Marine engine manufacturing giant MAN Energy Solutions is launching an extensive cost-cutting and restructuring program that will result in the layoff of almost 4,000 people, the company said.
The program is being rolled out as MAN Energy Solutions readies for a prolonged period of stagnant sales as a result of the COVID-19 pandemic.
German propulsion and machinery giant wants to cut its costs by €450 million and increase its operational flexibility, while aiming 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.
As part of the cost-cutting measures, the company intends to halt steam turbine production in Hamburg and is also considering closing the production facility in Berlin and relocating production currently conducted there to another site.
The program 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 need to prepare ourselves for a market environment that will remain difficult for a long period of time,” said Uwe Lauber, CEO of MAN Energy Solutions.
“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 program is in line with MAN Energy Solutions’ strategy launched in 2018, which targets the company’s transformation from a component supplier to a provider of sustainable energy solutions. These new solutions are expected to account for 50% of its business by 2030.
“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. 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,” Lauber added.
The implementation of the program will result in the elimination of up to 3,000 positions in Germany and 950 abroad.
MAN said that the reduction in the workforce will be carried out in a socially responsible manner as far as possible, although compulsory redundancies could not be completely ruled out.
The executive board has initiated talks with the works council regarding the program and the associated effects on employees.