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August 23, 2012

Gone with the Wind: Bracing for 2013, Vestas Reveals More Layoffs, Reductions



With a view toward sustaining “acceptable damages” during tougher economic times for the wind industry in 2013, turbine producer Vestas is intensifying its cost-savings and reducing its workforce.

Word of the cutbacks came even as the Aarhus, Denmark-based firm substantiated its position as the world’s premier producer of wind turbines—with more than 51 gigawatts (GW) of cumulative installed capacity worldwide— and forecasted revenue from servicing windmills to climb 21 percent during 2012 to €850 million ($1 billion).

The precautionary moves will increase the expected fixed-cost reduction initially announced by Vestas Wind Systems A/S, from €150 million (US$188 million) to €250 million (US$314 million). The company noted that this change “is based on a forecasted shipment of around 5GW in 2013; which will result in a significantly lower activity level in 2013, to which the company will naturally have to adapt.”

What’s more, Vestas had previously announced that its workforce would be reduced by 2,335 by the end of 2012. These staff reductions are ahead of schedule—and will be completed by the end of September 2012. The company then plans further cutbacks by year-end, bringing the bringing the total number of employees down to around 19,000, from 21,767 employees worldwide at mid-year 2012.

 CEO Ditlev Engel commented, “The further reduction in the workforce is part of the continued cost-saving plans, which Vestas has been working on since November 2011. It is always unfortunate to have to say goodbye to good colleagues in Vestas, but we have said before that 2012 will be tough and 2013 will be even tougher for Vestas, and in order to reach our target of making 2013 profitable, it is unfortunately a necessity.”

 Global SVP of People & Culture, Roald Steen Jakobsen said that the further reduction in the workforce demonstrates Vestas is in full control of the cost reduction plan. “Vestas is currently three months ahead of schedule in regard to employee reductions in the organization and being able to intensify this plan in order to increase our cost-savings target proves that Vestas is in full control and able to take the necessary action to secure profitability also in 2013,” he remarked.

“In order to determine which job functions will be affected by the reduction, Vestas is prioritizing to maintain functions which are directly revenue or business generating,” added Jakobsen.

The workforce reductions will primarily affect salaried employees and it is expected that around 55 percent of the reductions will be implemented in Europe, the Middle East and Africa; around 25 percent, in Asia Pacific; and about 20 percent in the Americas.

According to Bloomberg (News - Alert) Businessweek, Vestas also will boost its maintenance and spare parts business to salvage flagging profit from manufacturing. “In 96 percent of the cases when we announce new orders it comes with a service contract, so that’s going to be a very important part of our business,” Engel said in a phone interview yesterday with the publication.

According to Bloomberg, intensified competition from Chinese companies gutted turbine prices and forced Vestas to increase its reliance on maintenance.

In addition, the uncertain future of the PTC (production tax credit) in the United States is causing worry for the entire wind industry.

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Edited by Brooke Neuman

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