Unhappy New Year for Vestas following layoffs
Just a few short years ago, Vestas was so busy that it was worried about meeting demand. But after closing out 2011 with two straight months of reductions in sales and profit projections, and starting 2012 with cost-cutting moves that slashed 1,300 jobs in Denmark, the worldÂ’s largest wind-turbine maker is now caught in a whirlwind of uncertainty.
The company now says that it will only break even for 2011 – down from the nearly two billion kroner profit it predicted in October. Vestas blames the collapse on higher than expected production costs, reduced demand, and delays in connecting to wind farms.
Investors, citing the companyÂ’s bad track record and inability to deliver projects on time, are now calling on management, including CEO Ditlev Engel, to step down. When asked about his future at the press conference announcing the job cuts, Engel said he had no plans to resign.
Jakob Pedersen of Sydbank told the Associated Press that confidence in Vestas is “blown completely awayÂ”.
This is not the first time that Vestas has closed factories. In November 2010, it made similar moves that cost 3,000 jobs in Scandanavia. Some investors and analysts are insisting that the companyÂ’s management is the problem.
Vestas chairman Bent Carlsen told Jyllands Posten that lack of faith in the company is Â“embarrassing for us allÂ”.
Anonymous sources have said that senior investors are also seeking a replacement for Carlsen.
Vestas is warning that the current round of cuts may not be enough if the Production Tax Credit (PTC) is not extended in the United States. The entire wind industry is calling on U.S. lawmakers to extend the PTC, which grants companies a financial incentive per kilowatt-hour of wind power they generate.
Â“We will evaluate Â… 2012 entirely on how the political situation evolves,Â” Engel said.
The current round of reductions cost 182 US workers their jobs and Vestas says 1,600 more are threatened if the PTC is not extended.
Industry analysts say that the US market has turned into a massive disappointment for Vestas and other wind turbine manufacturers.
Amid the gloom, however, some investors believe that a leaner, meaner Vestas will be in a better position to compete in the emerging wind marketplace and characterised the companyÂ’s latest moves as a turning point.
Investors point out that many of the smaller players that started up in the wind turbine industry over the past few years are likely to blow away in leaner times, and customers tend to place orders with the larger firms that seem more likely to survive. Thus, investors still see a lot of value in Vestas.
Vestas is scheduled to announce its 2012 orders data in its annual report to be released February 8.