Vestas will Fire Expensive Danish workers from its Home Base in order to compete with Low Cost Asian competition

Vestas,the world’s no.1 Wind Turbine Producer has been bleeding in 2010 as it faces a slowdown in its main markets of Europe and USA.Developed Wind Market have been hit hard in 2010 with low gas prices,decreasing electricity demand and difficult financing.Gamesa and Vestas the dominant European Wind Turbine Makers have seen their stock prices take a massive fall.In comparative,the Chinese players like Sinovel,Ming Yang have emerged stronger taking advantage of the exponential growth of  their domestic Chinese market.Now the leading Wind players are changing their strategy to focus on emerging markets by building factories in those regions.GE,Gamesa and Suzlon have in recent months increased their investments in China and are also looking to newer markets like the United Kingdom.Vestas has little chance but to follow them.Its margins and profits have been falling off a cliff as it has failed to adjust to low cost competition from Asia till now.

Vestas employs over 8000 people in Denmark which is its home base out of the 22000 employees worldwide.The company now plans to fire 3000 workers mostly from Denmark even as it hires workers in places like India and UK.Vestas has to cut a lot of flab as Chinese companies destroy higher priced competition in the Wind Energy Industry.Like the Solar Industry,where European companies like Q-Cells and Solarworld are facing an existential crisis from low cost Chinese competition ,Wind Energy now faces similar dynamics.Like Q-Cells and REC which relocated their manufacturing to Asia,Vestas has to do a similar act.Despite a record  order book of 6.5 GW in Q310,Vestas has to fire Danish workers who are more than 10x more expensive than similar Asian workers.In  a globalized world,companies don’t have the luxury of employing expensive workers in developed countries if similar workers can be employed elsewhere.Note competition is increasing in Wind Energy with big players like Hyundai,Samsung,Northrop and smaller players entering the industry.

It will be hard for the Danish workers but I think they would have lost their jobs anyway if Vestas had become bankrupt.A tough but a good decision by Vestas which faces a still a long hard period of restructuring to radically change its business model to reflect the new realities.

Vestas plans 3,000 job cuts after Q3 profit falls – Reuters

Vestas, the world’s largest wind turbine manufacturer, said on Tuesday it would axe 3,000 jobs and shut some plants to adjust to weaker demand, after it posted a smaller-than-expected drop in third-quarter profit.

“In 2011, the European market growth will…not live up to Vestas’ expectations, which is why Vestas is compelled to adjust its capacity in Europe,” Vestas Wind Systems A/S said.