Schaeffler must tighten belt, cut jobs

Business news |
By Christoph Hammerschmidt

In view of the emerging technological and regulatory changes as well as customers’ switch to electric drives, automotive and industrial supplier Schaeffler had already begun to adapt its European plant network in 2018 and to streamline its organization and focus it more strongly on the needs of the divisions. Against this background, the presence in the UK was reduced by three locations in November 2018. In addition, the RACE efficiency program was established in the Automotive OEM division in spring 2019, which was followed by other divisional programs in the course of the same year. Since then, three automotive sites in Germany have been sold as part of RACE. In addition, an additional program for voluntary job cuts was launched in September 2019 before the outbreak of the corona crisis and is currently being implemented.

Since the end of 2018, the number of employees in the Schaeffler Group has fallen by around 8,250 to 84,223 (June 2020), a reduction of almost 9 percent.

Despite a revival in demand in all divisions and regions in recent months, uncertainty about the further course of the pan-demic and the resulting deterioration in the economic situation remains high, according to the pessimistic assessment of the Schaeffler management. In addition, market and sales expectations for the time horizon up to 2025 point to a slow recovery, resulting in structural underutilization of production plants. The automotive sector in particular, which was already undergoing a structural change towards e-mobility, is being hit hard by the corona crisis. At minus 20 percent, the global production of vehicles expected for 2020 is significantly lower than in the previous year. The pre-crisis level is expected to be reached in 2024 at the earliest.

On this basis, the Schaeffler Executive Board has adopted an additional package of measures. The package of measures has two thrusts. Firstly, the reduction of structural overcapacities and the consolidation of locations in Europe with the focus on Germany and, secondly, the strengthening of competitiveness and the expansion of local expertise at selected locations. These measures, which are to be largely implemented by the end of 2022, primarily affect twelve locations in Germany and two more in Europe.

Locations with a product portfolio that is being phased out technologically or with small-scale plant structures will be particularly affected by the capacity reductions and consolidation. The latter include the production locations in Wuppertal, Luckenwalde and Eltmann, the Schaeffler Engineering location in Claust-hal-Zellerfeld and the aftermarket facilities in Hamburg and Cologne. Production at the Eltmann location will be relocated to Schweinfurt. Eltmann already produces mainly for the Schweinfurt location, so that this is in fact an integration of production. The Clausthal-Zellerfeld site will be closed or sold. The employees of the aftermarket facilities in Hamburg and Cologne will be offered the opportunity to work from their home offices in future, wherever possible. The measures are still being discussed with the employee representatives; final results can only be communicated after these negotiations have been concluded.

A total of around 4,400 jobs will be affected by the cutbacks in Europe, with Germany accounting for by far the largest share.

As a second component of the package of measures, the Schaeffler Group is pooling local technology and production expertise at the Herzogenaurach, Höchstadt, Bühl and Schweinfurt locations, thereby strengthening the company’s competitiveness and selected locations in Germany.

The Herzogenaurach location, the headquarters of the Schaeffler Group, will in future be home to the Competence Center for Hydrogen Technology in addition to the establishment of a state-of-the-art central laboratory. Höchstadt will have a competence center for toolmaking that will take over the existing capacities from Herzogenaurach. At the end of the conversion, Höchstadt will be a pure automotive location.

The location in Bühl, home of the Automotive OEM division, is being expanded as a center of competence for e-mobility and the series production of electric motors. In this context, an additional 500 jobs will be created in Bühl, which were originally planned for the Szombathely site in Hungary. The construction of the plant in Hungary is not affected by this. The main development activity for future fields of the Industry division, such as robotics, will also be strengthened. In addition, an innovation center for industry 4.0 topics will be built. In addition, the expansion of the aerospace special products division is planned.

The package of measures is expected to result in potential savings of EUR 250-300 million p.a., 90 percent of which should be realized in 2023, with roughly half of this amount being allocated to the Automotive OEM and Industry divisions and only a small part to the Automotive Aftermarket division. This is offset by transformation expenses of around EUR 700 million, the majority of which will probably be booked as a provision in 2020. The capital released in the course of implementing the package of measures presented today will be reinvested in future business and technologies in Germany.

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