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    Fag K - A G R: Ugelfischer Erman Estructuring

    Uploaded by

    Kriyanshi Aggarwal
    Kugelfischer was the largest manufacturer of ball bearings in Germany and the second largest in Europe in the early 1990s. However, following German reunification and the economic downturn in the early 1990s, Kugelfischer's customers reduced orders and canceled previous ones, hitting the ball bearing industry with its worst recession in 50 years. The main restructuring options available to Kugelfischer included reducing its workforce, cutting bonus payments, reducing inventory, converting short-term debt to long-term debt, and selling land and buildings.

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    © All Rights Reserved
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    Fag K - A G R: Ugelfischer Erman Estructuring

    Uploaded by

    Kriyanshi Aggarwal
    47 views3 pages
    Kugelfischer was the largest manufacturer of ball bearings in Germany and the second largest in Europe in the early 1990s. However, following German reunification and the economic downturn in the early 1990s, Kugelfischer's customers reduced orders and canceled previous ones, hitting the ball bearing industry with its worst recession in 50 years. The main restructuring options available to Kugelfischer included reducing its workforce, cutting bonus payments, reducing inventory, converting short-term debt to long-term debt, and selling land and buildings.

    Original Description:

    CLRIR case

    Original Title

    Group 5_Sec A (1)

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    Kugelfischer was the largest manufacturer of ball bearings in Germany and the second largest in Europe in the early 1990s. However, following German reunification and the economic downturn in the early 1990s, Kugelfischer's customers reduced orders and canceled previous ones, hitting the ball bearing industry with its worst recession in 50 years. The main restructuring options available to Kugelfischer included reducing its workforce, cutting bonus payments, reducing inventory, converting short-term debt to long-term debt, and selling land and buildings.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    47 views3 pages

    Fag K - A G R: Ugelfischer Erman Estructuring

    Uploaded by

    Kriyanshi Aggarwal
    Kugelfischer was the largest manufacturer of ball bearings in Germany and the second largest in Europe in the early 1990s. However, following German reunification and the economic downturn in the early 1990s, Kugelfischer's customers reduced orders and canceled previous ones, hitting the ball bearing industry with its worst recession in 50 years. The main restructuring options available to Kugelfischer included reducing its workforce, cutting bonus payments, reducing inventory, converting short-term debt to long-term debt, and selling land and buildings.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Executive summary:

    FAG K UGELFISCHER - A

    Situational Analysis:

    G ERMAN R ESTRUCTURING

    Kugelfischer has a unique standing in the market due to its far reaching historical
    Case
    roots
    andAnalysis
    its size. In the early 90s, the company was the largest manufacturer for
    ball bearings in Germany, and the second largest in Europe.
    Over the years of its existence, Kugelfischer managed it to sustain its technological
    superiority over its competitors. It was well known for the quality of its products and
    the
    large varietyLegal
    of different
    bearings it offered. Additionally,
    the costumers valued
    Corporate
    Responsibilities
    & Industrial
    the services Kugelfischer offered them upon purchase of the actual product, e.g.
    Relations
    quick
    delivery, quality control, technical assistance, and customized product design.
    Sophisticated R&D activity and the highly skilled German workforce were vital for
    this competitive advantage. However, the quality standards used in the production
    process and the very high labour costs in Germany made the bearings more
    expansive
    then comparable
    products of Kugelfischers competitors.
    SUBMITTED
    ToThe world bearings market was dominated by a relatively small number of large
    Prof. Patturaja
    Selvaraj
    competitors.
    The Swedish
    producer SKF served approximately 18% of the world
    market, the two Japanese companies NSK and NTN each had a share of 10% to 11%
    followed by Kugelfischer with 9%. All competitors were multinational organizations
    although Kugelfischer had an especially strong standing in Germany and Europe as
    mentioned before. In the early 90s the bearings market was more or less satirized
    and a low growth business. Therefore, many producers tried to gain additional sales
    potential
    by entering
    emerging5markets
    in the
    SUBMITTED
    BY GROUP
    SECTION
    A quickly growing Asian economy. The
    fall of the Berlin wall opened additional possibilities for investments in the former
    Ambika Ratnoo
    -2012IPM012
    German Democratic Republic. Kugelfischer, for example, acquired East Germanys
    ball
    Kriyanshi
    Aggarwal
    -2015PGP178
    largest
    bearing producer
    DKFL for DM 69
    million.

    Jyotika
    Thawani
    -2012IPM051
    Like most parts of the industrialized world, FAG Kugelfischer was also greatly
    by
    Shruti
    Suman
    affected
    the fall
    of the Berlin Wall and the-2015PGP351
    end of the cold war. Shortly after the
    reunification
    in 1990,
    the economical situation
    in Germany improved due to the
    Shruti
    Garodia
    -2012IPM104
    unification boost. Since ball bearings are used in many if not most advanced
    machinery, they are vital for the most important sectors of the German economy,
    such as the mechanical engineering industry and automobile industry. During the
    unification boost the demand for ball bearings by these industries increased
    immensely. This effect was even intensified by the fact that Kugelfischers costumers

    typically bought more bearings then they actually needed in order to build up their
    stocks.
    However, shortly after these positive developments took place, the economic
    situation deteriorated. In order to finance costly infrastructure projects in Eastern
    Germany taxes were raised. The resulting loss of spendable income led to increasing
    dissatisfaction of the workforce. In 1992, the IG Metall, the largest German privatesector union, declared strikes in order to achieve a drastic increase in wages.
    Additionally, many companies in the former socialist part of Germany had to
    foreclose since they were not able to compete in the new business environment.
    Therefore, unemployment rates went up drastically which posed an additional
    burden on both the German government and the economy.
    These developments led to a general slowdown causing Kugelfischers costumers to
    demand fewer ball bearings and even cancel previous orders; the ball bearing
    industry was hit by the worst recession in fifty years.
    So the main option available in front of Kugerfischer was to go for restructuring but
    in Germany it was not like US-style restructuring, which typically involved the
    downsizing of operations and a laying off of significant numbers of employees. It was
    very uncommon here.

    Options:

    The options available for restructuring in the company can be summarized as


    follows:
    1.
    2.
    3.
    4.
    5.

    Reduction of Workforce
    Cutting of bonus payments
    Reduction of Inventory
    Conversion of short to long term debt
    Sale of land and buildings

    Evaluation of Options:

    1. Reduction of workforce.

    2. Cutting of bonus payments


    3. Reduction of Inventory
    4. Conversion of short to long term debt
    5. Sale of land and buildings

    Recommendations:

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