Friday, automotive components and defense equipment manufacturer Rheinmetall AG (RNMBF.PK), announced a series of stringent measures that included a cut in its workforce by 250 positions in addition to the 500 temporary and limited-term employees removed over the past two months, and an extension to its holiday season plant shutdowns. The company also plans to come up with a €50 million cost reduction program, to cope with the worldwide economic slowdown.
The Düsseldorf, Germany-based company said that it would accelerate its pre-approved restructuring program, resulting in the termination of another 250 positions by early 2010. Over the past two months, the company had already bid adieu to 500 temporary and limited-term employees.
Falling in line with the decision of other German automotive businesses, Rheinmetall, which has been rigorously streamlining its corporate portfolio since 2000, plans to extend its holiday season plant shutdowns by up to four weeks to allow flexi time accounts and vacation entitlements to be worked off. The automotive sector of the company, parented by Kolbenschmidt Pierburg AG, aims at erasing capital expenditures significantly by 2009 thereby falling well short of total amortization and depreciation.
Further, to secure its profit margins and improve earnings, Rheinmetall's Automotive sector is currently working on a program designed to shrink its fixed costs by another €50 million.
Looking forward, Rheinmetall Automotive foresees fiscal 2008 sales of about €2.1 billion including €0.4 billion from the stable non-OEM business, especially the company's after-market sector which is finding itself fueled by the industry crisis. The company expects approximately €1.7 billion to be generated by standard-production business transacted with car and truck OEMs.
Brushing aside the pessimistic views of experts, Rheinmetall's Automotive sector said that its earnings will still remain above breakeven even if auto production in its key markets, the Europe and the United States, dips by another 15%.
Rheinmetall, which recorded an annual sales of Euro 4.0 billion in fiscal 2007, expects notable growth in its defense sector, which according to present forecasts will contribute just fewer than three-quarters to the group's EBIT for 2008.
Klaus Eberhardt, Rheinmetall AG's CEO said, "We intend to and will emerge stronger from this crisis. Should it prove necessary to part with low-margin products or individual areas of business, we will press ahead and do so. And if it proves right for us to change the international plant and location structures faster and more sustainably than so far envisaged, we will do so, too."
Rheinmetall AG is currently trading at $24.60 OTC.
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