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French car parts supplier Forvia aims to cut 10,000 jobs, or more than a tenth of its workforce, saying it was bracing for an influx of Chinese competition in Europe as suppliers follow automakers to the region.
The group, one of the world’s biggest producers of car seats and dashboards, said it was “immediately and drastically reducing recruitment in Europe” as part of efforts to boost margins in the region, where it has struggled with overcapacity.
The job cuts would be spread over five years, Forvia said, and would be mainly carried out by replacing departing staff and cutting back on temporary employees. It usually has an attrition rate of about 2,000 people a year, while staff stood at 75,000 at the end of last year.
The move reflects the broad fallout from the car market’s shift towards electric models, which is forcing suppliers to reinvent themselves. Suppliers have been caught between Europe’s slow recovery in vehicle production to pre-pandemic volumes and sluggish demand growth for battery-powered cars, partly as consumers are still put off by high price tags.
Europe’s carmakers are starting to see Chinese rivals with more competitively priced electric vehicles making inroads in the region. Companies including BYD are planning European factories which, in turn, could offer Chinese suppliers an entry into the market.
Forvia, which ranks itself as the world’s seventh biggest auto technology supplier, said it was clamping down on costs in Europe in part to cope with “the arrival of newcomers from Asia.”
The plan was aimed at “[reinforcing] the competitiveness and agility of our operations in Europe and achieving significantly higher profitability”, chief executive Patrick Koller said in a statement.
The group, which closed a €6.7bn takeover of its German rival Hella in 2022, said its operating margins in Europe had shrunk in recent years, from 6.6 per cent pre-Covid to 2.5 per cent in 2023.
Although nearly half of Forvia’s €27.2bn in annual sales came from Europe in 2023, the region accounted for only 22 per cent of its €1.4bn operating profit. The company aims to increase that to 35 per cent as part of its five-year plan that includes the job cuts. The group said it would also slash its reliance on external research and development.
Forvia returned to profit in 2023, with net income of €222mn, after it was hit the previous year by its exit from Russia. The industry has also struggled in recent years from semiconductor shortages, although these have now eased.
The French group said it was aiming to increase sales to between €27.5bn and €28.5bn in 2024, or by up to 4.6 per cent, down from last year’s 10.8 per cent. Margins, however, would rise, it added.
Shares in Forvia, which rose close to 6 per cent in early trading, later retreated and were trading down 5 per cent at the €15 level by early afternoon.
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