Last year was not a good year for Denmark’s Vestas (OTCPK:VWDRY), the world’s largest manufacturer of wind turbines. Like the German PV companies, it grew its business based on home country government support, but like the PV companies is facing tougher competition in the global marketplace.
In 2009, publicly traded Vestas announced layoffs of 1900 workers, and last October axed 3000 more, closing four factories.
Now Renewable Energy World has a 2,500 word profile that’s supposed to be an upbeat update on the company’s fortunes, but to me sounds like more bad news. Europe faces overcapacity and 2010 sales were down because government buyers realized they’re broke. The industry’s trade association says their only hope is more aggressive GHG reduction mandates by EU governments.
At the same time, uncertainty in the US — the world’s largest installed base — is increasing.
Meanwhile, the article notes that Vestas faces increasing competition from Europe (Spain's Gamesa (OTCPK:GCTAF), Germany’s Siemens (SI)) and the US (NYSE:GE) which are offering improved products and increasing European production.
If that’s not enough, Vestas — like the German PV companies — faces increasing competition from low cost producers in China and elsewhere in Asia. The money quote of the paper:
"You could say we have been too optimistic for too long," Ditlev Engel, chief executive of Vestas said last October as the company cut its workforce by 15%. He later qualified these words, saying it was right to study the markets before taking "tough decisions" to close four production units in Denmark and another in Sweden, but it was inevitable this phrase would make headlines, sending shockwaves across the industry.
Vestas' move was in response to shifting fortunes, and shifting global markets. "If you can make a turbine in Asia and deliver it to Europe at a comparable price to making it in Europe, we have a problem," said Engel. "So we have to make sure we can always compete with what we call 'Asia plus freight'."
In the comments section, one reader wrote:
He said it all in the beginning...
"Asia + shipping"
The wind folks like to think they’re a tech industry (not really) or a growth industry (depends entirely on subsidies and mandates). The reality is that they make equipment for producing commodity electrons, which makes theirs a commodity industry as well.