Schaeffler to cut thousands of jobs, hit by weak auto and industrial units
Updates shares, adds Michelin in paragraph 9, industrial business in paragraphs 11-15
By Andrey Sychev
Nov 5 (Reuters) -German machine and car parts maker Schaeffler SHA0.DE on Tuesday said it planned to lay off 4,700 people in Europe after its operating profit almost halved in the third quarter, highlighting challenges in the European automotive industry.
Its shares fell 4.7% by 1120 GMT and are down more than 20% so far this year.
"Overall, a weak quarter and we expect further pressure on cash flow and balance sheet leverage going forward," J.P.Morgan analysts said in a note to clients.
The European auto sector is facing multiple hurdles ranging from high production costs and managing the shift to electric vehicles to falling demand and rising competition from China.
Schaeffler said Germany would see the biggest staff reduction, with plans to lay off around 2,800 people at ten sites.
The rest of the job cuts will span across five plants Europe, including two site closures, Schaeffler added without naming the locations.
About 1,000 jobs will be reduced through displacements, bringing the net layoffs to 3,700 people, or 3.1% of Schaeffler's total headcount that has increased after its merger with electric powertrain specialist Vitesco.
The German ball-bearings specialist expects to save around 290 million euros ($315.4 million) per year by the end of 2029 through the efficiency plan, which will cost around 580 million euros.
French tyre maker Michelin MICP.PA also announced job cuts and plant closures on Tuesday due to weak auto demand and cheap Asian competition. It plans to lay off 1,200 people and shut two plants in France by 2026.
WEAK INDUSTRIAL UNIT
Apart from the tepid automotive market, Schaeffler was hit by falling sales in its industrial business, which makes components for wind turbines and industrial robots, in the third quarter.
It saw weak demand and cheaper competition in China's wind energy market in particular.
As a result of weak demand for factory robots, Schaeffler said it would put its industrial robotics site Melior Motion up for sale.
It will relocate operations of another industrial automation site Ewellix to its plant in Schweinfurt, and close Ewellix's Taiwan factory.
Schaeffler had bought the Melior Motion and Ewellix sites only two years earlier.
($1 = 0.9195 euros)
Reporting by Andrey Sychev in Gdansk; editing by Milla Nissi
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