STUTTGART -- Global automotive production may have peaked, Robert Bosch said on Wednesday, announcing job cuts and a review of its business to cope with a 44 percent drop in full-year operating profit and a downturn in demand for cars.
Global automotive production is expected to fall for the third consecutive year, by 2.6 percent to 89 million vehicles in 2020, following a drop in demand in China, Europe and the U.S., the supplier said.
"It could well be that we have passed the peak of automotive production," Bosch CEO Volkmar Denner said.
He also said he assumed the low level would remain constant and did not expected an increase in global automotive production before 2025, while the market would shrink by 10 million units in 2020 compared with 2017.
Bosch said its full-year earnings before interest and taxes fell to 3 billion euros ($3.3 billion) in 2019, a 44 percent drop from 5.4 billion euros in the year-earlier period and its EBIT margin contracted to 4 percent from 7 percent because of lower demand in China and India.
Total revenue was stable last year, at 77.9 billion euros ($85.8 billion), as Bosch benefited from increased complexity in vehicles, which allowed it to sell more components and systems per vehicle produced.
Revenue from mobility services, Bosch's largest division, was flat at 47 billion euros ($51.8 billion). By region, sales in Europe were stable at 41 billion euros ($45.2 billion); sales in North America were down 0.5 percent to 13 billion euros ($14.3 billion); and South America was up by 5.3 percent to 1.4 billion euros ($1.5 billion). Sales in the Asia Pacific region fell by 4.5 percent to 22.5 billion euros ($24.8 billion), with growth in Japan and Southeast Asia unable to offset market declines in China and India, Bosch said.
A shift to electric cars is expected to create opportunities longer term, but will impact jobs in the near term, Denner said.
Ten workers are needed to make a diesel injection system, three for a gasoline system, and one to produce an electric motor, he said.
As a result, Bosch has said staff adjustments will be made where necessary, including shorter working hours, voluntary redundancy and severance packages, although Bosch declined to provide a global figure for headcount reductions.
Already last year, Bosch reduced its headcount by 6,800 to 402,800, with 2,000 jobs cut in Germany and 3,600 positions reduced in the Asia Pacific region.
Bosch hopes to exceed 1 billion euros ($1.1 billion) in sales from electric car components this year, and has set aside 500 million euros ($550.7 million) for investments in electromobility for 2020, Denner said.
Bosch will also start production of long-range lidar, a new sensor category, and begin production of hydrogen fuel cells in 2022.
Bosch ranks No. 1 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $49.5 billion in 2018.