Vestas Cuts 1,400 Jobs After Forecasting Drop in Shipments
Vestas Wind Systems A/S (VWS) is cutting an additional 1,400 jobs to lower costs by more than 250 million euros ($311 million) in preparation for a decline in wind turbines installations it expects next year.
The world’s biggest maker of the machines said it expects to have 19,000 employees at the end of the year, down 16 percent from the end of last year. It announced 2,335 cuts in January and is still considering whether to eliminate 1,600 jobs in the U.S., which depend on a tax credit that expires this year.
“We are now intensifying this which means we will get to about 3,700 job cuts before year-end,” Vestas Chief Executive Officer Ditlev Engel said today in an interview on Bloomberg Television’s “On the Move” show with Francine Lacqua. “That’s preparing for what we expect to be quite a tough 2013.” Engel said he could “never rule out” more reductions.
Vestas is suffering from increased competition from rivals such as Nordex SE (NDX1) in Germany and Xinjiang Goldwind Science & Technology Co. Ltd. (2208) in China at the same time governments from the U.S. to Europe are slashing subsidies. The shares fell after the Danish company cut guidance for shipments this year and said it expected them to fall in 2013.
“The industry is in very poor shape and overcapacity is all over the place,” Heinz Steffen, an analyst at Fairesearch GmbH & Co. in Kronberg, Germany, said today in a phone interview. “The outlook for 2013 is not too promising. The PTC will expire and it will be difficult to generate orders in the U.S,” he said, referring to a tax credit for the wind industry that expires at year-end which Congress has yet to renew.
The loss for the first half widened to 170 million euros from 30 million euros a year ago as margins narrowed, Vestas said. After earlier rising the most since June 1, the shares declined 6.4 percent to 31.77 kroner in Copenhagen.
The earnings were in step with guidance the company released three weeks ago. Vestas’s cuts announced January would have brought the overall headcount to 20,400.
With the new total to be eliminated in 2012 at 3,735 posts, Vestas said about 1,000 employees have already departed, another 1,100 will go next month and the rest will leave before the end of this year. The company said it will “evaluate” its U.S. manufacturing footprint as it waits to see if lawmakers extend a tax credit to the industry.
“Management at last got the message to restructure the business more strongly than earlier,” Steffen said. “It looked half-hearted when they announced just 2,335 job cuts earlier in the year.”
Engel said the company is looking to outsource manufacturing of some components so long as it doesn’t compromise turbine quality.
Of the 2,700 job cuts that remain this year, 55 percent will be in Europe and Africa, 25 percent in the Asia-Pacific region, and 20 percent in the Americas, according to Vestas. Those proportions work out to roughly 1,485 posts in Europe and Africa, 675 in Asia-Pacific and 540 in the Americas.
Engel said in January that as many as 1,600 U.S. jobs are at risk if lawmakers don’t extend the production tax credit beyond year-end. The credit gives an incentive of 2.2 cents a kilowatt-hour of wind power.
Vestas also reiterated full-year targets for revenue of 6.5 billion euros to 8 billion euros and a margin before interest and tax of zero to 4 percent, while cutting predicted shipments to 6.3 gigawatts from 7 gigawatts.
Vestas said it expects shipments to decline further to 5 gigawatts in 2013, hastening the need for job cuts. Lower shipments “will result in a significantly lower activity level in 2013 to which the company will naturally have to adapt,” Vestas said.
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