Vestas Wins Systems(OMX: VWS) has been rebounding in recent days in expectation of the reorganization plans. The company has just communicated that it will reduce fixed costs by more than 150 million Euros taking effect in 2012 through streamlining of support functions and closing of factories. A total of 2335 employees are in Vestas’ harsh words “expected to be made redundant”.
Executive Management will be extended to six members, presumably as a result of the input from institutional investors. A Global Solution and Services unit will accelerate the development of services business, which is certainly important for Vestas’ earnings going forward. Some engineering companies in the region have managed to greatly lessen the effect of business cycles by making maintenance services an important business arm.
CEO Ditlev Engel appears to be staying and will be informing employees and the press on the changes. Majority of the personnel cuts will be in Denmark. The company is entering 2012 with its strongest order backlog to date, but its margins have been crashing down, totally warranting the recent 0.5 price to book ratio. The company’s fiscal situation is however strong enough to still allow for changing of fortunes if correct decisions are made.
Vestas is also preparing for a negative decision concerning the extansion of the Production Tax Credit (PTC) in the United States. About 20% of Vestas’ orders come from the U.S. and the company says that if the PTC is not extended, it plans to lay off an additional 1600 employees in the there. This would add another 150 million in savings on top of those mentioned above.
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