Bosch Seeks Alternatives to Job Cuts Amid Weak European Demand
Bosch is working to avoid redundancies at its European plants as stagnant demand and excess capacity weigh on the supplier’s 2013 outlook.
Bosch is attempting to avoid job cuts at its European operations as the supplier faces weak demand across the continent and excess production capacity. The company’s leadership said in November 2013 that it would first look for alternative measures to improve competitiveness before considering redundancies.
Europe still represented 57 percent of Bosch’s sales in 2013, but demand in the region had stagnated following the eurozone debt crisis. Bosch’s management expected overall revenues for the year to remain below the pre-crisis peak of 2007, despite some growth in emerging markets. The company acknowledged that, after factoring in annual productivity gains, it had surplus capacity in its European factories.
Focus on competitiveness and new markets
Chief executive Volkmar Denner said Bosch’s immediate focus would be on creative solutions to improve the competitiveness of its European units. These included developing new products and expanding sales in markets outside Europe. Denner declined to specify any headcount reduction targets, emphasising that job cuts would only be considered if other options failed.
Bosch’s approach contrasts with other automakers and suppliers in Europe who have announced large-scale redundancies in response to the downturn. Recent years have seen major job cuts at companies such as Ford, PSA Peugeot Citroën and RWE, as reported in related news (see: Ford Cuts 400 Jobs from Windsor Ont Operations).
Solar unit losses and financial targets
Bosch was also seeking a buyer for its solar energy division, which had accumulated losses of about €2.4 billion since 2008. The solar business had become a financial burden, and its divestment was part of Bosch’s wider strategy to return to higher profitability. The group set a target of 2 to 4 percent revenue growth for 2013, following €52.5 billion in sales for 2012. However, its medium-term goal of achieving an 8 percent return on sales remained distant; in 2012, earnings before interest and tax were only 2.5 percent of sales.
Prospects for European demand
Denner said he believed the European car market had reached its lowest point and might see some improvement, but he did not expect strong growth in the near term. With no sharp rebound in sight, Bosch’s reliance on Europe left it exposed to ongoing weakness in the region’s automotive sector.
Bosch’s efforts to avoid redundancies stand out in a sector where many competitors have already resorted to large-scale job cuts. The company’s strategy depends on its ability to boost competitiveness and find new growth opportunities outside its traditional European base.
