Issue: Jul 2009


Knorr-Bremse charts a safe course through the crisis



Moody’s and Standard & Poor’s award Knorr-Bremse "Baa1/Outlook stable" and

by Nick Palmen

Despite the massive slump in the commercial vehicle markets and falling global demand for freight cars and locomotives, in 2009 Knorr-Bremse has charted a safe course through the crisis. This was confirmed by the latest ratings published by Moody’s and Standard & Poor’s: Moody’s awarded the company a "Baa1/Outlook stable" rating, while Standard & Poor’s retained a positive outlook for Knorr-Bremse in a "BBB+/Outlook positive" rating. In their ratings, both agencies acknowledge the strategic positioning of Knorr-Bremse, with the mutual support provided by its two main pillars, Commercial Vehicle Systems and Rail Vehicle Systems. Other
decisive factors in the positive ratings were the company's international strategy, its robust balance sheet, and a consistent management performance. Knorr-Bremse's financial stability is also secured through long-term credit lines. 

Overall, the Knorr-Bremse Group posted first-half sales of €1.317 billion in fiscal 2009, against €1.790 billion in the prior-year period. The downturn in sales was reflected in a similarly pronounced drop in earnings, which nevertheless remained positive. Consequently, in crisis year 2009, the family-owned company will be continuing along its strategic course geared to long-term success, while at the same time safeguarding its future development by driving
forward innovations in close collaboration with its customers. In 2009, Knorr-Bremse is also continuing to invest in strategically important product development activities and production facilities, such as the new Rail Vehicle Systems plant in Budapest. 

In the Commercial Vehicle Systems sector it was the two most important OEM markets for Knorr-Bremse – North America and Europe – that were hardest hit, showing downturns of 50% and 70% respectively compared to the prior-year period. In a fast and rigorous response, the company took the necessary steps to adapt to the revised market situation. A worldwide economy program was drawn up back in October 2008. Since then, investments have been postponed, overheads reduced, and flexibility reserves exploited, not least through the introduction of short-time working. The necessary adjustment in staffing levels will be kept
substantially lower than the scale of the market downturn, particularly in the research and development sector. Brazil and India too, where Knorr-Bremse maintains its own production facilities, have witnessed declines of 40-45% in commercial vehicle output. The downturns are less pronounced than in Europe because truck sales in these countries are being supported by regional investments in the infrastructure. 

In the Rail Vehicle Systems sector the financial and economic crisis has led to sharp declines in production of freight cars and locomotives, above all in the USA. In the Asian region, however, the Rail Vehicle Systems division posted a further marked increase in sales compared to the prior-year period, as a result of growth in the passenger transportation sector. This positive development is documented, for example, by orders obtained in China for the supply of complete braking systems for 300 locomotives, as well as for an additional 246 cars for two Guangzhou metro lines. The supply of braking systems and platform screen doors for the new
metro in Mecca, Saudi-Arabia, in collaboration with a Chinese rail vehicle manufacturer, is indicative of the growing significance of the Middle East as a growth region, where further major projects can be expected. 

The Knorr-Bremse Group is the world’s leading manufacturer of braking systems for rail and commercial vehicles. For more than 100 years now the company has pioneered the development, production and marketing of state-of-the-art braking systems. Other lines of business include automatic door systems and air conditioning systems for rail vehicles, as well as torsional vibration dampers for internal combustion engines.

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