A Chat with Markus Forschner: Bosch CFO on Job Cuts and 2026 Outlook
Continues to Expand: Bosch Corporation
Bosch, the tech giant, is chopping off a whopping 13,000 jobs, with 8,600 being sucked out of the Mobility division. A significant portion of these job losses will occur in Germany, where Bosch, a foundation-owned company, employs around 130,000 workers out of its total of 435,000 global employees.
So, what's the deal, Mr. Forschner? What's the economic lowdown behind this bold move, and how much is structured issues like the slower electromobility uptake playing a part?
I ain't a crystal ball reader, but most of it is structural stuff, mate. In the Mobility department, we've got these affected segments: automated driving and electromobility. We thought the demand for both of 'em would be skyrocketin' high, but it ain't lookin' like that just yet.
Unions are cryin' foul, claimin' y'all were too optimistic in hindsight. What's your take?
Well, things might look rosy in hindsight, but at the time, we were makin' our deci-sions based on established economic principles, just like other companies in our biz. Conditions changed due to market dynamics. Then, y'got two options: stick to the old plan and hope for the best, or adjust to the new realities. Course, we ain't a company that relies on hops and wishes.
So, explain the adjustment. How's this gonna affect sales and employment?
We gotta adjust our sales expectations to match the changed circumstances, and that means we gotta adjust the workforce as well. It's all about maintainin' our commitment to the company's continued success.
No room for playin' favorites here, right?
Right ya are, buddy. Bosch is a global enterprise with around 470 subsidiaries and regional companies, 430,000 employees and $90 billion in annual sales. Adjustments are necessary even in economic booms. And in this lousy situation, there's a load of burdens across the board.
But hang on a sec', there's a bit of confusion about the extent of job cuts in Germany. Will the announced layoffs be the final nail in the coffin, or will there be more?
That'll depend on the circumstances, mate. What we've announced so far is based on current projections, but with the risks of the economy and geopolitics, it'd be reckless to swears off further adjustments.
Have Bosch's beliefs in electromobility been shaken?
Nah, we're still convinced that we're gonna see a comprehensive transition to electromobility in the long haul. The speed of this transition isn't even across world regions, though. So, we're still advocatin' for technology openness and maintainin' our technical expertise in all fields.
So, what's Bosch's darling 2024 sales projection look like? Ain't the goal of being a growth company at stake?
Not at all, mate. Bosch's managed to grow, on average, by 6 to 8% a year organically and through acquisitions for the last few decades, and that's our ongoing goal. Even in 2024, we're expectin' to be 1% above the previous year's level, adjusted for exchange rate effects.
Lookin' at the current state of all four business segments, are there any signs of relief comin' our way?
Well, the Chinese government's recently said they're easin' up on fiscal and monetary policies, which could boost economic growth and be a boon for us. There's also an improvement expected in the USA due to interest rate cuts and a stronger growth in Europe. But sadly, the old continent's still in for another tough and weak year, with vehicle production around 4% lower than the previous year in 2024.
What about 2025?
We're projectin' a maximum of 1% global vehicle production growth for 2025. The operating profit margin before interest and taxes, adjusted for special effects, will be less than 4% this year, but we're still aimin' for a margin of 7% in 2026.
Job cuts in 2025 will steady things, or?
Yeah, that's gonna be a part of the impact for sure.
What about the free cash flow? You're aimin' for 1% of sales, but is that achievable in 2024?
Nah, we ain't gonna make that mark this year. But the free cash flow will at least be balanced.
Acquisitions are still a part of Bosch's master plan, even in these tricky times. You announced the acquisition of the global heating, ventilation and air conditioning business from Johnson Controls for $8 billion in July, right?
Spot on, mate. We're on track for the takeover, and it's an excellent addition to our non-automotive business, boosting our sales share in the USA and Asia, and filling gaps in our existing heating business.
And the takeover's still on track for mid-2025?
You betcha. Just need the green light from competition authorities first.
What about the headquarters for the heating and air conditioning business? Where'll it be?
Not decided yet, but nothing's set in stone.
So, Bosch's financing the entire purchase with its own funds?
In principle, we could, but we'll probably use a mix of existing liquidity and debt to maintain financial flexibility. We raised €4.5 billion with a Euro bond last year for such reasons, you know. Whether we'll issue another bond on the capital market next year will be decided in the first quarter.
An IPO for the heating and air conditioning business could be an option, right?
We've said it before and I'll say it again: an IPO for the entire Bosch Group is not on the table. However, we're not shuttin' it out entirely for individual sectors.
When would an IPO for an individual sector be attractive?
Our aim is to be among the top three in every sector worldwide. Merger in joint ventures or bringin' a part to the stock market might be necess-ary then. But bein' marketable is about more than just stocks.
And that means what, exactly?
It means havin' the know-how and experience to navigate the capital markets. Bosch's got all that covered, with a listed company in India, a €4.5 billion Euro bond in 2023, and a private placement in the US in 2023 that pulled in $1.2 billion. But it's also about the timeline.
What do you mean by that?
Complex transactions, like spinnin' off a part of a division, take a lot of time and money. That's a lot of effort, so we gotta consider how to boost our marketability.
But here's the thing: ain't got no concrete plans for any of that at the moment. The interview was conducted by Joachim Herr.
In light of Bosch's need to adjust to changing market dynamics, the company is expected to make further investments in other business sectors. The CFO, Markus Forschner, stated that Bosch is still committed to making acquisitions, as shown by their recent acquisition of the global heating, ventilation, and air conditioning business from Johnson Controls for $8 billion. However, the specific timeline for this takeover and any potential IPOs for individual sectors has yet to be decided. The company's financial flexibility will play a significant role in these decisions, with Bosch utilizing a mix of existing liquidity and debt to finance major purchases.
