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Forvia to shed jobs in Europe amid Chinese competition

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French automotive supplier Forvia said it plans to cut up to 10,000 jobs in Europe over the next five years as part of a plan to boost profits in the face of Chinese competition.

Shares in the world’s seventh-largest automotive supplier, which makes parts for companies including Stellantis, Volkswagen and Ford, were up 5.4% in early trading this morning.

As carmakers cut production in Europe, suppliers are grappling with excess capacity, benefiting Chinese rivals, Forvia said its overcapacity in Europe was particularly in seating and interiors, as well as lighting to some extent.

“Those who are more competitive today in the smaller segments tend to be the Chinese,” Forvia Influence Director Christophe Malbranque told Reuters.

Forvia’s operating profit in Europe, Africa and the Middle East was €316m in 2023, less than half of Asia at €815m. This was despite the region making up 46% of its sales, compared to 27% in Asia.

The Paris-listed company plans to cut 13% of its European workforce, mainly through attrition and drastically reduced recruitment in Europe.

“Our attrition rate is 2,000 to 2,500 people a year. So, in fact, the plan does not mean making 10,000 people redundant,” Chief Financial Officer Olivier Durand told reporters, adding it would limit recruitment to posts deemed strictly necessary.

Forvia aims to return to its pre-pandemic operating margin of 7% in Europe, compared to 2.5% last year, supported by annual savings of €500m from 2028.

It said Asia reported an operating margin of 11% for last year, with a double-digit margin in China, and forecast 2024 sales of 27.5 billion to €28.5 billion, compared with 27.25 billion last year.

The 2023 sales were in line with analysts’ estimate of 27.13 billion euros in an LSEG poll.

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