Securing the Future of the Schaeffler Group – Continuing Economic Crisis Requires Additional Cost Adjustments

* Company aiming for socially responsible solutions, trying to prevent layoffs
* Specific results by July 31
* Agreement on key elements with German metalworkers’ union
Faced with the downturn in market demand, the Schaeffler Group is going to implement additional cost adjustments while trying to prevent layoffs whenever possible.

This decision comes in reaction to sales decreases as a result of the economic crisis since late fall of last year and reduced sales expectations for the next few years. In the first quarter of 2009, the company’s Automotive division recorded a downturn of 33 percent compared to the previous year, which has now stabilized at a level 25 percent below last year’s. The Schaeffler Group’s Industrial division, which accounts for 40 percent of total sales, sustained losses of 12 percent in the first quarter.

At 7.5 billion euros, current sales expectations for 2009 are significantly below 2008 levels. In the current market situation, it is difficult to provide more far-reaching and precise forecasts. The Schaeffler Group does not expect the markets to return to 2008 levels until 2012 or 2013.

Due to lost sales, the Group has to achieve annual labor cost savings of 250 million euros in Germany. “If we were to reach this goal through layoffs alone, it would correspond to roughly 4,500 jobs. However, we have made it clear from the start that we want to prevent layoffs wherever possible. That is why we have focused on a number of other measures to reduce labor costs in Germany and save as many jobs as possible,” said Dr. Jürgen M. Geißinger, President and CEO of the Schaeffler Group.

While the Schaeffler Group has already cut 5,000 jobs in other countries, labor cost reductions in Germany so far have been achieved using short time, natural employee turnover and the termination of fixed-term and temporary employment contracts.

Measures to be taken to further increase labor cost savings in Germany include:

* Reduce working hours and adjust salaries and wages accordingly
* Expand use of short time
* Voluntary agreements to terminate employment
* Cuts in one-time payments
* Partial retirement
* Establishment of transfer companies

“We are convinced that this is the right way, and we have agreed with the German metalworkers’ union on a set of guidelines for cost reduction measures that we want to specify quickly,” Geißinger said. “We will work with employee representatives to identify socially responsible solutions and options for adjusting labor costs by July 31. One of the priorities now is agreeing on the specific implementation for each location as part of our package of measures.“

Implementation of the adjustment measures is to begin after an agreement has been reached with employee representatives.

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