Job Cuts On Weak Regional Sales
French auto parts maker Faurecia has announced that it is to end production of acoustic components and plastic bumpers at two plants in France on the back of falling demand in the country. BMI has long maintained a bearish outlook for vehicle production across Europe, and we are forecasting declines in many markets as autos companies reduce output and cut jobs in the face of falling sales. This decline in production volumes is impacting the supplier segment across the region, and many have announced restructuring measures.
Job Cuts And Restructuring
The Evreux, Normandy, site, which produces sound insulation and other acoustic parts, will close at the end of 2013. The factory currently employs 96 workers. A further 34 jobs will be cut as bumper production ends at the Bains-sur-Oust plant. The company warns that further cuts may follow from the 416-strong workforce at Bains-sur-Oust as dashboard and door panel production are reorganised later in the year.
Some of the Evreux production for the Peugeot 508 and Citroen C5 assembly lines in nearby Rennes will be transferred to Bains-sur-Oust, starting in late 2013, Faurecia said. However, Faurecia also aims to maintain at least 50 of the Evreux staff as it creates a new venture on the site making cycle parts for the IXOW brand with investment partner Terranere SAS .
Faurecia reported a 62% drop in full-year net income for 2012, to EUR140mn (US$186mn), on the back of undertaking significant restructuring charges due to declines in European autos production ( see 'Production Downturn Continues To Impact Supplier Segment', January 17 ). The company took EUR84mn (US$112mn) of restructuring charges in 2012 to adapt to declining autos production levels in Europe. The company estimates that restructuring costs for 2012-2013 will total some EUR190mn (US$253mn). In 2012, net debt rose to EUR1.81bn (US$2.42bn), from EUR1.22bn (US$1.63bn) in 2011.
In November 2012, the company announced that it would cut around 3,000 jobs in France, or 7.5% of its workforce, by end-2013. Further, the company plans to reduce its expenditure by around EUR100mn (US$130mn). These latest jobs cuts are part of this plan.
Europe A Dampener On Global Growth
The company is 57% - owned by French auto manufacturer PSA Peugeot Citroen , but supplies a number of other auto companies. Globally, full year-sales increased 7.3%, to EUR17.4bn (US$23.2bn) in 2012. Asia and North America were strong sources of growth for the company, commensurate with our views on production in these regions. Operating profit declined to EUR514mn (US$686mn), from EUR651mn (US$867mn); this represented 3% of total sales in 2012, down from 4% in 2011.
Broadly in line with BMI' s bearish regional view, Faurecia believes its sales in the European market will drop 4-5% in 2013.