Schaeffler Reduces Workforce by Thousands Amid Electric Vehicle Industry Challenges

Schaeffler, an automotive supplier from Bavaria, is set to cut 4,700 jobs, with 2,800 positions impacted in Germany, due to rising competition and a downturn in the electric vehicle market. Following its merger with Vitesco, which added 35,000 employees, Schaeffler’s workforce will see a reduction of about 3.1 percent. Concerns have arisen among employee representatives, as the company aims for substantial annual savings while grappling with declining profitability and a challenging market environment.

Schaeffler Announces Significant Job Cuts

The automotive supplier Schaeffler, based in Herzogenaurach, Bavaria, has made the difficult decision to eliminate 4,700 positions, with 2,800 of those cuts occurring in Germany. This move comes in response to intensifying competition and a downturn in the electric vehicle market, prompting the company to streamline its operations.

Impact of the Merger with Vitesco

In a recent development, Schaeffler merged with Vitesco, which was acquired just last October, adding 35,000 employees to its workforce and bringing the total to 120,000 globally. However, the announced job cuts represent a significant impact, affecting approximately four percent of the overall workforce. When considering net job reductions, around 3,700 positions will be eliminated, translating to about 3.1 percent of the total staff.

To navigate this transition, Schaeffler confirmed that the existing agreement with IG Metall, established in 2018, will guide the implementation of these measures in Germany. The job reductions will primarily occur through natural turnover, voluntary programs, and agreements regarding termination and partial retirement.

The company anticipates that these restructuring efforts will yield annual savings of about 290 million euros by 2029, with roughly 75 million euros resulting from cost synergies due to the merger with Vitesco. However, the initial phase of job cuts is expected to incur one-time costs of around 580 million euros, largely comprising provisions and relocation expenses.

Concerns and Reactions from Employee Representatives

The announcement has sparked significant concern among employee representatives, with the general works council of Schaeffler expressing that the proposed measures are excessive. IG Metall has urged management to consider alternative strategies to mitigate the impact on employees.

The sluggish demand for electric vehicles has been attributed to the high costs associated with battery technology, which remains relatively immature in the market. Schaeffler has cited “a challenging market environment, heightened global competition, and an ongoing transformation” as key factors driving the need for restructuring, particularly following the integration of Vitesco which has led to job reductions in administrative roles.

Moreover, the automotive division is undergoing additional restructuring, affecting both the internal combustion engine sector, which is gradually being phased out, and the electric vehicle components. The anticipated growth in electric vehicle sales has not materialized as expected, compounded by fierce competition that is exerting downward pressure on prices.

As a result, Schaeffler has experienced a notable decline in profitability, with the EBIT margin plummeting from 8.4 to 4.7 percent. These disappointing financial results have led to a decline in stock prices, with shares of the automotive supplier listed in the SDAX dropping by over three percent during early trading sessions.

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