German wiring system manufacturer Leoni, which gained industry notoriety during the invasion of Ukraine as its workers bravely dodged Russian missiles to keep production rolling, is selling its automotive standard and special cables business to its competitor, wire and cable supplier Stark Corp. of Thailand.
The sale does not include Leoni's wiring systems business, which makes cable harnesses and includes two Ukraine factories whose production has been disrupted by the war.
"With this decision, we strengthen our balance sheet, support the ongoing talks regarding our refinancing and drive forward our well-known strategic focusing on the wiring systems business," Leoni CEO Aldo Kamper said in a statement.
The cables business unit has a global production network of 10 locations in seven countries and about 3,300 employees. It generated about $1.39 billion in sales in the 2021 fiscal year.
Leoni has been hit hard by the war in Ukraine. In the first quarter, sales slipped 6.9 percent year over year to €1.26 billion ($1.35 billion).
The business sale comes as Leoni finds itself in fresh financial trouble. The company is trying to raise about $53 million on the capital market.
Plans to sell the wire and cables division date to 2019 as part of a restructuring plan, according to a Reuters report from November 2019.
Leoni has been struggling for years and just a year ago reported a return to the black. But supply bottlenecks, the steep rise in energy costs and the interruptions of the Ukraine war are now causing the company renewed trouble.
In May, the supplier said production of wire harnesses, a critical component for automakers, had almost returned to prewar levels at two factories in Ukraine. The supplier has about 7,000 employees in Ukraine, out of a total global work force of 101,000.
Wire harness sourcing out of Ukraine has been a major bottleneck for automakers in Europe and elsewhere. Suppliers have struggled to keep assembly lines moving and employees safe, to continue receiving materials and subcomponents through the war-torn region, and to remain staffed up as employees volunteer for duty defending Ukraine from its invasion.
But last week in Davos, Switzerland, Volkswagen Group CEO Herbert Diess sounded an optimistic note on the sidelines of the World Economic Forum.
"The situation from Ukraine is under control now," Diess declared. "If nothing bad really happens anymore, we will not lose too many cars."
Reuters contributed to this report.
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