The jobs affected relate to “technology projects” that will be paused while Vestas focuses its resources on delivering turbines to customers through 2020, a critical construction year in key markets such as the U.S. and China. The majority of the layoffs will be in Lem and Aarhus, Denmark. Around 4,000 of the company’s 25,000 employees are located in Denmark.
In a statement, the company said the wind industry has always been highly fluid, courtesy of trade wars and a rapidly evolving marketplace, but with the added pressure of COVID-19, something had to change.
“Simultaneously, and due to the extraordinary situation from the pandemic, additional measures are needed to ensure the organization executes as strongly as possible on our order backlog and customer commitments in 2020. To this end, Vestas intends to reduce its workforce across functions in Denmark that do not directly support 2020 deliveries,” Vestas said.
The company is discontinuing a range of products, some still to be announced, a spokesperson for Vestas told GTM.
“The most prominent discontinuation so far is the V138, a 3-megawatt turbine, announced last year. That discontinuation is not a move away from modularization. After an assessment, we have decided to accelerate modularization and focus on other models or variants,” the spokesperson said.
Vestas introduced a new modular platform, EnVentus, in January 2019 with the goal of finding greater efficiencies and stretching profit margins on each turbine.
“We look at a lot of factors when evaluating the portfolio. [Return on investment] is key, and it was decided we could get more bang for our buck if we discontinued some products and accelerated others,” the spokesperson added.
In addition to closing the projects at the Lem blade facility and in Aarhus, where the company is headquartered, a temporary facility established for its offshore wind joint venture with Mitsubishi, MHI Vestas, will also shut down.
The facility closures follow Vestas' recent decision to suspend its 2020 financial guidance.
“We’re in a period of high uncertainty and by making a strategic decision on our product portfolio and reduce complexity, we sustain our competitiveness in the future and ensure we can adjust quickly to COVID-19 challenges,” said Henrik Andersen, president and CEO of Vestas, in a statement.
“It’s always difficult to say goodbye to good colleagues, and the timing for these decisions is never good, but our responsibility is to strengthen Vestas for long-term success," Andersen added. "By making Vestas and wind energy more competitive, we want to provide the solutions that make the energy transition an integral part of rebuilding societies and economies, and ultimately creating jobs across the value chain."
The executive management team also announced they would be taking a 10 percent pay cut.
Coronavirus impact hits home for renewables
A wave of speculation and warnings about the impact of the COVID-19 pandemic is giving way to direct, on-the-ground impacts for wind and solar companies around the world.
The list of companies that have reduced or withdrawn their 2020 financial guidance is growing by the week, and now ranges from U.S. solar players like Sunpower and Sunrun to global clean-energy developers like EDF.
A number of wind manufacturers’ operations have been impacted by the pandemic. Last week, GE reportedly closed a wind-blade factory temporarily in North Dakota due to an outbreak of cases among the workers and their families. Siemens Gamesa temporarily closed facilities in Spain for deep cleaning after positive COVID-19 cases among staff. A U.K. blade facility closed for a week while it was altered to enable social distancing during operation.
During its 2019 full-year results call in February, Vestas confirmed a record-high order intake for the year. At the same time, Andersen warned that the impact of the coronavirus, which was then largely restricted to China, could impact the entire industry. Vestas has 3,000 employees in China at its fully integrated manufacturing facility in Tianjin.
“It affects the...world’s entire supply chain," Andersen said in February. "It’s right from commodities to components, and for us as well, a very high level of assets that we transport. […] That is going to hurt us as much as it is going to hurt the rest of the world in [terms of the] supply chain.”