Electrolux Moves European Production
This year Electrolux spun off Husqvarna and entered an "intensive phase" in its efforts to move European production to countries with a lower cost base. In the last 2 years the company has moved 25 percent of its total European volumes to new plants in lower-cost countries. Electrolux constructed a factory in Hungary in 2004, with annual capacity of 560,000 refrigerator/freezers. The plant added to Electrolux's existing manufacturing base in the region, already producing 4 million refrigerators, chest freezers, and vacuum cleaners annually. With the addition of the new plant, Hungary became Electrolux's largest production center for refrigerators and freezers in Europe. Most appliances produced in the new plant are exported to Western, Central and Eastern Europe, as well as Russia and Ukraine. Electrolux inaugurated two Polish plants, in Zarow and Olawa, and a third Polish plant opened in December, in Zwidnicia.
Electrolux began closing down its AEG laundry plant in Nuremberg at the start of 2006, to move manufacturing to Italy and Poland. The plant had been identified as being simply too costly to keep. It was a painful process, with months of negotiations as the appliance maker and unions struggled to come up with cost-cutting measures that would save the plant and jobs. At one point, Electrolux CEO Hans Straberg and Bavarian Premier Edmund Stoiber were personally involved in the talks. Nothing could change the simple reality that moving the manufacturing would cut costs dramatically. "We finally had to conclude that there is no way to bridge the large cost gap that would make production in Nuremberg competitive,” says Johan Bygge, head of Electrolux Major Appliances Europe and Asia Pacific.
Production Increases in the UK
But not all Electrolux production is leaving Western Europe. Electrolux will start producing a new line of Zanussi ranges in 2007 at a plant on the Merrington Lane Industrial Estate in Spennymoor, County Durham, United Kingdom, according to a report in the UK's The Northern Echo. The manufacturing start-up comes after an investment of 7 million pounds (approx. U.S. $ 13 million). The new line will produce 70,000 Zanussi-brand appliances in 2007, and will bring the total annual production of the plant to approximately 230,000 Electrolux home appliances. The investment included about 1.2 million pounds (approx. $2.2 million) from One NorthEast, a regional development organization, which helped Electrolux upgrade manufacturing and help safeguard the 630 jobs at Merrington. The Northern Echo reports that Electrolux began producing the new Insight line of ranges (cookers) at the plant a year ago, and the Zanussi products will be manufactured on the same production line
Production Developments Around the World
Electrolux said it plans to scale back Australian manufacturing operations with a decision to close its washer/dryer and dishwasher plants in Adelaide over the next year and a half. Production will be moved gradually to other Electrolux factories. The Electrolux dishwasher plant will close at the end of April next year and the Electrolux washer/dryer plant by the end of first quarter of 2008. Approximately 500 jobs will be affected by the closures, which are part of the ongoing restructuring program that was announced in 2005.
Electrolux also announced that it will restructure some North American operations, which includes building a new plant in Mexico to manufacture laundry appliances currently made in Webster City, Iowa, U.S. The plant in Juarez, Mexico, just across the border from El Paso, Texas, U.S., will make front-load (horizontal axis) washing machines, which are increasingly popular in the U.S. Electrolux officials said the Webster City facility does not have the capacity to meet demand expected for the products. While Webster City will retain manufacturing of other laundry products, it is expected to lose about 700 jobs. The plant in Juarez, expected to start-up in late 2006, will eventually employ about 800 workers.
Electrolux’s Third Quarter Results
Electrolux finished the third quarter of 2006 with net sales increased to SEK 75,962 million (approx. U.S. $10,373 million), compared to SEK 72,050 million (approx. $9,839 million) for the first 9 months of 2005. Income from continuing operations was SEK 1,213 million (approx. $166 million), compared to SEK 485 million (approx. $66 million) for the same period last year.
Other Electrolux Happenings
The Foodservice Consultant Society International (FCSI) named the Air-o-speed by Electrolux Professional the Product of the Year. The air-o-speed is a high-speed combi oven with an innovative method of cooking that uses a combination of convection, steam, combi (steam and convection), and a patented micro-wave technology, designed to provide a completely integrated cooking process.
Magnus Yngen was appointed head of Electrolux Major Appliances Europe. Yngen previously held the position as head of the Electrolux Group's global floor care and small appliances business. Johan Bygge, current head of Electrolux Major Appliances Europe and Asia Pacific, will serve as head of Major Appliances Asia Pacific for a transition period, then will leave Electrolux to pursue opportunities outside the company.
Electrolux and Sharp Corporation entered a collaboration to develop a new range of mid-sized frost-free refrigerators. The first project consisted of joint development of six different types of environmentally friendly, energy saving, small and mid-size frost-free refrigerators. Electrolux and Sharp differentiated their own products in terms of marketing, design and features. The products are built in Sharp's Thailand factory, slated to be launched during the autumn of 2006.
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