Supplier Layoffs Planned at Schaeffler, Continental as Economy Dies

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Germany’s Schaeffler AG will reportedly be eliminating 4,400 jobs and abandoning several facilities in its home country as the supplier confronts what it dubbed complications relating to the global pandemic. Like Continental, which is actually controlled by the same people, Schaeffler has been coping with lessened demand after automakers around the globe shut down earlier this year as a precautionary measure. While the coronavirus lockdowns can’t be faulted for every issue the companies are facing, they have been a thorn in the side of parts suppliers everywhere.

Continental announced it would need to eliminate roughly 13 percent of its workforce last week. That’s roughly 30,000 fewer jobs. Schaeffler’s restructuring plan only calls for eliminating 4,000 positions. However, it is the smaller of the two and has decided to spread its cuts out as much as possible.

Schaeffler will be freeing up jobs at facilities across Europe with a couple of sites likely to be closed or sold to other entities as a way to save money. According to Bloomberg, Georg Schaeffler and his mother Maria Elisabeth Schaeffler-Thumann (some of the suppliers’ largest shareholders) have seen one of the deepest declines in wealth among Europe’s richest families in 2020. While its hard to get misty over that when poor people also seem to be taking it on the chin with a sledgehammer, it would explain why Schaeffler Group (which includes Continental) is so interested in fixing its finances.

From Bloomberg:

Most of the reductions will take place at a dozen facilities in Germany and two sites elsewhere in Europe, the maker of engine, transmission and chassis components said in a statement Wednesday. Factories in Wuppertal, Eltmann and Clasthal-Zellerfeld will be shut or shopped to other companies, with the cuts expected to save Schaeffler as much as 300 million euros ($354 million) a year. The company will take a one-time charge of 700 million euros ($826 million) for the restructuring.

“We’re in a situation where the really bad effects of the pandemic are easing, but the levels we saw in 2019, we’re not going to reach anytime soon,” CEO Klaus Rosenfeld said in an interview, adding that a recovery might take until 2024. “It’s not going to be v-shaped.”

Schaeffler is also planning on raising $1.5 billion through new shares and offered a voluntary severance package to nearly 2,000 employees it thought might be willing to retire early. While technically still profitable, the business’ revenue has shrunk by around 20 percent through the first half of this year and has begun costing its biggest shareholders money. But this all gets fixed for suppliers the second the lockdowns end, right?

Not necessarily.

Plenty of countries plan to maintain rather aggressive restrictions through the remainder of this year. While that timeline could be shortened by demonstrations demanding governments stop enforcing unsustainable safety policies, tons of economic damage has already been done in the name of health. With unemployment already up around the world and rolling reports of how coronavirus lockdowns obliterated local economies, many are convinced a secondary round of restrictions would guarantee a prolonged economic depression. Some are even suggesting we’re already in for another recession akin to the one endured in 2008, regardless of what steps are taken now.

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