Bosch to pay Solarworld to overtake its plant in Germany

Bosch has been one of the biggest losers in the solar industry, as we estimate that the company has lost more than $1.2 billion in its solar venture. Bosch bought two Tier 2 German solar companies for extremely expensive valuations during the peak of the solar boom. The vicious solar industry downturn made its solar operations unviable, as most German solar companies shut down. The Chinese solar industry took over the global market through its massive scale and low costs. Europe was forced to sign a deal with China to impose price and volume quotas, as the European solar manufacturers were eviscerated by the competition. Solarworld has tried to survive, but massive losses in the last couple of years has decimated its balance sheet. A recent restructuring saw its equity shareholders take a huge haircut and Qatar buying a big stake in the company. Solarworld led by Frank Asbeck has refused to face the realities of the solar market in which all the western companies have relocated their plants to Asia. Manufacturing in Europe and USA does not make sense because of the high costs involved. However, Solarworld has persisted with its factories in Germany and Oregon. The company made more than $600 million in losses last year and looks unlikely to become a solar force again.

The company is surviving by the skin of its teeth, as the other German companies (Siemens, Bosch, Solar Millenium, etc.) have left the solar business. Bosch which has made massive strategic mistakes in the solar industry now plans to sell its plant in Germany to Solarworld. And instead of receiving money, Bosch will give Solarworld $177 million to take its factory and its 800 workers. Note the labor laws in Germany do not allow easy firing of workers. Bosch has been forced to pay the employees for more than a year, since it decided to get out of the solar manufacturing business. However, no one is willing to pay a dime to buy a German factory. LDK Solar (LDK), the Chinese company which bought a small German solar company is now bankrupt itself. German solar manufacturing operations do not have commercial value. Some factories can exist as niche players in the global market as they use domestic content requirements and German preference. Solarworld should continue to run given that it has now Qatari backing, but the company is unlikely to regain its position as a top global player.

WSJ

Robert Bosch GmbH will pay SolarWorld AG (SWE.XE) up to 130 million euros ($177 million) to take most of its German solar operations off its hands and continue to employ most the personnel based in Arnstadt, in the German state of Thuringia, people familiar with the agreement told The Wall Street Journal Thursday.The deal involves the majority of Bosch’s German solar manufacturing plants and other assets in Arnstadt. SolarWorld will to continue to employ around 800 employees in cell and module production at the site.