Adient restructures after $149M quarterly net loss

Automotive seating supplier Adient said it will move forward with a flatter organizational structure and a regional focus following its fiscal second-quarter net loss of $149 million.

The company disclosed in a regulatory filing May 7 that it realigned its organizational structure to manage its business primarily on a geographic basis, resulting in a change to reportable segments. These new segments include the Americas, which includes North and South America; Europe, Middle East and Africa; and Asia Pacific and China.

Adient's new CEO, Douglas Del Grosso, told investors that Adient's approach includes putting in place general managers who have complete autonomy and responsibility of their assigned region. The company also essentially replaced the front-line operating team except for Asia, which continues to perform well, he said.

In addition, Adient increased its bench strength with several external hires to accelerate the turnaround, Del Grosso said.

"Speed and focus are the primary reasons for making the change," he said. "We implemented the new organization to drive change, to do it quickly, and within specific areas — namely commercial discipline and operational performance."

Adient's new organizational direction drove reductions in central departmental costs, as well as reductions in informational technology spending, he said. Adient's next steps call for integrating various operating groups into areas such as seating, seat structures and engineering.

Del Grosso said he expects the company to achieve about $90 million in annual savings once the organization plan is fully implemented.

It was not immediately clear how many jobs Adient has targeted for cuts in the restructuring. As of its last disclosure, on Sept. 30, the company employed 85,000 people — 70,000 hourly and 15,000 salaried. Total employment was about the same a year before, but the company listed 68,000 hourly and 17,000 salaried workers.

Del Grosso became Adient's CEO in October, replacing Fritz Henderson, who became nonexecutive chairman. He previously led a turnaround at chassis supplier Chassix. Del Grosso also spent 23 years at seating supplier Lear Corp., where he rose to COO before departing in 2007.

The company's $149 million net loss was a slight improvement from the $168 million net loss it reported for the same period last year.

The company recorded restructuring costs of $113 million during the fiscal second quarter, down from $315 million from the same period last year.

Revenue fell 8 percent to $4.23 billion. Adient said the negative impact of currency movements between the two periods, primarily the euro, accounted for just over half of the decline. Additionally, lower volume mix in Europe and Asia dinged year-over-year results by about $168 million, the company said.

Gross profit fell 30 percent to $197 million.

Second-quarter sales for the Americas segment remained relatively flat, at $1.92 billion. However, sales for the Europe, Middle East and Africa segment decreased 14 percent to $1.78 billion, while Asia's sales fell 19 percent to $599 million.

Adient's shares fell 9.8 percent to close Tuesday at $21.97, with markets down across the board.

Adient said the execution of its turnaround strategy will take about four years. The process calls for various financial actions, efficiencies and cuts.

The company expects its adjusted earnings and margins to improve in the second half of the 2019 fiscal year, as the restructuring plans gain traction.

The supplier's 2019 full-year revenue and capital expenditures targets remain unchanged.

Adient ranks No. 11 on Automotive News' list of the top 100 global automotive parts suppliers, with $16.2 billion in parts sales to automakers in 2017.