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September 10, 2020

Schaeffler to cut 4,400 jobs

Schaeffler is cut its net workforce by 4,400 in Germany and Europe by the end of 2022 focusing mainly on 12 locations in Germany and two elsewhere on the Continent.

By Rhodri Morgan

Schaeffler is cut its net workforce by 4,400 in Germany and Europe by the end of 2022 focusing mainly on 12 locations in Germany and two elsewhere on the Continent.

The company says sites in Herzogenaurach, Bühl, Schweinfurt, Langen and Höchstadt are to be strengthened by clustering technology and production capabilities and investing in future growth areas

The German supplier has identified potential annual savings of EUR250m–EUR300m (US$296m-US$355m) to be 90% realised by 2023, with transformation costs of around EUR700m.

When the COVID-19 pandemic emerged in February and March 2020, resulting in a sharp drop in demand across all three divisions, the Schaeffler Group responded with short-term counter-measures that have so far, it says, enabled it to weather the crisis.

For example, the company increased the scope of its European voluntary severance scheme from 1,300 to 1,900 positions, 1,700 of which are in Germany. It also used temporary measures such as plant closure days, using up accumulated overtime and holiday leave, as well as short-time working through Germany’s Kurzarbeit job subsidy scheme.

Although in recent months demand has picked up across all of Schaeffler’s three divisions and four regions, uncertainty surrounding the pandemic outlook and the resulting economic downturn remains high. Moreover, market and revenue projections for the five years to 2025 point to a slow recovery, resulting in structural over-capacity at the company’s production plants.

“The automotive industry, which was already undergoing structural transformation amid the move to electrification, has been hit hard by the COVID-19 crisis,” said a Schaeffler statement. “In a sharp decline, global vehicle production for 2020 is forecast to be down 20% year on year and a return to pre-crisis levels is not expected until 2024 at the earliest.

“Global industrial production has also been significantly impacted, with estimates for 2020 pointing to a downturn of between 8% and 12%. In light of this economic environment, it is now vital for Schaeffler to take further structural measures in addition to the current temporary measures, which the company will continue to make full use of.

“Accordingly, the board of managing directors of Schaeffler has now adopted an additional package of measures at group and divisional programme level designed to accelerate the Schaeffler Group’s transformation and strengthen its ability to compete and realise future opportunities.

“The package of measures has two broad aims. The first is to downsize structural overcapacity and consolidate Schaeffler’s locations in Europe, focusing in particular on Germany. The second is to strengthen the company’s competitiveness and build up local capabilities at selected locations in Germany.

“The structural changes, which the company aims to have largely implemented by the end of 2022, relate mainly to 12 locations in Germany and two further locations elsewhere in Europe.”

While the capacity downsizing and consolidation measures will affect Schaeffler’s larger locations in Herzogenaurach, Bühl, Schweinfurt, Höchstadt and Homburg, most of the impact will be felt at locations with technologically obsolescent product portfolios or highly fragmented plant structures.

The latter include the Wuppertal, Luckenwalde and Eltmann plants, the company’s engineering location in Clausthal-Zellerfeld, and its Automotive Aftermarket operations in Hamburg and Cologne.

The supplier added having explored all options for the Wuppertal plant over a period of several years, it can no longer rule out plant closure. The company will, however, endeavour to retain as many jobs as possible in Germany under a partial relocation of production. For the Luckenwalde location, a partial relocation of activities is planned.

At the same time, the company is looking for alternative uses and sale options. All production at the Eltmann site will be transferred to Schweinfurt, thereby retaining the majority of jobs by moving them to a location nearby. Already, the Eltmann site manufactures primarily for the Schweinfurt site, so the change is effectively a production integration measure.

The Clausthal-Zellerfeld location will be closed, unless a buyer can be found in the short term. Wherever feasible, employees at the company’s Automotive After-market operations in Hamburg and Cologne will be given the option of working from home.

There are also plans to reduce administrative overheads in Schaeffler’s corporate functions and within its divisions. This applies mainly to the Herzogenaurach, Schweinfurt, Bühl and Homburg locations.

The specifics of the plans for each of the various locations will be outlined at local employee meetings. No final outcomes can be released until after the negotiations with employee representatives on the required reconciliation-of-interests agreements (Interessenausgleiche) have been finalised.

In total, the measures will result in a net workforce reduction of about 4,400 jobs in Europe. The bulk of these will be in Germany. All three of the group’s divisions and all of its corporate functions will contribute to the measures.

The package of measures will be implemented on the basis of the Future Accord signed between Schaeffler and the IG Metall trade union in 2018. The company is currently engaged in dialogue with employee representatives.

“We moved early to take all steps necessary to overcome the current crisis,” said Schaeffler CEO, Klaus Rosenfeld. “However, in light of market developments, further measures are now unavoidable in order to improve the Schaeffler Group’s long-term competitiveness and ability to realise future opportunities.

“The package announced today by the board of managing directors will help our company achieve these aims. We, on the board of managing directors, are committed to ensuring the transformation of the Schaeffler Group proceeds wherever possible in accordance with the principles of social responsibility and partnership.

“That’s why we signed a future accord in 2018 and deal still stands. We’re a family business, so we know just how vital that is to achieving successful change and transformation at Schaeffler.”

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