Schuler strengthens international sites and reduces capacities in Germany
by Hans Diederichs
The Executive Board of Schuler AG has adopted a program of measures aimed at adapting operating capacities in Germany to the changed competitive conditions and increased pressure on costs. Its objective is to improve the utilization of growth opportunities by strengthening international sites and expanding the product portfolio in line with market needs. At the same time, a sustainable perspective will be created for the remaining business activities in Germany. By improving profitability, the concept will also strengthen the scope for technological innovations and the systematic digitalization of the Schuler Group.
Schuler will now discuss the implementation of the future concept with worker representatives. The main reason for the adaptation measures is that demand for fully automated press lines, mechanical presses, servo technology and forging from customers in the automotive, industrial and hydraulic sectors has been steadily shifting away from Germany and Europe in recent years – and toward Asia in particular. This trend is set to continue across all customer groups. For example, Schuler expects that around 80% of press line orders will come from the foreign production facilities of car manufacturers in the future. The relevant cost, tariff and foreign exchange trend for Schuler’s domestic sites in Germany means there is no perspective for this growing international demand to be served competitively from Germany.
Göppingen will remain head office – New machine production closes
In detail, the plan is to close new machine production at the Göppingen facility. Field service and on-site assembly will stay in Göppingen. Göppingen will also remain the Schuler Group’s head office with the corresponding corporate functions and an important location for research and development, innovation, engineering and Service.
In addition to Göppingen, Schuler will also reduce capacities for manufacturing, on-site assembly and in-house assembly in Erfurt and other German sites. The reasons are the stronger use of existing plants in China and Brazil, as well as a general reduction in vertical integration across all divisions. At the same time, there will be a significant increase in value added by Schuler’s facilities in China – especially in business with automotive and industry customers.
Production in Brazil will also be strengthened, and the hydraulic business expanded. Equally, Schuler’s global localization strategy means that customers in Europe will continue to be served from Germany.
The improvements in Schuler’s competitive position targeted by the future concept will be flanked by significant savings in the Group’s administrative, selling and general expenses. This applies to all sites and divisions in Germany. All in all, the number of jobs in Germany will decline by around 500 as a result of the future concept. At around 350 jobs, production will account for the overwhelming share of this reduction.
At the end of 2018, the Schuler Group employed 6,574 people – of which 4,195 were in Germany. The reduction in headcount now required is to be made as socially acceptable as possible. However, redundancies cannot be ruled out.
Significant competitiveness improvements and savings
Schuler expects total one-off costs for the future concept of around € 85 million in 2019 – especially in the field of Schuler Pressen GmbH. Around 70 percent will be cash-effective, while the rest will be mainly asset write-downs. The accruals formed for these expenses will be recognized in the third quarter of 2019 with a corresponding negative impact on earnings. In addition, Schuler will recognize impairment charges on company investments of around € 25 million.
In addition to the significant improvements in the company’s competitiveness that these measures will achieve, the burdens will be opposed by initial savings effects as of the second half of 2020. Together with the effects from the current restructuring program 2018, these savings will reach their full extent of around € 60 million compared to the current fiscal year as of 2022. Schuler expects a gradual improvement in the Group’s operating profitability by 2021 at the latest.
Source and photo: Schuler AG