Bosch to Boost Non-Automotive Business Through Takeovers

Robert Bosch GmbH, the world's second-largest automotive group, expects its sales to decline by around 2 percent in the current year, but it's planning to bounce back by decreasing its reliance on its core business.

"The downturn in the global car industry has not yet gone as far as it's going to," chairman Hermann Scholl explained the group's muted outlook for this year.

Last year, Bosch already struggled with low capacity utilization, which put pressure on margins and led to a stagnation in annual net profit. Sales rose 8 percent, but mostly because of consolidation effects.

Investments have already been scaled back. But the group will continue to get by without job cuts in the current year, Scholl stressed.

"Bosch is still clearly in a much better position than its competitors, some of which have reported a two-digit percentage drop in earnings," said Bernhard Jeggle, analyst at Landesbank Baden-Württemberg.

Bosch's big plans

Despite the gloomy short-term outlook for Bosch's most important division, automobile equipment, the group has big plans for the slightly longer term. It intends to lift sales on average by 8 to 10 percent annually.

"An even stronger growth rate is targeted for the group's non-automotive activities," said Scholl.

These are industrial technology, power tools and thermo-technology. The aim was to raise the share these activities contribute to group sales to 40 percent from the current 34 percent.

Eyeing America and Asia

The U.S. and Asian markets will play an important role in the expansion plans. Scholl said that the European markets accounted for 70 percent of sales, meaning that the group was still too dependent on the region.

"Only acquisitions will make it possible to significantly shift these proportions," he added.

In the area of industrial technology, Bosch last year took a major step forward with the acquisition of Mannesmann-Rexroth. With sales of 3.7 billion euros, the group has become one of the world's leading providers of hydraulic steering systems.

In the area of thermo-technology, Bosch remains on the lookout for a takeover target after talks with the major shareholders of heating and engineering group Buderus AG broke off unsuccessfully.

The group also intends to expand its broadband cable business, though Scholl stressed that it didn't plan to be "a driving force in the current market consolidation".