German auto wiring systems maker Leoni will move part of its Romanian production to countries with lower labour costs such as Moldova or Ukraine, local media reported.
Leoni will not close any of its factories in Romania, but will transfer part of its production to other countries in Eastern Europe with lower labour costs, such as Moldova and Ukraine where wages are only 60-70% of the level in Romania, local business online portal Profit.ro, reported quoting economy ministry officials.
You can download the 2024 Automotive industry in Southeast Europe report here
In Eastern Europe, Leoni has factories in Romania, Poland, Russia, Serbia, Slovakia and Ukraine.
Currently, Leoni employs 16,000 people in Romania in three wiring systems factories in Arges, Arad and Bistrita.
Last month, Leoni said in a statement that its three Romanian plants will be most affected by a jobs cut prompted by lower earnings and bigger charges in the sector.
In order to solve the problems in the company's wiring systems division, Leoni said it will improve the performance of the critical projects that were responsible for the loss of earnings by restructuring jobs.
Leoni said unexpectedly large wage cost increases resulted from a hike of the minimum wage in Romania, which was not appropriately reflected in the company's budget.
Romania increased the gross minimum wage to 1,200 lei ($301/268 euro) as of January 1 and will increase it further to 1,250 lei starting May.
Leoni's consolidated earnings before interest and taxes decreased to 151 million euro ($169 million) in 2015 from 182.5 million euro in the previous year, mostly because of lower earnings in the wiring systems division.
The wiring systems division‘s earnings before interest and taxes declined to 87.4 million euro in 2015 from 104.6 million euro a year earlier. This figure included a positive effect from the sale of a 50% stake in Langfang LEONI Wiring Systems Co. Ltd. of 19.6 million euro in 2015.
The total package of restructuring measures will incur charges of approximately 25 million euro in 2016, the company said.
(1 euro=4.4668 Romanian lei)