Expectations of a prolonged financial impact from the pandemic are continuing to drive a broad range of companies to retrench to prepare for the next few years. Among the latest companies to announce efforts to align their operations, MAN Energy Solutions, a leading manufacturer of marine power, and shipbuilder the Damen Shipyards Group each confirmed upcoming changes to their operations.
MAN announced that its executive board and representatives of its employees agreed to terms for the company’s restructuring, which will include job cuts, reductions in personnel costs, and the relocation of certain operations to foreign production centers. Just two weeks ago, the board had said these significant steps were necessary to ensure the future viability of the company as they prepared “for a prolonged period of stagnant sales as a result of the COVID-19 pandemic.”
The company will reduce the size of its operations, realign and combine locations resulting in the loss of 2,600 jobs, including approximately 1,650 in Germany and 950 in Europe and other countries. MAN is targeting 450 million euros in cost cuts and its unions have agreed to negotiations to achieve 40 million euros annually in personnel costs between 2021 and 2023.
As part of these agreements, MAN’s parent company the Volkswagen Group announced if these steps can be finalized before the end of 2020 it will suspend its plans to sell MAN until at least the end of 2024. Further, if MAN achieves a profitability target of nine percent EBIT on a consistent basis Volkswagen agreed to retain the company until at least the end of 2026.
“We need to prepare ourselves for a market environment that will remain difficult for a long period of time,” said Dr. Uwe Lauber, CEO of MAN Energy Solutions. “Some of the company’s key areas of business, such as the cruise ship business, have been directly affected by the economic impact of the COVID-19 pandemic and we do not expect to see a recovery to pre-crisis levels until 2023. The program is designed to address these negative market influences and make lasting improvements to MAN Energy Solutions’ ability to respond to market fluctuations.”
Separately, the Damen Shipyard Group headquartered in the Netherlands is also taking steps to realign its operation with the current market opportunities. According to reports in the Dutch media, more than 1,000 of the company’s approximately 13,000 employees will be impacted. There may also be a reduction in hours for some employees at the shipyards in Ukraine and Poland.
While Damen reports strong business in many areas it will be cutting back in the operations that work on ferries as well as vessels for the offshore and dredging sectors. These are areas of the shipbuilding business that have been especially challenged in the past few years. Compounding this, Damen points to the impact of COVID-19 and low oil prices which are hitting sectors such as offshore and cruise ships.
The majority of the job cuts will reportedly come at Damen’s operations in Romania. A reported 173 jobs in the Netherlands will be impacted, although the company says it is exploring reassigning people to other divisions. Damen reports that some divisions, such as the work on its contacts for the Belgium, Dutch and German navies, are busy and possibly could employ some of the Dutch employees that will be impacted by the changes.
Like MAN, Damen believes that these changes are necessary to maintain the strength of the operation and align for the opportunities in sectors of the shipbuilding and repair market.
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