Inventory has increased. It may be that the company is getting its supply chain in order. Raw material has increased; could this be because of new launches or delayed launches for GM and other new designs? Has the manufacturing capacity finally caught up in the new factories so that there are as many days of finished goods as factory lead time, 1-3days? Does this increase represent the inefficiencies of low cost geographies? They are further away therefore more raw material and finished goods are required. Premium freight is even more expensive when borders are crossed. Labor on the automotive side is less than 1% of cost. Outsourcing production would also increase semi-finished goods inventory.
Reducing high cost geography head count in reaction to a missed quarter is a sign of short sighted management. The reduction should be part of on going plans to move services and production to where they are required. Some of the rolled heads were working on controlling and reducing costs. The amount of production Harman has in high costs geographies is down over 65% since current CEO in place. This includes Germany. Design has also been following this path. Harman 's premium value is its leading products as perceived by the automotive manufacturers. Failure in the product side will cause the value to leak out over time.