"We want to further reduce the large extent to which we rely on the internal combustion engine" - Schaeffler Automotive OEM division CEO, Matthias Zink.

"We want to further reduce the large extent to which we rely on the internal combustion engine" - Schaeffler Automotive OEM division CEO, Matthias Zink.

Schaeffler's Automotive OEM division is to axe 900 jobs and "consolidate" five European plants as it reacts to the shift from internal combustion engine to electric and hybrid powerplants.

Germany will be hardest hit in terms of job losses with 700 of the 900 redundancies planned there, while the five European locations slated for consolidation have not yet been named.

The supplier adds the cuts will include the disposal of non-core activities in the Engine and Transmission Systems business divisions, although it notes it will increase its order intake in the Emobility and chassis mechatronics units to EUR1.5bn (US$1.7bn) to EUR2bn during the next three years.

"Having successfully completed the first two stages of the efficiency programme, CORE, in the Industrial division two years earlier than originally anticipated, we are launching a third stage, called Fit and have now turned our main focus to increasing the efficiency of our Automotive OEM division," said Schaeffler CEO, Klaus Rosenfeld.

"I am confident we will be able to transfer our experience with CORE to the conceptual design and implementation of RACE [Regroup Automotive for higher Margin and Capital Efficiency].

"RACE represents another important building block in the transformation of the Schaeffler Group. The focus is on increasing efficiency and optimising the portfolio.

"We are fully determined to consistently execute the programme, which allows us to access new opportunities for growth. In that process, we will mainly rely on our technological expertise and our innovative strength."

All planned measures will be discussed with employee representatives in advance as agreed in last year's Future Accord. Schaeffler says both sides are striving for "socially responsible solutions without lay-offs or site closures."

The supplier will focus on six earnings levers:

  • Optimising the footprint in Europe.
  • Optimising the business portfolio
  • Consistently reduce overhead costs
  • Increase R&D efficiency and capital efficiency
  • Sustainably improve order intake.

The measures affect all four business divisions (Engine Systems, Transmission Systems, EMobility, and Chassis Systems) as well as the corporate functions internal and external to the division and will primarily impact Europe.

"Our RACE measures and decisions address the pressure on margins in certain product areas as well as the decline in gross margins," said Schaeffler CEO of the Automotive OEM division, CEO, Matthias Zink.

"At the same time, we want to further reduce the large extent to which we rely on the internal combustion engine while – being an innovative technology partner to our customers – utilising the opportunities offered by the fields of hybridisation and electrification much more extensively.

"Our discipline regarding cost and capital in that process will be much more rigorous. Additionally, we will reduce the number of products that generate low margins and expand the proportion of higher-margin products.

"Products that are being phased out or that do not generate sufficient returns will be reviewed closely. We will also allocate our R&D expenditures and our capital in a manner ensuring high-return products and system solutions as well as future-oriented areas such as E-Mobility and autonomous driving will benefit the most."

Show the press release

Schaeffler launches program RACE
HERZOGENAURACH, 2019-03-06. • Program designed to sustainably increase efficiency and optimize portfolio of Automotive OEM division • Safeguarding and strengthening long-term value added in three stages (2019-2024) • Initial stage focuses on six earnings levers • Stage I measures aimed at improving earnings by approximately 90 million euros (EBIT margin 100 basis points) • Medium-term target is an EBIT margin percentage before special items in the high single-digits
During its annual press conference today, Schaeffler AG announced its program RACE, which is designed to sustainably increase the Automotive OEM division's efficiency and optimize its portfolio. The abbreviation RACE stands for "Regroup Automotive for higher Margin and Capital Efficiency". Within Schaeffler AG's Board of Managing Directors, responsibility for the program rests with Matthias Zink, CEO of the Automotive OEM division. Like the approach taken in the Industrial division's program CORE, RACE consists of three stages. The initial stage of the program, which started on January 1, 2019, covers the next 18 to 24 months.
The program was made necessary by a number of external and internal factors that had significantly weakened the division's EBIT margin before special items for 2018.
To address these, the overriding goal of RACE is to sustainably improve the margin over the next three to four years and to generate an EBIT margin percentage in the high single digits going forward.
The division plans to achieve this margin improvement by a collection of measures focused on six earnings levers: (1) optimizing the footprint in Europe, (2) optimizing the business portfolio, (3) consistently reducing overhead costs, increasing (4) R&D efficiency and (5) capital efficiency, and (6) sustainably improving order intake. The measures affect all four business divisions (Engine Systems, Transmission Systems, EMobility, and Chassis Systems) as well as the corporate functions internal and external to the division and will primarily impact Europe.
"Our RACE measures and decisions address the pressure on margins in certain product areas as well as the decline in gross margins," Matthias Zink said. "At the same time, we want to further reduce the large extent to which we rely on the internal combustion engine while – being an innovative technology partner to our customers – utilizing
the opportunities offered by the fields of hybridization and electrification much more extensively. Our discipline regarding cost and capital in that process will be much more rigorous. Additionally, we will reduce the number of products that generate low margins and expand the proportion of higher-margin products. Products that are being phased out or that do not generate sufficient returns will be reviewed closely. We will also allocate our R&D expenditures and our capital in a manner ensuring that high-return products and system solutions as well as strategic future-oriented areas such as E-Mobility and autonomous driving will benefit the most."
As part of the first stage of program RACE, the division plans to further consolidate its European plant network. This will likely affect five European locations where the Automotive OEM division maintains production sites. All of the planned measures will be discussed with employee representatives in advance as agreed in last year's Future Accord. Both sides are striving for socially responsible solutions without layoffs or site closures. In light of this, the consolidation will primarily involve disposing of or combining activities. At the present time it is anticipated that these changes will result in a reduction by about 900 positions, including about 700 positions in Germany. These numbers include the disposal of non-core activities in the Engine and Transmission Systems business divisions. The R&D ratio (R&D expenditures as a percentage of sales) of the Automotive OEM division will be restricted to 8 to 8.5 percent in 2019 and 2020 taking into account IFRS 15. Furthermore, capex for the same period will be limited to no more than 900 million euros p.a. Finally, the division will increase its order intake in the EMobility and chassis mechatronics units to 1.5 to 2 billion euros p.a. over the next three years.
Klaus Rosenfeld, CEO of Schaeffler AG, stated: "Having successfully completed the first two stages of the efficiency program CORE in the Industrial division two years earlier than originally anticipated, we are launching a third stage – called Fit – and have now turned our main focus to increasing the efficiency of our Automotive OEM division. I am confident that we will be able to transfer our experience with CORE to the conceptual design and implementation of RACE. The program RACE represents another important building block in the transformation of the Schaeffler Group. The focus is on increasing efficiency and optimizing the portfolio. We are fully determined to consistently execute the program which allows us to access new opportunities for growth. In that process, we will mainly rely on our technological expertise and our innovative strength."

Original source: Schaeffler