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issue: August 2007 APPLIANCE Magazine

Europe Report
A Better Year for European Appliance Makers


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by Paul Roggema, Europe Correspondent

Annual reports from Europe’s biggest OEMs clearly show that the economic upturn in Europe is being felt by the appliance industry.

BSH Bosch und Siemens Hausgeräte GmbH in 2006

BSH looks like the front-runner in Europe these days. BSH had a great year, with increases in revenues, profits, and market share. BSH’s annual report states that a 4% growth in the world economy did surely help, despite the negative factors facing all appliance makers. These include price erosion, steel cost increases, and aggressive competition from low-wage countries. It is no secret that BSH started to relocate manufacturing some time ago, largely before Electrolux. BSH did report a slightly lower net profit, resulting from higher taxes.

Despite these trends, average finished goods prices went up, which is attributed to shifting customer tastes. German market researcher GfK awarded BSH the No. 1 rating in customer service, and BSH received many other awards and honors in 2006 for environmental, design, and partnership initiatives. Its Nauen (Berlin) factory is now considered one of the most advanced appliance plants in the world, with its recent installation of a high-end washer line. BSH’s Russian refrigeration plant in St. Petersburg is expected to start production in early 2007, accompanied by a logistics center.

The greatest regional contributors to BSH performance were Spain, Turkey, Poland, China, and the UK. Negative regional impacts were also seen, stemming from production realignment and changes in administrative structures in Germany, Spain, China, and the United States.

Electrolux AB in 2006

The Electrolux annual report shows clearly the effects of manufacturing relocation out of high-cost countries. The closure of the flagship AEG factory in Nuremberg, Germany, resulted in bad publicity, revenue loss, and a hefty SEK 2098 million (approx. US$300 million) restructuring provision in 2005. Final closure was in Q1 2007, earlier than originally planned. AEG production lines are now in Italy.

Globally, Electrolux appliance production in low-cost countries is now 40%, but a 60% level is targeted for 2009. The same trend applies to purchasing. In floor-care appliances, which have lower shipping costs, all production is now in low-cost countries. After moving manufacturing to Hungary, labor costs for these products dropped from 35 to 12% of the total production cost.

Still, by designing innovative products such as the Ergorapido handheld vacuum cleaner, Electrolux is striving to reverse the trend of declining end-product prices. This product is priced 40% higher than an "average" vacuum, and total sales in 2005–2006 were 800,000 units. The trend to bagless models, which are usually more expensive, also helps.

Another innovative product is the Time Manager washing machine. The user sets the total washing time, and the program is adjusted accordingly. Electrolux was the first to offer tumble dryers using steam, which eases ironing and freshens garments. The AEG heat pump dryer is the only one to achieve energy Class A requirements. On the brand front, Electrolux is investing heavily in cobranding its high-end European products under the AEG-Electrolux label.

European workers and engineers must be proud that the Duet high-capacity drum washer continues to be the bestselling front-loader washer in the United States This machine is produced and designed in Germany by the former Bauknecht organization. It is sold in Europe too as Bauknecht Big and Whirlpool Dreamspace. Bauknecht also introduced the Hygiene+ washer, which uses 80˚C (176˚F) water temperature to destroy bacteria and remove allergens. The company expanded the Whirlpool brand further in Europe in 2006, especially in Turkey and Russia. Preparations are under way for the European introduction of the high-end KitchenAid brand.

 

 

Profits are net profits, except for Candy and AM. 1) Profits are after tax. Before tax 542 million, +8.4 %. 2) Profits 2005 SEK 494 million (including restructuring costs). 3) Europe revenues include noncomparable operations (plant closures, Husqvarna spin off). 4) Includes Maytag acquisition. 5) Staff is for consumer durables products and excludes professional products. 6) Growth in Turkish Lire is 11.4%. 7) July 2005 through June 2006. 8) Includes other consumer products and integration of Brandt. 9) Profits are Ebitda. 10) Profits before taxes. 11) Estimate, cooling products only. 12) White goods only.

 

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