DAIMLER-BENZ Aerospace (DASA) has suffered a double blow, with its Dutch subsidiary Fokker revealing record first-half losses, as fears emerged of a new round of job cuts at the German aerospace giant, which could affect up to 15,000 employees.
The new developments exacerbate an already bad month for DASA, which started with the publication of a controversial letter by Gerhard Liener, former finance director of DASA parent Daimler-Benz, attacking former company president Edzard Reuter, over the wisdom and cost of the company's entry into the aerospace field, particularly its acquisition of Dornier.
Now Fokker has suffered a DFl651 million ($407 million) net first-half loss, exceeding the company's total 1994 loss of DFl449 million. At one stage its shares were suspended on the Amsterdam stock exchange amid fears over its financial position.
Fokker blames the disastrous result of the low dollar-exchange rate, which has also moved DASA from an anticipated 1995 return to profit into expected losses of hundreds of millions of deutschmarks.
Fokker's management is in talks with DASA and the Dutch Government - the company's other main shareholder - about a rescue package, but details of this are not expected until later this year.
In the meantime, "bridge financing" is being arranged by DASA to cover current business until a firm plan is decided. The financial lifeline is being provided by an agreement, to transferring control of leased aircraft to a new leasing subsidiary of Daimler-Benz subsidiary debis, to be called debis AirFinance, allowing Fokker to remove leasing deals from its balance sheet.
The company says that it faces another financial write-off later this year, with the closure of its Ypenburg plant. Alongside a persistently low dollar rate, this will produce a further "sizeable" loss in the second half of 1995.
Fokker's first-half turnover was DFl1 billion, down DFl100 million on 1994. Deliveries totaled 16 aircraft, compared with 15 for the first half of 1994. New leases of 13 aircraft were concluded, with a value of DFl406 million, bringing the value of the lease portfolio to a total DFl1.3 billion.
As if the Fokker figures were not bad enough, Daimler-Benz management has also had to deal with the apparent leaking of its "Dolores" (dollar low rescue) plan to the unions.
The Dolores plan, is now being drafted by the company, to help the group recover from its dire financial position. The unions say that the company wants to slash, a further 15,000 jobs by 1998 and close its Dresden, Laupheim and Speyer plants. The cuts would come on top of an existing workforce reduction plan to cut 16,000 jobs between 1993 and 1996.
Before the dollar crisis, DASA had been predicting a 1998 profit of DM1.1 billion, rising to DM1.2 billion the following year. The company now wants to implement measures, which will save DM979 million a year, allowing it to achieve these profits at a dollar rate as low as DM1.35.
Hardest hit, according to the unions, would be Daimler-Benz Aerospace Airbus, which will have to save DM450 million a year and reduce its workforce from 17,778 to 11,484. The company is already working on a separate project to cut costs and increase efficiency at DASA Airbus by 30%.
German newspaper Handelsblatt is also claiming that the Dolores includes drastic recommendations on the future of the loss-making Dornier 328 turboprop. These range from transferring production to the USA - where the market is more promising, and exchange-rate troubles could be avoided - to canceling the programme.
DASA has declined to comment on the details of the Dolores programme beyond saying the unions' statements are their own interpretation of an interim report produced with support by consultancy McKinsey.