German car woes worsen with parts maker Schaeffler cutting 4,400 jobs

Schaeffler AG will cut 4,400 jobs and close or sell several German plants as the automotive supplier joins peers in reeling from the coronavirus pandemic.

Most of the reductions will take place at a dozen facilities in Germany and two sites elsewhere in Europe, the maker of engine, transmission and chassis components said in a statement Wednesday. Factories in Wuppertal, Eltmann and Clasthal-Zellerfeld will be shut or shopped to other companies, with the cuts expected to save Schaeffler as much as 300 million euros ($355 million) a year. The company will take a one-time charge of 700 million euros for the restructuring.

“We’re in a situation where the really bad effects of the pandemic are easing, but the levels we saw in 2019, we’re not going to reach anytime soon," Chief Executive Officer Klaus Rosenfeld said in an interview, adding that a recovery might take until 2024. “It’s not going to be v-shaped."

Schaeffler shares briefly reversed a decline of as much as 1.1% in Frankfurt trading before closing the day little changed. The stock has plunged 41% this year.

Parts makers including Schaeffler and Continental AG, which are controlled by the same billionaire family, have been dealing with massive declines in demand after Covid-19 forced the shutdown of production lines earlier this year. Although Chancellor Angela Merkel has resisted calls for more state aid for the sector, German government and industry leaders are holding talks on ways to support companies, with a particular focus on suppliers.

Schaeffler’s announcement follows a plan that Continental laid out last week to slash its workforce by as much as 13%, affecting as many as 30,000 jobs. The two companies’ top shareholders Georg Schaeffler and his mother Maria Elisabeth Schaeffler-Thumann have seen among the biggest declines in wealth among Europe’s richest families this year, according to the Bloomberg Billionaires Index.

Leaders of Germany’s largest labor union, IG Metall, called plans to close the Wuppertal site unacceptable. “We will not give up the plant without a fight," Clarissa Bader, a managing director for the labor group, said in a statement.

Schaeffler announced plans last month to to bolster its finances by raising as much as 1.3 billion euros from issuing new shares. It had already extended a voluntary severance program to 1,900 positions in Europe, and Rosenfeld told Bloomberg News last month the company was considering more cuts depending on how economies recovered.

Revenue fell by more than a fifth in the first six months of the year, though Schaeffler still managed to generate a small profit.