Progress-Werk Oberkirch AG: PWO accelerates restructuring of Oberkirch site

Press Release

PWO accelerates restructuring of Oberkirch site

- Oberkirch site to focus even more strongly on its core competencies

- Voluntary program successfully completed

- Further adjustment in staff number by around 120 to 150 employees resolved

Oberkirch, December 29, 2020 - As early as in the fall of 2018, PWO had already initiated comprehensive and long-term programs for efficiency enhancements and process improvements at all its locations. These were complemented by extensive adjustments in 2020 due to the effects of the corona pandemic. The consistent implementation of these measures made a significant contribution to steering the Group well and safely through the corona pandemic of 2020. Thanks to continued solid cash flow, debt was reduced by a further EUR 20 million in the first three quarters of 2020, despite the fact that the global economy has been in the greatest recession of the post-war period.

Whereas the international sites have already returned to achieving good results during the recent only moderate market recovery, this was not the case at the Oberkirch site. Due to a supplementary collective agreement, which includes job security, compulsory redundancies were not possible in Oberkirch until December 31, 2020.

To make the necessary personnel adjustments, we initially launched a voluntary redundancy program, which has now been successfully completed. As part of this program, around 200 employees will leave the site; the vast majority by the end of 2020. Around half of these are permanent employees and the other half temporary employees.

At the same time, the Oberkirch location must place an even stronger focus on its core competencies of maximum innovative strength in the development of custom solutions for the mobility of tomorrow and the design of robust and efficient processes for the production of complex components and modules in large series.

Nevertheless, staff costs in Germany, as an industrial location, have risen sharply on a continuous basis in recent years, resulting in a strong burden on some current series productions due to high labor costs. These higher costs can no longer be sufficiently offset by productivity measures. Furthermore, our customers have relocated an ever-growing portion of their production to Eastern Europe, resulting in a change in the locations to which PWO delivers. We must therefore also consider relocating production to Eastern Europe in order to avoid losing existing series productions. We are already extremely competitive in that region through our fast-growing plant in the Czech Republic. For this reason, at today's meeting, the Executive Board decided to further adjust the capacities of the Oberkirch site to bring it in line with the expected future level of capacity utilization.

This adjustment will include, among others, a further reduction in staff by 120 to 150 employees, mainly from the permanent workforce in the production area. The Executive Board is striving for the most socially responsible implementation of this plan as possible in consultation with the employee representatives and will begin negotiating this shortly. The expected costs for this reduction in staff numbers, which will result in an additional burden on EBIT in the 2020 fiscal year, will presumably be in the upper single-digit-million euro range. The anticipated savings of EUR 9 million is expected to fully materialize in the 2022 fiscal year for the first time. The preliminary figures for the 2020 fiscal year are not yet available and will be published as scheduled on February 24, 2021.

CEO Carlo Lazzarini explains: "We are a globally active group. Cost pressure in the automotive supply industry is forcing us to place each order in the plant that is most competitive for the specific order. Unfortunately, the competitiveness of Germany as an industrial location has declined sharply in recent years, which has led to a disproportionate increase in order volumes at our plant in Czechia. As a result, we are forced to adjust capacities in Oberkirch to correspond to the declining revenue volumes for that location.

At the same time, however, we intend to strengthen the Oberkirch site and transform it into a high-tech center. To do this, we are counting on the opportunities presented by the fourth industrial revolution, which offers unprecedented possibilities."

Oberkirch will be developed into a best-in-class location for highly efficient, modern, data-driven manufacturing. The goal is to increase competitiveness by continuously reducing the use of resources while, at the same time, further improving process efficiency and manufacturing quality, which is ultimately the prerequisite for future growth. To this end, we will rely on big data analytics and machine learning.

In 2020, the Company conducted a pilot project in which measurement data collection and analysis and signal processing and their automation were successfully implemented. The solution used features pronounced connectivity and was seamlessly vertically integrated into the PWO's IT system landscape with the Manufacturing Execution System (MES). While the software is a commercially available solution, the decisive know-how for the analysis of the manufacturing data and the development of the digital twin lies with PWO. Other important process and customer requirements, such as traceability, could also be integrated into the MES.

In 2021, the system architecture will successively be rolled out. A dedicated team will ensure that the newly generated data and analyses are used across as many disciplines as possible - for example, in production, quality assurance and maintenance.

Progress-Werk Oberkirch AG

The Executive Board

Company Profile PWO
PWO is a partner to the global automotive industry for the development and production of advanced metal components and subsystems using lightweight construction. The Group has developed a unique knowledge in the forming and joining of metals over the course of its more than 100-year history since it was founded in 1919. With our expertise in cost-efficient lightweight construction, we contribute to environmentally friendly driving and greater distances.

All of the Group's more than 1,000 products contribute to automotive comfort and safety. More than 90 percent of revenue is independent of the vehicle's type of drivetrain. Approximately 3,000 employees on three continents at five production sites and four assembly plants ensure the highest level of delivery reliability and quality.