Mahindra CIE Automotive closing down a manufacturing unit in Germany

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New Delhi: Mahindra group’s auto component arm, Mahindra CIE Automotive is closing down a manufacturing unit in Germany as part of a turnaround strategy in Europe.

Mahindra Forging Europe (MFE), the Germany-based arm of Mahindra CIE Automotive, has decided to close down its unit Jeco Jellinghaus Gmbh, based in Gevelsberg, in north west of Germany over the next six months, Mahindra CIE Automotive said in a filing to BSE.

Jeco Jellinghaus is continuing to face pressure on profitability due to a combination of fluctuating market requirements and some internal inefficiencies.

“As a result it has been decided to close Jeco in a phased manner over next six months by shifting machines and equipment to other manufacturing locations of MFE and outsourcing most of the machining operations,” the filing added.

The announcement of closure of Jeco will affect around 160 jobs, it added.

The customers currently supported from Jeco will be supplied from other manufacturing facilities of MFE in future. This restructuring is not likely to materially affect sales or profitability of MFE in the current calender year, it said.

MFE is one of the largest suppliers of of forged and machined parts to the commercial vehicles industry in Europe and operates out of six locations in Germany.

It has been facing pressure on its margins for quite some time and the management has put in place a turnaround strategy.

The first phase of the turnaround strategy, focused on rationalising costs through improving operational efficiencies, selectively making price corrections, availing of power subsidies, outsourcing of simple operations and reduction of overtime and contract labour costs, has been successful and there has been an improvement if profitability of MFE over the last 12-15 months.

“In the second phase, the management will focus on further improvement on operational efficiencies by optimising manufacturing locations and product portfolio,” the filing said.