Stockholm - Swedish heavy-vehicle maker Volvo on Friday reported a 37-per-cent drop in pre-tax income for the third quarter of 2008, citing the economic downturn in key markets.

Pre-tax income was 2.89 billion kronor (370 million dollars), compared to 4.57 billion kronor in the corresponding period 2007 for the Volvo group, excluding the Ford-owned car division.

Net sales were up 2 per cent to 69.6 billion kronor, while net income fell 36 per cent to 2 billion kronor.

"After a first and second quarter with record sales and record income, sales growth decelerated much more rapidly than expected during the third quarter," chief executive Leif Johansson said.

Johansson noted declines in Europe, "weak demand" in North America and Japan, and slower demand in other markets.

"Because of the deceleration being so rapid, we haven't been able to reduce our costs at the same pace," the Volvo CEO said.

Operating income was 3.2 billion kronor, down 37 per cent on the corresponding business period 2007.

Volvo said it expected the European truck market to grow at most 5 per cent in 2008.

In North America, the market was estimated to decline by about 10 per cent compared with 2007.

During the quarter, the group delivered 56,243 trucks, down 2 per cent compared to the corresponding business quarter of 2007.

Order bookings for Europe were flat, Volvo said.

The bus division sold 2,119 units, up 7 per cent on third quarter 2007, Volvo said, adding that order bookings were up 14 per cent.

The group sells trucks and heavy vehicles, buses and construction machinery, and includes the divisions Volvo Aero and Volvo Penta.

The construction-machinery division was hit by higher steel prices, and lower activity in the housing and construction sector.

On the eve of the third-quarter report, Volvo said it planned to cut a further 850 jobs in the construction-machinery division in Sweden. (dpa)