Yet another traditional Tier 1 supplier has announced layoffs!
Forvia, the eighth largest globally and one of the top three suppliers in Europe, has just officially declared a layoff of ten thousand employees.
This marks the second supplier, following ZF, to implement layoffs on such a massive scale.
The reasons for the layoffs are similar to those of previous Tier 1 announcements:
To reduce costs in response to the challenges brought by the transformation of the automotive industry.
Forvia Announces Layoff of Ten Thousand Employees
Forvia recently decided to lay off ten thousand employees in Europe.
With approximately 75,500 employees in Europe, this layoff accounts for 13% of the workforce.
However, it's not about simply letting employees go, but rather achieving it through reducing hiring, natural attrition, and minimizing contractual positions over the next five years.
The CFO of Forvia stated that the group loses between 2000-2500 people annually and will only recruit positions deemed absolutely necessary in the future, while also reducing reliance on temporary workers.
The most direct reason for layoffs is to reduce costs. Forvia's plan is to start saving €500 million (¥3.883 billion) annually from 2028.
At the same time, the group also aims to enhance profitability in the European market.
Currently, Forvia is grappling with the issue of overcapacity, particularly in seating and interior components, which is linked to the decline in European automotive sales.
So, why the specific focus on increasing profitability in the European market?
It's because there's a need to reduce reliance on the Chinese market and better contend with competition from Chinese suppliers and automakers.
The Director of Influence at Forvia stated that nowadays, Chinese companies tend to be more competitive in smaller niche markets.
This situation has compelled Forvia to opt for layoffs to reduce costs and maintain competitiveness.
Who is Forvia?
Some may be unfamiliar with the name Forvia, but it's actually a conglomerate formed by the merger of two giants, Faurecia and HELLA. In 2022, Faurecia completed the acquisition of controlling shares in HELLA, making it a formidable partnership.
After the group merger, six business units and 24 product groups were formed, including:
Among them, the Seating, Interior, and Green Mobility business units originate from Forvia, while the Lighting business unit comes from Hella, which were the core businesses of the two companies before the merger.
The overlapping automotive electronics-related businesses of Forvia and Hella merged to form the Automotive Electronics business unit, while Hella's acquisition business formed the Lifecycle Solutions business unit.
Through technological complementarity and merger, the Forvia Group immediately became a global giant supplier with over 300 industrial bases, 77 R&D centers, and 150,000 employees in more than 40 countries worldwide.
Most of the group's cooperative customers are familiar faces, including Volkswagen, Stellantis, Ford, Renault-Nissan-Mitsubishi Alliance, Mercedes-Benz, General Motors, and others, including Chinese automakers, accounting for 8% of sales, ranking in the top five.
Percentage of sales for each customer in 2023:
Forvia even states that globally, for every two cars sold, one of them is equipped with components provided by Forvia.
Furthermore, since the merger, the group's business performance has been thriving.
Total sales in 2023 amounted to 27.248 billion euros (approximately 2,116.11 billion CNY), an increase of 10.9%; operating profit was 1.439 billion euros (approximately 111.75 billion CNY), a growth of 35.6%.
The most important thing is that the net profit has turned positive, reaching 2.22 billion CNY (approximately 17.24 billion CNY), an increase of 604 million euros (approximately 46.91 billion CNY) compared to 2022.
At first glance, it seems like Forvia Group is in a strong position and has no worries, but they choose to stay vigilant.
The deeper reason, as the group itself has pointed out, lies in its significant reliance on the Asian market, especially the Chinese market.
For example, the sales revenue in the Asian market amounts to 7.39 billion euros (approximately 573.91 billion CNY), ranking second among all markets, only behind the European market.
Additionally, the second-ranked Asian market contributed the highest operating profit, totaling 815 million euros (approximately 6.329 billion CNY), accounting for over 56%, which is 191 million euros (approximately 1.483 billion CNY) more than the combined total of the European and American markets.
Forvia also revealed that the operating profit margin in the Asian market reached 11% in 2023, with China's market also in the double digits.
It can be said that Forvia's ability to make money depends on the performance of the Asian market, with the Chinese market being the most crucial within Asia.
Meanwhile, the European domestic market is showing signs of decline. In December 2023, new car sales in the European Union dropped by 3.3%, marking the first decline in 16 months.
Furthermore, Chinese automakers are eyeing the European market eagerly, with exports beginning to show results.
In the first seven months of 2023, the number of vehicles exported from China to Europe increased by 361% compared to 2021. Models such as the BYD Atto 3 (Yuan PLUS) and the MG4 from MG Motor are among the best-selling models in Europe.
To cope with the declining European market and ensure competitiveness in the ever-changing automotive industry, downsizing and cost reduction have become the go-to strategies.
Prior to Forvia's announcement of layoffs, three out of the top ten global Tier 1 companies had already announced significant layoffs to adapt to the transformation of the automotive market. These companies include Bosch, Continental, and ZF.
△ Top 10 Global Suppliers in 2023
The reshaping of the automotive industry by the new energy market is also starting to reshape the supply chain.
What can be certain is that this transformation is only just beginning.
