Vestas – has the wind gone out of their sales.
Recommend on Google+
Last Wednesday, Vestas the leading supplier of wind turbines posted a substantial operating loss of €166m on its operations. This has led to the resignation of the Chief Financial Officer Henrik Norremark, and the Chairman Bent Carlsen and two other main board directors. Norremark was about to be promoted to Chief Operating Officer, in control of the firm’s manufacturing operations.
Vestas share price dropped 14.5% to 57.05 Dkr. The firm has been trying to introduce new technology, but is operating in a saturated market, characterised by over capacity, fierce competition, falling prices and margins. Governments, under pressure from voters and creditors to reign in state spending, has led to falling subsidies and the removal of tax breaks for wind farms. Going green appears to be running in second place to financial retrenchment.
Reuters reported that the firm had threatened to cut 1,600 more at U.S. plants later this year if a tax credit for renewable energy is not extended. This followed an announcement in January, that 2,335 jobs would go in an attempt to restore profitability.
The wind turbine may be deemed by governments to be a merit good, but Vestas’s losses suggest that this may mean that the product is not immune from becoming a market failure.
On windless days, and during periods of heavy snow, the wind farm may not contribute much towards the output of electicty, but its supporters still advocate subsidies from the state.
blog comments powered by Disqus
BUSINESS TEACHER RESOURCE NEWSLETTER
Get first news of business teaching resources, ideas and other materials from tutor2u. Over 9,400 business teachers from the UK and around the world receive our regular teacher email newsletters. Sign up for free here!
