Bosch braces itself for economic downturn with tough austerity measures

Bosch braces itself for economic downturn with tough austerity measures

Bosch ceo volkmar denner wants to prepare the group for a possible slump in sales by adopting a tough cost-cutting course. "Strict cost discipline and consistent implementation are important," said denner at the presentation of the financial statements on thursday. Especially in europe, bosch’s most important market, the situation remains uncertain.

Just a few weeks ago, the technology group announced that it was pulling out of its solar division – 3,000 jobs at stake. Discussions are currently underway with potential investors. But the solar division is only the beginning. Budgets are capped throughout the group, and acquisitions and investments are limited. Bosch had already invested less in 2012 than in the previous year.

If necessary, jobs should also be cut by social contract, denner announced. How many of the 305,900 jobs worldwide could be eliminated, the bosch boss is reluctant to say. No across-the-board job cuts are planned; reductions are planned individually at each location.

In germany, denner has already negotiated rules with the works council for a more flexible reduction in working hours and income in the event of a noticeable drop in orders. This should help to cushion sales downturns of up to 20 percent.

But despite these cuts, bosch will miss its long-term target of an operating profit margin – the ratio of profit to sales – of eight percent again this year.

Due to high write-downs in the solar division, operating profit in 2012 had slumped by almost half to 1.3 billion euros. Denner also expects burdens this year. The situation in the solar industry had not improved. As long as the company continues to operate, this will cause further costs.

2013 will not be easy according to denner. The global business climate had brightened, said the manager. But bosch’s strongest market in terms of sales is its home continent, which has been shaken by the euro crisis, with a share of 57 percent. In addition, bosch is having to cope with the cutback in global vehicle production. Only in the emerging markets does the group expect robust growth.

After a slight drop in sales at the beginning of the year, the group expects an overall increase of two to four percent in 2013. Last year, group sales rose by 1.9 percent to 52.5 billion euros.

Bosch is still a long way from its long-term target of eight percent growth. The technology giant is pinning its hopes on new business areas such as the networking of cars, electromobility, and more energy-efficient construction technology.

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