Volvo AB said today it is laying off more than one-third of the workforce at its bus factory in Mexico City as the economy there slows and it completes a contract for 900 vehicles. The workforce reduction will take place during the first half of September, the company said.

The production capacity at Volvo Bus de Mexico will be at current market conditions after it completes a 1999 order for 900 buses, forcing the company to downsize from its current 2,550 employees.

The Volvo 7550 coach bus will continue to be produced in Mexico City, but at an adjusted level.