‘Peak Car’ May Be Past, German CEO Says
‘Peak Car’ May Be Past, German CEO Says
(Bloomberg) -- Robert Bosch GmbH expects global car-production to stagnate in coming years after the privately owned engineer firm’s 2019 results showed waning demand in major markets, including China, and the burden of higher investment in new technology.
The world’s largest car-parts maker is expanding its sprawling electronics and software operations to try to avoid another drop in earnings this year, Bosch said late Tuesday at a press briefing in Stuttgart.
“It could well be that we passed the peak in global automotive production,” Chief Executive Officer Volkmar Denner told reporters. “We are assuming that this low level will remain constant in coming years and do not anticipate any increase” before 2025, he added.
Bosch has embarked on a sweeping overhaul to adapt to the shift toward new technology from the traditional combustion engine that’s been the bedrock of the company for years. Denner has trimmed operations and sold assets including a packaging-systems division to focus on areas like software and connected devices.
The revamp has put a strain on labor relations. Bosch’s top labor representative slammed management two months ago for poor transparency about planned cutbacks as peers including Continental AG mapped out painful restructuring measures. Hartwig Geisel said Bosch intends to slash another 3,300 German jobs on top of 2,500 positions already eliminated, and cull 20% of management.
The company on Tuesday confirmed cutbacks in production are planned, without providing details. The industry change will have a “significant impact on employment,” Denner said. “We need 10 associates to manufacture a diesel injection system, three for a gasoline system, and one for an electric motor,” he said.
Bosch’s earnings before interest and tax almost halved to “about 3 billion euros” ($3.3 billion), according to preliminary figures for 2019. The profit margin eroded to “just under 4%” return on sales from 7% in the previous year. The numbers for 2018 are not adjusted for an accounting change related to pension obligations. Revenue was flat at 77.9 billion euros. The privately-held company, which employs 403,000 people across 60 countries, will publish final results later in the year.
Bosch plans to spend more than 1 billion euros this year alone on electric-car technology, automated driving and connected-vehicle systems, and is also stepping up efforts in areas like fuel-cell technology, artificial intelligence and self-driving vehicles.
Denner welcomed Tesla Inc.’s plan to build a factory in Germany. The project “offers new business potential” for Bosch, he said. Bosch already supplies Tesla with vehicle components and factory machinery.
To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net
To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Andrew Noël
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