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Schaeffler accelerates transformation and strengthens compet

Writer: Eric Bearing Limited

 Global automotive and industrial supplier Schaeffler today announced measures that continue to build on changes initiated in 2018. Back then, in recognition of looming technological and regulatory developments and changing customer requirements, the company began adjusting its European production footprint in order to streamline its structures and align them more closely with divisional requirements. As part of that process, the company downsized its footprint in the United Kingdom by exiting three of its sites in November 2018. In early 2019, Schaeffler established an efficiency program (RACE) in its Automotive OEM division, followed that same year by the GRIP and FIT efficiency programs in its Automotive Aftermarket and Industrial divisions, respectively. The RACE program has since led to the sale of three of the company’s automotive sites: Hamm, Una, and Kaltennordheim. In September 2019 – before the COVID-19 crisis had even emerged – the company launched an additional voluntary exit program, which is currently being implemented.

The Schaeffler Group’s employee numbers have decreased from 92,478 at the end of 2018 to 84,223 at the end of June 2020, a reduction of just over 8,250, or about 9 percent of its workforce. However, at this stage the company’s employee numbers only partially reflect the measures undertaken.

Additional package of measures with two main aims

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 quickly responded with short-term countermeasures that have so far enabled it to weather the crisis relatively unscathed. 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 vacation leave, and short time under 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 overcapacity 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. In a sharp decline, global vehicle production for 2020 is forecast to be down 20 percent 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 percent.

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 AG has now adopted an additional package of measures at group and divisional program level that is designed to accelerate the Schaeffler Group’s transformation and strengthen its ability to compete and realize 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 twelve locations in Germany and two further locations elsewhere in Europe.

Capacity downsizing and consolidation of locations

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.  FAG HCB71920-E-2RSD-T-P4S-UL bearings online , pls click here :

Having explored all options for the Wuppertal plant over a period of several years, Schaeffler can no longer rule out plant closure. The company will, however, endeavor 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 actively 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 Aftermarket 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 finalized.

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.