German automotive parts maker Schaeffler AG announced plans to eliminate 4,700 jobs across Europe, following a 45% drop in third-quarter profit this year.
Bulk Layoffs In Germany
Schaeffler, which supplies components to major automakers worldwide, is the latest in a series of companies within the automotive industry hit hard by the shifting market dynamics and mounting global competition.
Schaeffler cited several factors driving the decision, including intensifying competition, rising costs, and an ongoing shift within the automotive sector, especially in the supply chain segment.
“This is the company’s response to the challenging market environment, growing global competition, and the transformation of the automotive industry, particularly in the supply chain,” Schaeffler said in a statement according to Ziare
The bulk of layoffs — approximately 2,800 positions — will occur in Germany across ten sites. Additionally, Schaeffler announced plans to close two facilities elsewhere in Europe but did not specify which locations would be affected.
These measures are expected to save Schaeffler about €290 million ($310 million) annually through 2029, with an upfront cost of approximately €580 million ($620 million).
$640 Million in Cost Savings
Schaeffler has also been investing in electric vehicle (EV) components to adapt to the market’s shift away from traditional combustion engines.
In October, the company announced plans to acquire Vitesco, a manufacturer specializing in EV parts, with the goal of expanding Schaeffler’s EV product line and reducing costs.
Schaeffler projects that the acquisition will lead to €600 million ($640 million) in cost savings by 2029.
The decision to downsize comes as the global automotive sector faces significant challenges, including high inflation, supply chain disruptions, and declining demand for internal combustion vehicles.
Rising costs for raw materials and energy have put pressure on profit margins, leading many automakers and suppliers to restructure and streamline operations. Moreover, consumer demand for new cars has dropped in some regions, partly due to economic uncertainties and rising interest rates, which have made financing new vehicles more expensive.
In the third quarter of 2024, Schaeffler reported an EBIT (earnings before interest and taxes) of €187 million ($200 million), falling short of analyst expectations of €209 million ($224 million).
Globally, Schaeffler employs over 120,000 people, and this recent round of job cuts reflects the intense restructuring sweeping through the automotive industry.
