Heidelberg Concludes Employee Negotiations to Adjust Production Levels

HEIDELBERG, GERMANY—March 30, 2012—The Management Board and Workers’ Council of Heidelberger Druckmaschinen AG have reached an agreement regarding the implementation of the “Focus 2012” efficiency program. The consensus reached provides for reductions in personnel costs, more flexible working time arrangements, and worldwide job cuts through socially acceptable measures that will result in a head count of below 14,000 by mid-2014.

As of Dec. 31, 2011, Heidelberg had 15,666 employees worldwide (including trainees and apprentices).

Highlights:

• Socially acceptable measures to reduce global head count to below 14,000 by mid-2014.
• Negotiations result in redundancy agreements, including use of transfer company, along with a permanent reduction in working hours and more flexible working times.
• Innovative model results in immediate capacity reduction of around 15 percent and ensures balanced age structure.
• Sales structures adapted - realignment of research and development.
• Total measures help ensure sustainable cost savings totaling some €180 million by financial year 2013/2014, with up to a third thereof already in financial year 2012/2013.
• “Focus 2012” aims to deliver an operating result excluding special items of around €150 million in financial year 2013/2014.

As Heidelberg CEO Bernhard Schreier explained, “The outcome of the negotiations will enable us to adjust capacities to meet demand and achieve the announced savings as planned. In consultation with the Workers’ Council and the IG Metall union, we have devised a responsible concept for making the required cost and capacity reductions on a socially acceptable and sustainable basis through the global job cuts announced.”

Taken together, these measures will help achieve the targeted annual savings of around €180 million from financial year 2013/2014. Up to a third of these savings will already be achieved in financial year 2012/2013. The necessary one-off expenditure amounts to approximately €150 million, most of which will be posted during the current 2011/2012 financial year.

Global headcount to fall below 14,000 by mid-2014
The agreement reached on a wide-ranging package of measures will ensure the company’s profitability targets can be met. Most of the job cuts in Germany will be achieved by mid-2014 through voluntary redundancies, including options for older staff. This will ensure a balanced age structure at the company and prevent qualified staff from having to leave based on social criteria.

Staff whose jobs disappear as a result of structural changes and adjustments to achieve greater flexibility will have the option of moving to a transfer and qualification company. The planned job cuts outside Germany are also under way.

Immediate capacity reduction of around 15 percent with rapid and sustainable cost savings
Shortening the working week to 31.5 hours for all staff and reducing remuneration levels accordingly will put in place a long-term, collectively agreed arrangement that will lower personnel costs and immediately cut capacities at the German production sites by 15 percent. Taking the shorter working week as a basis, working-time accounts can be used to adapt individual working hours to the relevant capacity utilization. This will enable the company to make working times far more flexible and respond effectively to changing market requirements in the future.

“Thanks to the rapid consensus, we are in a position to implement the agreed measures earlier than expected on May 1 this year and achieve the planned job cuts through socially acceptable means. Taken as a whole, the agreement reached represents a big step toward achieving the target operating result before special items of around €150 million in financial year 2013/2014,” said Schreier.

Sales structures adapted - realignment of research & development
The company has introduced measures to adapt its global sales organization to the changed market conditions. The adjustment of activities in industrialized nations is being accompanied by an increased presence in emerging markets. To significantly reduce structural costs, sales activities have been pooled and specific markets restructured. Comprehensive support for the global customer base will still be ensured.

A realignment of research and development as part of the “Focus 2012” program will take effect as announced on April 1, 2012. This will involve further optimizing internal processes and placing research in a number of fields on a new footing. By modularization, the company will facilitate access to the latest technologies throughout the portfolio.

Development work on digital printing for commercial and packaging applications is to be pooled and expanded. With regard to the promising printed electronics market, Heidelberg is involved in intensive research into new technologies in cooperation with other technology companies. Initial potential applications are already at the advance development stage. Research activities focusing on the multidisciplinary technology of hybrid lightweight construction will be expanded, with a slight increase in investment in this new market segment.

Source: Heidelberg.