Assembly in the Schweinfurt factory
The European plants are to be rearranged, small parts of the business to be sold.
(Photo: Bloomberg)
MunichThe pressure on the SchaefflerGroup comes from two sides: On the one hand, the automotive supplier like many competitors suffers from the weak economy in the automotive industry. Last year, the family-owned company failed to meet its original goals and also met its 2020 targets. Secondly, the mechanics specialist is strongly affected by the transition to electromobility.
The current figures show the acute need for action: In 2018, sales grew weaker than originally expected by currency-adjusted 3.9 percent to 14.2 billion euros, as the company announced this Wednesday. The year before, the proceeds had amounted to 14 billion euros. Without taking currency effects into account, Schaeffler has hardly grown. The operating result before special items fell from 1.6 to 1.4 billion euros. As a result, the return on sales before special items fell from 11.3 to 9.7 percent.
Management Board member Matthias Zink and CEO Klaus Rosenfeld have announced further cuts. The car division is to be rebuilt for higher margins and better capital efficiency. Therefore, Rosenfeld has called the conversion program “Race”, short for “Regroup Automotive for Higher Margin and Capital Efficiency”.
The car division is to be rebuilt for higher margins and better capital efficiency. Therefore, Rosenfeld has called the conversion program “Race”, short for “Regroup Automotive for Higher Margin and Capital Efficiency”. “We want to further reduce the dependence on the internal combustion engine,” said Zink.
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Rosenfeld once again put the test of the network of factories in Europe to the test. In this area, there should be a further consolidation of the works network, he announced. This is likely to affect five locations.
Schaeffler left open what exactly should happen with these works. It is “mainly about sales and merging activities”. In the discussions with the employee representatives, one strives for “solutions without operational layoffs and site closures”. Of the total of 55,000 jobs, Schaeffler wants to divest 900, around 700 of them in Germany, According to estimates in industrial circles, these are likely to be smaller sites.
Auto parts supplier: Schaeffler drops annual forecast due to slack in China
The goal of “Race” is “to sustainably improve the margin level in the next three to four years and to generate a profit margin in the high single-digit percentage range in the future,” the company said. It also wants to reduce the proportion of products with low margin and invest more in high-yield activities.
In addition to the decline from the MDax, investors now also have to accept the move away from the 2020 targets: the shares of the automotive and industrial suppliers fell more than nine percent on Wednesday morning.
In autumn, Schaeffler had already revised its expectations downwards. Originally, the Group had forecast revenue growth of five to six percent and operating income (ebit) before special items of 10.5 to 11.5 percent. After all, the expectations lowered in the autumn – sales growth of four to five percent and an EBIT margin of 9.5 to 10.5 percent – were now achieved.
Schaeffler had already announced the reduction of 950 jobs worldwide almost half a year ago, half of them in Germany.
Finding the right strategy for the electric age
Schaeffler is a rolling bearing specialist and must be able to make the transition to the age of electrotechnology. So far, the company is still more than 50 percent dependent on the combustion engine – and thus of the diesel. Most recently, Rosenfeld created its own business units for e-mobility and Industry 4.0 activities. It is clear that the electronic share is likely to rise in the future. But Rosenfeld is convinced that mechanics will continue to play a significant role in the future.
All major automotive suppliers are currently looking for the right lineup. Sun announced Continental, which also involves the Schaeffler family, last year “One of the biggest conversions in the company’s history” and decided the splitting: The “Continental Rubber” stands in the future for the traditional business with tires and rubber products and the division “Automotive” for the classical supply business with chassis and components with the future field of the autonomous driving.
The third pillar “Powertrain” is responsible for the business with injection systems, engine controls, hybrid and electric motors. She should come to the stock market. “Over the next decade and beyond, the automotive industry worldwide is undergoing the biggest and most profound change in its more than 130-year-old history,” said CEO Elmar Degenhart at the announcement of the plans.
Automotive supplier: Continental is reacting to the transformation of the automotive world with a radical change
The third largest German automotive supplier ZF Friedrichshafen turn talks with brake manufacturer Wabco about a takeover, A purchase from the manufacturer of truck brakes would ZF on the way to become a system supplier for electromobility. In 2015, ZF already bought for around ten billion euros TRW Automotive to expand into the growth market for self-driving cars.
ZF wants to invest more than twelve billion euros in electromobility and autonomous driving. With the acquisition of Wabco, whose volume estimates experts at up to eight billion euros, ZF would implement nearly 40 billion euros and then close to eye level with the market leaders Bosch and Continental to reach.
Schaeffler had almost taken over once with the acquisition of its larger competitor Continental. The financial crisis burst in the middle of the transaction. As a result, Schaeffler was offered more Conti shares than planned and the company was facing an immense debt mountain. But the good economy, a recovery in the Conti share and clever debt management brought Schaeffler back on track.
In any case, Schaeffler has always been one of the most profitable auto parts suppliers worldwide. Even the numbers of the past year can still be seen in the industry comparison. However, Schaeffler fell below the ten-percent mark in its operating return on sales last year. In the Automotive OEM division, it was only 7.7 percent, well below the previous year’s figure of 10.8 percent.
Auto parts supplier: ZF Friedrichshafen confirms talks with Wabco
“After a good first half of the year for the Schaeffler Group, market conditions in the global automotive business deteriorated significantly in the second half of the year,” said Rosenfeld. But there are also “a number of homemade factors”. These should now be tackled at a tighter pace.
Rosenfeld is cautious for the current year. He announced currency-adjusted sales growth of one to three percent for the group. The operative return on sales before special effects should reach eight to nine percent.
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