Vestas Wind Systems A/S, the worlds largest wind turbine manufacturer, will lay off around 3,000 employees after confirming that 2011 orders are likely to fall compared with 2010.
However, in Britain, news of new government subsidies to the wind industry sent giant wind turbine makers scrambling to announce future investment plans.
Ditlev Engel, Vestas chief executive, said the surge in demand for wind power they had hoped for in Europe fell well short expectations.
The company’s third quarter report also revealed that it has more employees than needed to manufacture expected orders in Europe next year.
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The company is expecting to receive around 7 gigawatts to 8 gigawatts of orders compared with a range of 8 GW and 9 GW for this year as previously projected.
The firm also confirmed that its net profit was down from 165 million euros ($228.3 million) to 126 million euros year on year, as with sales that fell from 1.81 billion euros to 1.72 billion euros.
Shipments were also hit hard, with only 719 wind turbines sent out, or 27 percent less than in the third quarter of 2009.
To protect its competiveness as a global company, Vestas decided to start negotiations to close four production facilities in Denmark and another one in Sweden.
Overall, the decision will cut 14 percent of its global workforce, mostly focused on the European market. A further announcement on negotiations with employees is expected on November 21.
Time to move forward
Meanwhile, British Prime Minister David Cameron said this week the country needs thousands of new wind turbines and the government would provide up to £60 million ($95 million) to meet the demands of offshore wind infrastructure.
The large wind turbine companies were quick to respond. Vestas’ rivals General Electric, Siemens and Gamesa committed a total of more than £300 million of investment in new manufacturing centers in the country.
G.E. (NYSE:
GE
) said it would invest £100 million in a manufacturing plant in Britain. The company said the project will form part of a 340 million euro investment in Europe’s wind energy industry over 10 years. In addition to a British manufacturing site, it plans to build facilities in Norway, Sweden and Germany.
Spanish firm Gamesa said it will spend 150 million euros ($208.5 million) to set up a worldwide center for offshore wind, including a turbine factory, while Siemens will reportedly build an £80 million wind turbine factory. Up to 70,000 jobs in offshore wind could be created in Britain by 2020, according to government estimates.
“Based on the expectations we have for 2011 in Europe, however, we must now recognize that a higher European level of activity will not be realistic – at least not in the short term,» Vestas’ Mr. Engel said.
Mr. Engel also said despite the fall in sales, Vestas’ market position has never been stronger, pointing out that the job cuts would protect future growth.
«Vestas must always be able to compete against what we call Asia-cost plus freight,» he said. «And that is unfortunately not possible with the current overcapacity in Northern Europe where the cost level is too high.”
The layoffs follow the company’s decision to move their production facilities away from Europe to focus on countries where demand is higher and manufacturing and shipping costs are cheaper. In fact, 99 percent of its products in the past years were sold outside of Denmark, the company’s home base.
Mr. Engel said it was cheaper for Vestas to produce a wind turbine in Spain and ship it to Sweden than to send it out of Denmark. A turbine manufactured in China and shipped to Denmark costs about the same as making it locally, he said.
