Machinery maker KraussMaffei Technologies GmbH is in talks with workers’ representatives in Europe over “several hundred” layoffs for the German company, although it says those job cuts will not impact its North American subsidiary.
The war in Ukraine, supply chain disruptions and transportation bottlenecks contributed to a loss of some $230 million last year at KraussMaffei, including a goodwill impairment of at least $108.6 million.
Planned projects, such as moving the company headquarters and manufacturing plant in Allach, Germany, to a new facility about 15 miles away in Parsdorf, also are taking a financial toll on the builder of machinery for injection molding, extrusion, reaction process and additive manufacturing.
Since 2018, KraussMaffei has invested more than $100 million in four new locations as part of a modernization strategy. The other three sites are Jiaxing, China, and Einbeck and Laatzen, Germany.
During the same period, the COVID-19 pandemic struck, cities locked down, the supply chain kinked, Russia invaded Ukraine, inflation hit globally and interest rates spiked.
Now company officials say tough steps need to be taken to shed expenses, including the layoffs of “several hundred” employees whose jobs are not related to manufacturing and assembly.
Details, including the number of job cuts and the affected sites, will be negotiated with the Works Council during the next few weeks, a company spokesman said in an email.
The layoffs won’t extend to subsidiary Krauss-Maffei Corp. (KMC) in Florence, Ky., the spokesman also said. The North American group offers sales, service and a 30,000-square-foot innovation center that can handle short production runs to help customers in the medical, logistics and packaging markets on the injection molding side of the business and recycling and profile applications on the extrusion side.
The overall company goal is simply to make money again selling machines.
“In the light of internal and external challenges, taking actions to enable us to be more competitive is important to restore profitability at KraussMaffei,” CEO Li Yong said in a Feb. 28 news release. “Therefore, various measures have been initiated to improve operational performance, to increase work efficiency and to reduce the cost base, including job reductions. We are confident that KraussMaffei will get back on the road to success.”
A profit warning published Jan. 30 on the Shanghai Stock Exchange says KraussMaffei lost between $230 million (RMB 1.58 billion) and $275 million (RMB 1.89 billion), according to preliminary estimates for the audited 2022 annual report.
The figures include a goodwill impairment of at least $108.6 million.
While the parent company, state-owned China National Chemical Corp., saw sales increase overall, its “important subsidiary,” KraussMaffei Group Ltd., experienced increased losses, the profit warning stated.
KraussMaffei also ended 2021, 2020 and 2019 in the red.
The profit warning lists a slew of factors, including Russian troops invading Ukraine on Feb. 24, 2022.
“The downward pressure on the economy continues to increase, and KM Group’s business is concentrated in Germany and the entire European region,” the profit warning says. “The problems of chain instability, significant increases in the prices of major raw materials and energy, and logistics and transportation bottlenecks have not been fundamentally improved. KM Group material purchases, order production, product deliveries and revenue recognition were significantly affected.”
The job cuts will not be the only action taken by KraussMaffei to reduce spending.
“In a next step, we are now adjusting our cost base. We are convinced that the company has thus laid the foundations for the turnaround and the return to growth,” said Zhang Chi, chairman of the supervisory board.