In January, some thought the situation for the wind industry's biggest manufacturer could not get worse — after 2,335 jobs cuts, profits warnings and the departure of several senior executives, including chief technology officer Finn Stromm Madsen and offshore chief Anders Soe-Jensen. Vestas' profit warnings were, in part, the result of high research-and-development costs and the failure to bring online a generator factory for its latest V112 and Gridstreamer turbines.
Just three weeks later, Vestas announced the sacking of two recent board appointees, Rieks and chief financial officer Henrik Norremark. In response, chief executive Ditlev Engel said he would assume their roles. It was also announced that board chair Bent Carlsen and deputy chair Torsten Rasmussen along with two other board members would not seek re-election at Vestas' annual general meeting (AGM) in Arhus, Denmark on 29 March. Carlsen has been seen as a supporter of Engel. Compounding all this was Vestas' failure to meet its own preliminary revenue figure for 2011.
Alone in troubled times
Since then the remainder of the board have nominated Sony Ericsson president Bert Nordberg to replace Carlsen at the helm. Although the mobile-phone manufacturer had a torrid 2011, suffering a €248 million loss, the nomination has been generally positive. There is no indication of Nordberg's plans, but Julien Desmaretz, a renewable energy analyst at Bryan Garnier & Co, said he had good experience of corporate restructuring. Also, Lars Olof Josefsson, a former president of both Alstom Power and Siemens Industrial and current president of the Sandvik Mining Corporation, is being nominated for deputy chairman. "The company is left without a deputy chairman, and half the executive management is missing at a time when strong decisions need to be taken, especially regarding better costs management," said Desmaretz.
Vestas faces a number of challenges, including overcapacity and falling margins. According to Bloomberg New Energy Finance, wind manufacturers are being hit by falling turbine prices on older turbines, including the V90, while younger products, such as the V112, are being sold too cheaply.
The Danish manufacturer is also struggling in the burgeoning offshore market, where it has fallen behind Siemens and now Repower, both of which have larger-capacity turbines. Engel has even admitted that Vestas could bring in partners to help it develop its V164 7MW next-generation offshore turbine.
Martin Lykkes, owner of Danish investment broker NPForex, has long been critical of Vestas' management, describing the current situation as "total chaos". "If the shareholders want [Engel] to step down, but they've said it's not their job to pick a new CEO, that's a job for the new board,' he said. "I'd be very surprised if they gave him a chance. The other problem is him stating the strategy is 100% clear, so he's giving no room to the new board to disagree with his strategy," said Lykkes. "For me, it's obvious there will be major changes."
The likelihood is that Engel will still be CEO by the time of the company's AGM at the end of this month. This is when shareholders — who did not receive a 2011 dividend — will vote on Carlsen's replacement. If the incoming chairman wants change it could prove Engel's final curtain call on the wind industry's number-one stage.
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