Bosch starts cutting costs as purchases decline

The company has frozen large-scale recruitment, will hire selectively

Faced with slowing demand for heavy commercial vehicles, light commercial vehicles and passenger cars, Bosch, the Bangalore-based supplier of automotive components to original equipment manufacturers, has embarked on a cost-cutting exercise to improve margins and profitability.

Bosch recorded just two per cent growth in net profit at Rs 252 crore for the quarter ended June.

Now, the company is focusing on expanding and developing its non-automotive product portfolio, as the automotive product segment hasn’t seen much growth in recent quarters.

It is also taking steps to improve operational efficiency and has initiated measures to curtail expenditure on travel and advertisements. It has also frozen hiring in non-growth areas.

“We are hiring selectively this year, especially in growth areas…and put a freeze on recruitment in non-growth areas. If our turnover is not increasing, our number of employees cannot increase. So, we are hiring selectively, based on the need,” Managing Director Steffen Berns told Business Standard.

The company’s employee strength has declined six per cent to 11,500 from 12,236 in December 2011. Overall, the Bosch Group has 26,000 employees. Berns didn’t specify the number of additions being made in 2013.

Bosch also planned to utilise manpower effectively by streamlining various processes and structures, Berns said. The company has also resorted to reduction in shifts at its factories, depending on the demand for products, and optimisation of equipment to adjust inventory levels.

Demand for tractors
During the quarter ended June, the company saw good demand from tractor makers.

“Tractors are doing well and we are operating at full speed. We have some products in other segments for which we don’t need three shifts at the moment,” Berns said. The company is also investing in new sales channels and marketing concepts and increasing localisation. For instance, it has opened a plant for power tools, abrasives, accessories and grinding paper.

It was also offering customised solutions to Indian customers and had also opened a plant for thermo technology and solar water heaters, Berns said.

Bosch doesn’t intend to scale down its investment plans for this year.

“We are convinced there is a good future for India. We are investing in the future and continuing long-term investments in India. We are continuing with the construction of our new plant at Bidadi, which will see an investment of Rs 600 crore. Once we shift our plant from Bangalore to Bidadi, we will transform the Bangalore plant into a technology and development centre,” Berns said.

AUSTERITY MEASURES

* Expand and develop the non-automotive product portfolio

* Improve operational efficiency

* Cut spending on travel and advertisements

* No hiring in low-growth areas

* Fewer shifts at factories

* Optimisation of equipment to adjust inventory levels