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Vestas considering factory sale amid operations overhaul

COPENHAGEN–After a tough year marked by profit-warnings and job cuts, Danish wind turbine maker Vestas Wind Systems A/S (VWS.KO) is looking to overhaul its business model by fostering closer ties with parts suppliers and concentrating its own activities on higher margin turbine engineering and design and service of wind power plants.

Chief Operating Officer Jean-Marc Lechene said in an interview that the company would like to outsource the manufacturing of less advanced components, such as wind towers, in order to focus more on lucrative advanced wind turbine technology including blades and control systems, manufacturing of turbines and sale and service of wind power plants.

As part of that strategy, the company is seeking buyers for a number of manufacturing facilities, possibly including the towers factory in Pueblo, Col. Vestas declined to confirm if talks were already underway regarding Pueblo, which currently produces towers, the tall structural support components carrying the turbine’s rotor blades, for both Vestas and an unidentified third party.

“We want to focus on areas where we create value and realize that, in towers, Vestas does not add a lot,” Mr. Lechene said.

The company last year said it plans to sell or close down some of its 25 factories by the end of 2014 in order to bring built-up excess production capacity in line with demand and reverse deep losses. In 2012, the company widened its net loss to 963 million euros ($1.25 billion) from EUR166 million in 2011. It aims to cut staff to 16,000 by the end of this year from 17,778 at the end of 2012.

Once boosted by subsidy-fueled growth, Vestas has recently been hurt by development-budget overruns and production overcapacity as it ramped up in the past five years in anticipation of a wind-power boom that never materialized. The company has said it expects to rein in turbine shipments to between 4 Gigawatts to 5 GW of production capacity this year from 6 GW in 2012.

Mr. Lechene joined Vestas in July 2012 after the company underwent a management and boardroom shake-up amid pressure from shareholders.

The COO said he is studying organizational models typically used by the car industry where suppliers work for many companies and thereby can keep unit production costs down.

Any possible new owners of Pueblo and other factory sites to be sold should become strategic partners since Vestas would use them as suppliers and involve them in the development of products as well, Mr. Lechene said.

Vestas has plants in North America, Europe, China and India.