Cost-Out puts the business back on track
How EFESO helped an industrial machinery group return its subsidiary to profitability
A long-established manufacturer of drive and linear motion technology needed to reinvent its business. Falling market prices, declining demand, and unsuccessful turnaround attempts had pushed EBIT into negative territory for the second consecutive year. The parent company, an international industrial machinery group, decided to take a fundamentally different approach. Together with management, EFESO analyzed the interaction between the Product portfolio and the fixed-cost structure. The result was a robust business case featuring a competitive portfolio and a lean cost base, which was immediately implemented by the same project team.
Challenge
A long-established manufacturer of drive and linear motion technology came under increasing pressure as its core markets underwent structural change. Overcapacity drove prices down, demand declined, and despite multiple turnaround initiatives, EBIT remained negative.
MoreEFESO approach
Product portfolio and cost structure cannot be optimized independently. Using a scenario-based approach, EFESO integrated Product portfolio decisions, fixed-cost structures, and indirect cost drivers into one holistic framework.
MoreLessons learned
Successful restructurings are built on facts, not wishful thinking. The strongest results are achieved when strategy development and implementation remain in the hands of the same team, ensuring accountability, continuity, and commitment.
MoreEFESO success model
The analysis phase resulted in an optimized Product portfolio, a robust business case, and a clearly defined action plan for restoring profitability. Implementation began immediately.
MoreRestoring profitability to enable future growth
The subsidiary of a global industrial machinery manufacturer had reached a critical point. The company develops and manufactures complete linear motion systems, including motors, guide components, and mechanical assemblies. These systems are used not only for tool positioning and feed systems in machine tools, but also in packaging applications and high-precision positioning solutions for high-tech industries, resulting in a broad and complex Product portfolio.
While the company's technological capabilities remained strong, its economic performance continued to deteriorate. Structural changes in its core markets placed increasing pressure on the business. Competitors from Asia drove down global market prices, while demand in the European market declined sharply. The business was under pressure from both supply and demand. Production assets were significantly underutilized, and the remaining niche business was no longer sufficient to absorb the company's fixed cost base.
As a major regional employer, the company had long played an important role in the local economy. Management had already implemented cost reduction measures, optimized parts of the portfolio, invested in process automation, and explored new business opportunities. Nevertheless, EBIT remained negative, while both the available time and the strategic options for a successful turnaround became increasingly limited.
To secure the site, its workforce, and the company's know-how for the long term, the parent company decided to fundamentally redesign the business model and rebuild the subsidiary on a profitable foundation. Remaining hopes for market recovery or regulatory support were deliberately excluded from the planning assumptions. Based on EFESO's proven track record in restructuring and implementation projects, management selected EFESO to support the transformation.
An iterative approach connects the product portfolio and the cost structure.
A two-phase approach to success
The project was structured in two consecutive phases. The first focused on redesigning the Product portfolio to restore profitability. The second phase, dedicated to operational implementation, was designed to follow immediately afterwards. The EFESO team for Phase I consisted of an experienced project manager, an analyst responsible for building the quantitative foundation, and an operations expert who prepared the implementation phase in parallel and later took responsibility for leading it. On the client side, the core team initially comprised only senior management with the necessary product expertise.
Integrating portfolio and fixed costs
Methodologically, the project followed an iterative approach that consistently linked the Product portfolio with the fixed-cost structure. The starting point was a detailed analysis of all products based on revenue and gross margin. The team then identified those products that generated disproportionate indirect costs in areas such as planning, logistics, and production planning. The key objective was to identify products where the fixed-cost savings achieved by discontinuation significantly exceeded the resulting loss in contribution margin.
For each portfolio segment, the team evaluated this trade-off in detail. Material flow analyses, which attempted to capture every movement of materials, proved too complex and granular for this purpose. Instead, EFESO developed and assessed a series of business scenarios together with management. Based on these analyses, the project team eliminated loss-making products and low-margin volumes that contributed little beyond covering fixed costs, while simultaneously defining a coordinated program for fixed-cost reduction.
EFESO takes ownership of the identified value potential
In parallel with the portfolio analysis, the team assessed the efficiency improvements that could be achieved with the optimized portfolio and the recalibrated production throughput. In this project, the EFESO team also remained responsible for the subsequent implementation phase. Having the same team that developed the business case lead its execution provided management with additional confidence during a highly challenging period. It also ensured continuity, accountability, and a strong commitment to delivering the identified value potential.
Focus on facts, root causes, and commitment
The project generated several key insights that extend well beyond this specific case and are relevant for restructuring initiatives across industries:
Base decisions on facts – not hope
Restructuring efforts often fail because they rely on wishful thinking and unrealistic assumptions, such as unsubstantiated growth forecasts or overly optimistic expectations. Companies aiming for sustainable recovery need the courage to make decisions based solely on facts and the resources that are actually available, while deliberately setting aside unsupported assumptions.
Always consider the portfolio and cost structure together
Reducing costs without adapting the Product portfolio addresses only the symptoms, not the root causes. Likewise, streamlining the portfolio without adjusting the fixed-cost base risks sacrificing revenue without creating corresponding value. The real restructuring lever lies in understanding which products drive which costs—particularly across indirect functions.
Keep strategy and execution in one hand
Successful restructuring requires strategy and execution to go hand in hand. Business cases that are never implemented, and identified value potential that nobody takes ownership of, create no value. When the same team that develops the restructuring concept also leads its implementation, continuity, accountability, and commitment are significantly strengthened, increasing the likelihood of achieving the agreed objectives.
The seamless implementation puts the company back on a growth trajectory.
Building an operational foundation for sustainable growth
Through the project, the company established a solid foundation for a successful turnaround and defined a clear path back to profitability. At the end of the design phase, the deliverables included an optimized Product portfolio, a robust business case, a clearly defined action plan, and a seamless transition into implementation.
The consolidated Product portfolio builds on the manufacturer's core strengths and is consistently aligned with realistic market opportunities. Going forward, the business focuses on technologically advanced, high-value products for carefully selected market segments where the company maintains clear competitive advantages over international competitors. This portfolio is supported by a realistic business case with clearly defined performance targets. To reduce fixed costs, the project team developed a comprehensive action plan specifying, among other measures, which production assets should be downsized, where capacity reductions at key bottlenecks should take place, and which indirect functions should be streamlined.
The significance of the project extended far beyond its financial impact, particularly for the parent company. By committing to this transformation path and investing in the long-term competitiveness of the site, the parent company clearly demonstrated its willingness to take responsibility, even in times of difficult market conditions and structural change. As planned, EFESO also led the second project phase, focusing on implementation. The same team that had developed the business case took responsibility for delivering the targeted results and realizing the identified value potential. This seamless transition ensured continuity, strong ownership, and a rapid start to execution.