by Nathan Vifflin
(Reuters) – Automotive supplier Forvia announced on Monday plans to cut 10,000 jobs in Europe over the next five years, partly through attrition, becoming the latest player in the auto industry to worry about a drop in demand and Chinese competition.
The title of the world’s seventh largest automobile supplier, which manufactures parts for Stellantis, Volkswagen and Ford, and which also sells in China, was among the strongest rises in the Stoxx 600 in the morning, before turning downward.
At 3:59 p.m. GMT, Forvia shares fell 13%, their biggest drop in trading since September 2022.
Read also…
Competitor Valeo, the largest French automotive supplier, fell by 6%. The German group Continental, which announced last week that it would reduce its workforce, lost 4%.
According to one analyst, who asked not to be named, the scale of the restructuring and the comment about overcapacity in Europe troubled investors.
As automakers cut production in Europe, OEMs face overcapacity issues that benefit Chinese competitors.
Forvia highlights overcapacity in Europe for seats and interiors, as well as to a lesser extent for lighting.
The equipment manufacturer plans to reduce its European workforce by 13%, thanks to a significant attrition rate and a drop in recruitment.
“The attrition we have is 2000-2500 people per year. So, in fact, the plan does not mean a layoff of 10,000 people,” explained vice-president and financial director Olivier Durand, adding that he would limit recruitment to positions deemed strictly necessary.
Forvia’s operating profit in Europe, Africa and the Middle East (EMEA) amounted to 316 million euros in 2023, compared to 815 million euros for Asia. However, the EMEA region represents 46% of the group’s turnover, compared to 27% for Asia.
Forvia, formerly known as Faurecia, plans to return to its pre-pandemic margin level of 7% in Europe – up from 2.5% in 2023 – thanks to cost reductions of 500 million euros per year at from 2028.
Asia posted an operating margin of 11% last year, with a double-digit margin in China, Forvia said.
Forvia posted revenue of 27.25 billion euros in 2023, in line with expectations and up from 24.57 billion euros recorded a year earlier.
(Report by Nathan Vifflin, with the contribution of Lucy Raitano, French version by Stéphanie Hamel, Corentin Chappron and Diana Mandiá, edited by Blandine Hénault)
©2024 Thomson Reuters, all rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. “Reuters” and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.