Forvia to cut 10,000 jobs, tap AI to better compete in EV transition

Forvia plans to cut up to 10,000 jobs in Europe over the next five years as the supplier taps artificial intelligence to better compete with Asian rivals in the shift to electric cars.

Forvia will reduce its European workforce, now 75,500 people, by 13 percent, mainly through attrition and drastically reduced recruitment.

The company, born from French supplier Faurecia's takeover of German lighting and electronics maker Hella in 2022, plans to use artificial intelligence to optimize spending on development.

The cost-cutting plan includes changes to regional manufacturing, staffing and spending on research and development to keep pace with the industry’s fundamental changes, CEO Patrick Koller said on Monday.

The plan is needed to adapt to a structural volume decrease in light-vehicle sales to less than 17 million annually until 2030, compared with more than 21 million in 2019, as well as the accelerated shift to EVs, Forvia said.

Automakers and suppliers are recalibrating strategies amid the industry's shift to electrification and software-defined cars. Last week, German parts maker Continental said it was cutting 7,150 jobs to improve competitiveness for the transition to electric vehicles.

Forvia said it will reduce overcapacity with staffing cuts focused on natural attrition.

"Our attrition rate is 2,000 to 2,500 people a year. So, in fact, the plan does not mean making 10,000 people redundant at all. What it does mean is that we need to ensure that recruitment is limited to what is strictly necessary," Chief Financial Officer Olivier Durand said in a press call on 2023 results.

Higher margin goal

Forvia forecast 2024 sales in the range of €27.5 billion to €28.5 billion, with an operating margin between 5.6 percent and 6.4 percent based on "broadly stable" automotive production. The company reported sales of €27.25 billion for 2023, against €24.57 billion a year prior.

Forvia targets a return to its pre-pandemic operating margin of 7 percent in Europe this year, compared to 2.5 percent last year.

The company is targeting savings of around €500 million on an annual basis in 2028 to help lift margins to more than 7 percent of sales.

The supplier is seeking to rebalance its regional mix, with Europe representing 40 percent of sales in in 2028 versus 46 percent in 2023. At the same time, operating income in Europe will grow to 35 percent from 22 percent, reducing Forvia’s dependence on China.

The plan will incur about €1 billion in restructuring costs, Forvia said. 

Forvia, based in Nanterre, France, ranked eighth on Automotive News Europe’s list of top 100 global suppliers, with automotive sales of $26.84 billion in 2022.

Reuters and Bloomberg contributed to this report