MAN Energy Solutions Cutting Jobs, Costs To Ensure ‘Viability’

22 July 2020

MAN Energy Solutions plans to cut €450 million in costs—including nearly 4000 jobs—as it works to “ensure the future viability of the company.”

Extensive cost-cutting and restructuring measures are the necessary next steps on the way to the company’s transformation into a solutions provider for sustainable energy supply, according to Dr. Uwe Lauber, CEO of MAN Energy Solutions. In addition, the company is preparing for a prolonged period of stagnant sales as a result of the COVID-19 pandemic.

‘Difficult for a long period of time’

“We need to prepare ourselves for a market environment that will remain difficult for a long period of time.” –Dr. Uwe Lauber

“We need to prepare ourselves for a market environment that will remain difficult for a long period of time,” Lauber said. “Some of the company’s key areas of business, such as the cruise ship business, have been directly affected by the economic impact of the COVID-19 pandemic and we do not expect to see a recovery to pre-crisis levels until 2023. The program is designed to address these negative market influences and make lasting improvements to MAN Energy Solutions’ ability to respond to market fluctuations.”

The company, which makes engines and turbomachinery for marine and stationary applications, is part of the Volkswagen Group. Several media organizations have reported Volkswagen was trying to sell the unit as it tries to narrow its portfolio of businesses. Cummins, INNIO, Mitsubishi Heavy Industries and Kohler have been mentioned as potential suitors. But the sales rumors were swirling before the COVID-19 pandemic.

Along with cutting costs, the company said it plans to increase its operational flexibility, among other objectives. The aim is to achieve an operating margin of 9% and improve the company’s cash and liquidity position by 2023, even taking the global economic impact of COVID-19 into account.

Adapting and optimizing the production network with a focus on core value creation and greater flexibility is a key component of the program. In this context, the company intends to halt steam turbine production in Hamburg, Germany and is also considering closing the production facility in Berlin and relocating production currently conducted there to another site.

The company will also focus on reducing the cost of materials and equipment, optimizing the service network, streamlining the product range, cutting costs within the group functions, and focusing research and development on next-generation technologies.

“We have already begun to combat negative market influences in recent years and, as a result of the measures we have introduced, we have achieved and even exceeded our revenue targets,” Lauber said. “In terms of earnings, however, we haven’t yet reached our goal. Therefore, increasing our profitability and improving our competitive ability are key to continue successfully implementing our strategy for the future.”

MAN Energy Solutions announced its new strategy in 2018, which describes the company’s transformation from a component supplier to provider of sustainable energy solutions. These new solutions are expected to account for 50% of its business by 2030.

Focus on fast implementation

The executive board expects that the implementation of the program will result in the elimination of up to 3000 positions in Germany and 950 abroad. This reduction in the workforce will be carried out in a socially responsible manner as far as possible, the company said, although compulsory redundancies cannot be completely ruled out.

The executive board has initiated talks with the works council regarding the program and the associated effects on employees.

“In the light of the effects the Covid-19 pandemic has on our target markets, we must act fast”, said Martin Rosik, Board Member responsible for Human Resources at MAN Energy Solutions. “The company and the employee representatives are therefore negotiating under great pressure. Our focus is on structural improvement and on reaching the cost down target. We will negotiate the feasible options to get there with the employee representatives in a very timely manner.”

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