Germany's Schaeffler AG plans to cut up to 500 jobs at its industrial division, where slow delivery chains and overly centralised sales operations are hurting profit.
Operating earnings at the industrial unit, which makes ball bearings for products ranging from tools to aeroplanes, fell 1.7 percent to 171 million euros ($190 million) in the first six months of 2015, the family-owned company said on Thursday.
Its sales were up 7.5 percent to 1.7 billion euros but slid 0.8 percent if currency tailwinds were excluded.
Most of the job cuts will be carried out in Germany and Europe through the end of 2017, the company said, adding it would avoid forced layoffs and plant closures. Schaeffler has a total of 83,774 employees.
Schaeffler is setting up a new European distribution centre and will cede more responsibilities to regional sales branches to be able to respond to customers' needs more quickly.
"This approach will consistently align our industrial business along customer and market needs and set the course for sustainable sales growth and increased profitability," said Stefan Spindler, head of Schaeffler's industrial unit.
Schaeffler, based in Herzogenaurach, Germany, generates three quarters of sales from its automotive business, which posted a 3.2 percent gain in first-half operating profit to 647 million euros.
Car registrations in Europe, where Schaeffler earns about 60 percent of its revenue, grew at their fastest monthly rate since December 2009 in June, boosted by low interest rates and falling unemployment.
The family-owned group affirmed its full-year guidance for sales growth of 5-7 percent, compared with 8.2 percent in 2014, and an operating of between 12 and 13 percent, after 12.6 percent last year.