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Cost-Cutting Measures in 2013 - Key Strategies to Improve Original Equipment Manufacturer Profitability

Summary

Wind turbine manufacturers faced cut-throat competition in 2012 and 2013. Higher variable costs and increasing raw material costs adversely affected the financial statements of most Original Equipment Manufacturers (OEM). Most OEMs employed drastic cost-cutting measures in an effort to improve the financial situation. Many of these companies, including Nordex and Suzlon Energy, quoted negative Earnings Before Interest and Taxes (EBIT) in 2012 with the rest reporting only very small EBIT margins. Nordex and Suzlon quoted EBIT margins of -5.50% and -4.96%, respectively, whereas the EBIT margins for Vestas Wind Systems and Gamesa Corporacion Tecnologica were just 0.10% and 1.70%, respectively. High competition in turbine sales and tight EBITs triggered these companies to change their strategies in order to be profitable and survive in the current market scenario. Reduction in manpower and the closure of facilities were major strategies employed by OEMs to reduce operational costs. Vestas, Suzlon, Gamesa and Senvion reduced numbers of employees in 2013 (quoting reductions of 3,982, 2,144, 1,307 and 237 employees, respectively); contrastly Nordex increased its number of employees by 7 in 2013 and focused on increasing sales instead. Nordex observed a growth of 8.50% from its 2012 EBIT margin through a 34.92% growth in sales.

Scope

- This report covers various strategies adopted by Wind Turbine Original Equipment Manufacturers to reduce their costs and improve the profitability.
- It covers total number of employees with major global wind turbine manufacturers, number of employees at the end of 2012 and 2013, Reduction in Manufacturing facilities, Corporate Offices and Warehouses, Focus on Core Competency and Outsourcing Other Activities, Optimization of Material Cost, Platform-Based Product Development and Product Improvements and Effects on Q1 2014 Performance Report order intake for wind turbines during 2013.

Reasons to buy

- To understand various problems faced by Original Equipment Manufacturers in 2012 and 2013.
- To understand various strategies adopted by Original Equipment Manufacturers to reduce their fixed operational costs in 2013 and Q1 2014.
- To understand various strategies adopted by Original Equipment Manufacturers to improve their margins in 2013 and Q1 2014.
- To evaluate effects of Original Equipment Manufacturers’ strategies on Q1 2014 Quarterly Performance Report

Table Of Contents

Cost-Cutting Measures in 2013 - Key Strategies to Improve Original Equipment Manufacturer Profitability
1 Table of Contents

2 Summary 3
2.1 Cost-cutting Measures in 2013: Reduction in Manpower 4
2.2 Cost-Cutting Measures in 2013: Reduction in Manufacturing facilities, Corporate Offices and Warehouses 5
2.3 Cost-Cutting Measures in 2013: Focus on Core Competency and Outsourcing Other Activities 6
2.4 Cost-Cutting Measures in 2013: Optimization of Material Cost 6
2.5 Cost-Cutting Measures in 2013: Platform-Based Product Development and Product Improvements 7
2.6 Cost-Cutting Measures in 2013: Effects on Q1 2014 Performance Report 10
3 Appendix 11
3.1 Abbreviations 11
3.2 Methodology 11
3.3 Coverage 11
3.4 Secondary Research 11
3.5 Primary Research 12
3.6 Modeling and Forecasting 12
3.7 Contact Us 13
3.8 Disclaimer 13

1.1 List of Tables

Table 1: Cost-Cutting Measures Adopted by Original Equipment Manufacturers, 2013 3
Table 2: Number of Employees, 2012 versus 2013, Change from 2012 (%) 5
Table 3: Component Outsourcing Share, Gamesa (%), 2011-2013 6
Table 4: Platform-Based Product Development 9
Table 5: Effects on Q1 Performance Report, Earnings Before Interest and Tax Margin (%), Q1 2013 and Q1 2014 10
Table 6: Abbreviations 11

1.2 List of Figures

Figure 1: Average Cost of Material for Nordex (€m/MW) and Average Metal Use for Vestas (metric tonnes/MW), 2012 and 2013 7

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