainty and credit restrictions,” affecting some of its customers.

“The planned reductions are not only being undertaken to rebalance capacity, but also to increase efficiency in production and to compensate for the higher raw material prices that we are now experiencing,” the statement said.