Nuremberg, Germany – German automotive cables specialist Leoni AG is planning to lay off up to 2,000 workers in a bid to stabilise its business after reporting a persistently poor performance.
As part of a far reaching restructuring plan, the Nuremberg-based company has also identified subsidiaries with annual income of up to €500m for possible divestment.
Leoni has also ordered a group-wide hiring freeze and delayed salary increases for non-tariff employees and managers.
Earlier this month, the company reported a significant dip in 2018 pre-tax profits to €144 million from €227 million in 2017.
Leoni blamed the decline chiefly on “exceptional” costs and a “disappointing performance” at a newly launched wiring systems production plant in Merida, Mexico during the fourth quarter of 2018.
Higher raw material prices, increased spending on customer-specific research and development and inefficiency in its wiring systems division also contributed to the decline, Leoni said.
The troubled firm admitted it is already facing challenging market conditions, especially in China.
Additionally, the company noted a 'substantial' decline in demand for its auto wiring systems from car manufacturers.
Leoni expects “major pressure on earnings”, in particular in the first half of this year. It estimates profits will be hit to the tune of around €50m over the full year due to the Merida debacle.
Restructuring costs of €120m in the three year programme, half of it relates to the group’s headcount, will be incurred in the financial years 2019 and 2020.
The plan is scheduled to return €500m in structural savings per year compared with 2018, Leoni forecast.
Leoni manufactures high-temperature automotive cable & wiring based on a range materials, including thermoplastic elastomers, silicone rubber, PVC and thermoplastic polyurethanes.