Schaeffler realigns Industrial division

2015-08-20 | Herzogenaurach / Pune

Program “CORE” initiated for Industrial division

Increased sales growth through high-volume business and optimized product and service portfolio

Enhanced delivery performance and service quality

Stronger customer orientation through strengthened regional sales organization

Cost savings and efficiency improvements through leaner organizational structures, reducing workforce by 500 jobs in a socially acceptable manner, mainly in Germany and Europe

Schaeffler AG’s Board of Managing Directors has decided to realign the company’s Industrial division. The decision comes in reaction to the stagnating development of the Industrial division in recent years. The program is aimed at improving the efficiency and competitive position of the Industrial business for the long term in order to facilitate further improved profitable growth. The development program is titled “CORE“. The key elements of this program are increased sales growth, enhanced delivery performance and service quality, stronger customer orientation as well as cost savings and efficiency improvements.

The realignment program has been prompted by the modest performance of the Industrial division. The division generated revenue of EUR 1.7 billion in the first half of 2015, representing an increase of 7.5 percent over the prior year period. Excluding the impact of currency translation, revenue declined slightly by 0.8 percent.

The program consists of measures to optimize the product portfolio and enhance delivery performance, which will improve the division’s competitiveness and develop opportunities for further growth. These measures include expanding the high-volume business with standard roller bearings, especially in Asia. The first definite measure will be the global product relaunch of “GenC” ball bearings. Further advancing customer-specific products and engineering solutions as well as actively shaping technology trends such as digitization in engineering are also part of the program. In addition, in order to meet global market requirements, we plan to gradually increase localization in our main growth markets and increase the speed of our reaction to the market by optimizing the supply chain. Ongoing projects to improve delivery performance such as the new European Distribution Center, will be implemented.

In addition, the program will strengthen the regional sales organization and significantly increase the customer orientation of the division’s operations. Especially in the Europe region, which also includes the Middle East, Africa and India, this means defining how responsibilities are allocated between the corporate functions in Schweinfurt with their overall strategic aspects and the operating selling functions in the regions. In order to better serve the division’s major global customers, the regionally focused sales units will be supplemented by a realigned global key account management function. “In future we will increasingly operate our Industral business from our regions. This approach will consistently align our Industrial business along customer and market needs and set the course for sustainable sales growth and increased profitability,” said Dr. Stefan Spindler, who has been responsible for the Industrial division since May 2015, when he joined Schaeffler AG’s Board of Managing Directors.

This organizational realignment also serves as the basis for streamlining workflows and processes and improving their efficiency. It will include streamlining the organizational and leadership structure of the corporate functions and of the corporate product and application development units. As part of the program, the company currently expects to reduce the Industrial division workforce by up to 500 jobs in a socially acceptable manner until the end of 2017, most of them in Germany and Europe. Some of the affected staff will be relocated to other areas of the company outside of the Industrial division. In addition to normal employee turnover, the company will be offering severance agreements and partial retirement arrangements. The program does not entail lay-offs or closing down locations. Corporate functions for the Industrial division and the Europe region will be combined and concentrated in Schweinfurt, thereby further strengthening this location. The company’s next steps will be defining the details of the plan and entering into negotiations with employee representatives, which it anticipates to be completed by year-end.

Klaus Rosenfeld, CEO of Schaeffler AG, stated: “The Industrial division is key to our strategy and has always been part of the Schaeffler Group’s core business. The “CORE” program will help us strengthen the Industrial division in the context of our integrated business model, focus it on future challenges, and bring it back to sustainable profitable growth.”