Nuremberg, Germany — German automotive cables specialist Leoni AG is planning to lay off up to 2,000 workers in a bid to stabilize its business after reporting a persistently poor performance.
As part of a far reaching restructuring plan, the Nuremberg-based company also has identified subsidiaries with annual income of up to $500 million for possible divestment.
Leoni also has 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 $170 million from $246 million in 2017.
Leoni blamed the decline 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," especially during the first half of this year. It estimates profit will see a negative impact of about $56 million throughout the full year, due to the Merida performance concerns.
Restructuring costs of about $134.5 million during the three-year program — half of that relating to the group's workforce — will be incurred in the 2019 and 2020 fiscal years.
The plan is expected to return $561 million in structural savings per year compared with 2018, Leoni said.
Leoni manufactures high-temperature automotive cable and wiring based on a range materials, including thermoplastic elastomers, silicone rubber, PVC and thermoplastic polyurethanes.