NUREMBURG, Germany—Troubled global auto cable and wiring manufacturer Leoni A.G. aims to streamline its structure with a plan to either sell off or list its Wire and Cable Systems business on the stock market.
Leoni aims to separate WCS, which is focused on cable solutions, from its other core business Wiring Systems Division, which specializes in energy and data systems. Group directors see very limited synergies between the two and believe separation would allow each to "realize its full potential."
The group, which must decide whether to sell or list WCS, will concentrate resources and development on WSD to continue building on Leoni's leading position automotive wiring systems.
Leoni aims to become a global solutions provider for automotive customers capturing emerging opportunities on the energy and data side. It believes it is well placed through its technology and market position to benefit from the shift toward electric and hybrid vehicles.
"We believe that both divisions will benefit from a separation," Leoni CEO Ado Kamper said. "This creates two clearly focused businesses whose individual market and technological development as well as investments can be better and more quickly implemented."
The firm, based in Nuremberg, decided to separate its operations after an in-depth structural review of the group. This was one of several urgent measures the firm has taken to stabilize its business after it reported persistently poor performance.
Earlier this year, Leoni revealed it planned a global layoff of up to 2,000 workers and had ordered a group-wide hiring freeze and delayed salary increases for non-tariff employees and managers.
In March, the group reported a significant dip in annual 2018 pre-tax profits to about $169.8 million from a figure of approximately $300.1 million achieved in 2017. Leoni blamed the setback largely on "exceptional" costs and a "disappointing performance" at a newly launched wiring systems plant in Merida, Mexico, in the fourth quarter 2018.
But, Leoni added that higher raw material prices and inefficiency in its wiring systems business also contributed to the decline. It admitted that urgent measures were required as it faced challenging market conditions, especially in China, and demand for its auto wiring systems had fallen substantially.
In March, the cable harness supplier abandoned its pre-tax earnings target for 2019 of $110 million to $145 million, a expectation it has set forth just one month earlier.
Leoni introduced its "Value 21" cost-cutting program aimed at improving cash flow and profitability which is expected to make annual savings of $556 million, largely in WSD, by 2022.