Supplier Brose said, “after several years of stagnation”, sales grew to EUR7.5bn due mainly to consolidation of its joint venture with Volkswagen subsidiary Sitech.

Fifty two percent of turnover was generated in Europe, 27% in America and 21% in Asia.

However, Brose said in a statement, “the return on sales and on capital were at an unsatisfactory level of 1.1 and 1.7 percent, respectively”.

“The inadequate return on investment no longer allowed the family business to finance itself. Therefore, bank loans had to be taken out on a considerable scale. Nevertheless, the equity ratio is above 50%. As a future SE, Brose also becomes capital market viable.”

The supplier added unspecified “logistics problems” had led to an average inventory of 32 working days, with one day tying up around EUR20m in liquidity. 

In a surprisingly frank admission, Brose also said “shareholders, advisory board and management are also concerned about the motivation of the workforce, which has now grown to over 31,000 employees at 69 locations in 25 countries.

“This is reflected in extraordinarily high staff turnover. Many employees want the personal, unbureaucratic and pragmatic way of working offered by a family business again.

“Although Brose has not generated a positive result at its German locations for four years and is not covered by collective bargaining agreements at its major sites in Coburg and Bamberg, the collective agreement of the metal industry was fully adopted.

“In contrast to its competitors, the Brose Group employs almost one third of its total workforce at German locations. Compensation for the associated cost disadvantages can only be achieved by significantly above average [worker performance].

“For this reason, the shareholders and the advisory board have asked the management to considerably streamline [the] decision making processes and the organisational structure.

“The shareholders, the advisory board and the management agree that to improve the unsatisfactory earnings situation, not only must costs be reduced in production, logistics and administration, but more attention than before must be paid to the return on investment when acquiring new projects and unprofitable businesses must be terminated.”

Brose added it expected sales of EUR8.6bn and stabilisation of global vehicle demand.

Following investments of EUR332m in 2022, shareholders and the advisory board approved investments of EUR422m for the current year. This would create additional capacity in production, and administration, in other European countries, China, North America as well as Germany.

Including the Brose Sitech JV, the company employs 31,000 people at 69 locations in 25 countries.