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Rheinmetall Mulls Options for Auto Unit, Citing Gloomy Outlook

Rheinmetall Mulls Options for Auto Unit, Citing Gloomy Outlook

Rheinmetall AG, the more the 130-year-old German defense manufacturer, is exploring strategic options for its automotive division because it may take years for the sector to recover from the coronavirus pandemic.

The Dusseldorf-based company will take a non-cash charge of 300 million euros ($353 million) in the second quarter related to the impairment of its automotive business, according to a statement Monday. The writedown is almost entirely related to its hard-parts division, the maker of pistons, bearings and pumps said.

Experts “anticipate significantly lower growth for passenger cars and light commercial vehicles even over the medium term,” Rheinmetall said. Global production probably will drop more than 20% this year and may not return to pre-crisis levels before 2024, the company added.

Rheinmetall rose 4.8% in Frankfurt, to 84.46 euros a share, as of 5:20 p.m. local time.

Rheinmetall’s automotive sales plunged 53% in the quarter, and the division recorded a preliminary operating loss of 52 million euros. That contrasts with a 21% jump in sales for its defense business, which posted a 93 million-euro operating profit.

©2020 Bloomberg L.P.