• Contact
• Locations
• German

Eliminating a source of losses at Schenck

10/07/2003

• Closing of pre-manufacturing operation in Darmstadt, Germany
• About 350 jobs to be cut at Schenck Fertigungs & Service GmbH
• Dürr expects positive pretax result in 2003 despite high one-time charges

Carl Schenck AG, a member of the Dürr Technology Group, is closing its loss-making pre-manufacturing operation in Darmstadt. The measure will entail one-time charges of about EUR 18 million. The Dürr Group nevertheless expects a positive pretax result for the year 2003.

About 350 jobs will be cut by the end of 2004 at Darmstadt-based Schenck Fertigungs & Service GmbH, which supplies parts and components to other divisions of the Schenck Group and to a small extent to external customers. The company's management and works council will immediately begin talks about how to implement the job cuts in a socially fair and proper manner. The measure will not affect the roughly 220 persons working for other Schenck companies in equipment assembly in Darmstadt. Altogether, about 1,800 persons are employed at the Darmstadt facility.

The reason for closing Schenck's pre-manufacturing operation, which has been making losses for years, is lack of competitiveness due to structural cost disadvantages arising, for example, from insufficient capacity utilization and high personnel costs. Against that background, there is no realistic prospect of a return to the profit zone, according to Ralf Dieter, who has been CEO of Carl Schenck AG since May. He says, "We have considered various models, but the production and cost structures at the Darmstadt facility present no point of departure for an earnings turnaround. With the closing of the pre-manufacturing operation, we are eliminating a long-standing source of losses and opening up access to low-cost procurement markets. That will make cost advantages possible by means of which we will boost the competitiveness of our divisions."

Through the use of low-cost suppliers, for example in Eastern Europe, the one-time charges required for closing the pre-manufacturing operation will also be quickly amortized. In the current year, however, the one-time charges will entail a significantly negative pretax result of the Schenck Group.

With the one-time charges for closing the Schenck pre-manufacturing operation left out of account, the Dürr Group's goal is to stabilize its earnings before taxes in 2003 at the preceding year's level (EUR 22.6 million). Even after deduction of all one-time charges, Dürr still expects a positive pretax result in 2003. Systems business, which has developed positively overall in the course of the year, is primarily responsible for this, while development of product business has been subdued. "For 2004, we expect a significant earnings increase - also with a view to the structural adjustments in the Schenck pre-manufacturing operation. With the earnings enhancement program SPRINT SQUARE, we have set the stage for more profitability in the entire Group," according to Stephan Rojahn, CEO of Dürr AG.

The Dürr Technology Group is one of the world's leading suppliers of production systems and manufacturing support services for automobile manufacturers and their suppliers. With a workforce of about 13,000 employees, it achieved sales of nearly EUR 2.1 billion and operating income (EBITDA) of EUR 89.1 million in 2002.