© Leoni Electronics Production | March 18, 2019
Leoni needs to stabilise its business – plans headcount reduction
Given the significantly greater costs connected to the ramp-up difficulties at the plant in Merida, Mexico, coupled with the persistently poor performance in the Wiring Systems Division and a further downturn in the market, Leoni says it cannot maintain its guidance for 2019.
To curb this, Leoni says that it has applied immediate measures and taken staffing decisions to stabilise its business. The greater objective is to sustainably improve both profitability and cash flow and at the same time “align the company to promising and profitable business areas,” as the company puts it. Leoni’s ongoing, difficult situation persisted to an unexpected extent in the first two months of 2019. In its Wiring Systems Division, this was above all due to persistently high personnel and freight costs related to the ramp-up difficulties in Merida, Mexico. Based on these developments Leoni now estimates an earnings impact of about EUR 50 million due to Merida. Overall, the company is facing continued challenging market environment, particularly in China. In addition, certain OEMs have significantly reduced their delivery expectations for the next months with respect to the Wiring Systems Division. “The developments at the end of fiscal 2018 and especially in the first two months of 2019 have made it clear that we must act even faster and more decisively to bring Leoni back on track. We have identified inefficiencies, applied specific measures and have a clear roadmap to address these problems. My colleagues on the Board of Directors and I are convinced that thanks to its technological expertise and its market position, Leoni will return to sustainable profitability once these measures are implemented,” says Aldo Kamper, CEO of Leoni AG, in a press release. The company’s measures include a planned headcount reduction of about 2’000 employees worldwide, of which 500 are in high-wage countries, particularly in indirect functions, and other personnel-related measures such as a group-wide hiring freeze, as well as a delay of salary increases for non-tariff employees and managers. The employee representatives will be consulted regarding all personnel relevant measures. Leoni intends to significantly reduce the cost base as it aims to increase in profitability. As of 2022, VALUE 21 (the company’s performance and strategy-enhancement programme) is expected to deliver savings of around EUR 500 million annually compared with 2018. To some extent, the savings will be offset by factors such as wage cost increases and price reductions. The programme entails restructuring costs amounting to about EUR 120 million, half of it related to headcount and most of which will incur in the 2019 and 2020 financial years. Connected to all of this, Karl Gadesmann has resigned his position as Chief Financial Officer with immediate effect. The search for a replacement will be immediately started. Aldo Kamper will however take over the responsibilities on an interim basis.