Electrolux Not Yet Naming Plants To Be Closed
Nov 17, 2011
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Electrolux AB hosted a Capital Markets Day this week in which President and CEO Keith McLoughlin explained why the company needs to cut costs and cull overcapacity, but he still did not name which plants in Europe and North America that will be shuttered.

Electrolux gave warning that cuts were coming at the time it announced its disappointing third-quarter 2011 results in late-October.

McLoughlin said at the Capital Markets Day that Electrolux has an action plan that will provide an estimated annual savings of SEK 5.1 billion (approx. US$750 million)—about twice as much as the company had originally discussed.

Electrolux said its core strategy is the same, but it now plans to implement faster. The company intends to create sustainable economic value by;
• capitalizing on growth opportunities
• speeding up product-innovation
• adapting manufacturing capacity to improve operations
• cutting overhead costs
• accelerating steps to capitalize on its global scope

In North America, Electrolux expects 2011 sales volumes of household appliances to be 25% down from the peak year in 2005.

In Western Europe, It expects 2011 sales volumes to be 15% below the peak year of 2006.

Electrolux said that, even as it was being affected by lower consumer confidence in mature markets, increased costs for raw materials impacted earnings. It expects these factors to amount to SEK 2 billion (approx $295 million) in 2011 and half that in 2012.

Electrolux plans manufacturing restructuring that its estimates will generate annual savings of SEK 1.6 billion (approx. $235 million) as of 2016. Costs for these measures amount to approximately SEK 3.5 billion (approx. $515 million).

Overhead costs will be reduced by about SEK 500 million ($74 million) which will come after a review of staffing levels in all regions.

Overall, the restructuring will cost the company about SEK 1 billion in 2011 and 2012, with total annual saving estimated to be SEK 3 billion ($440 million) by 2015.

Electrolux broke ground on a new cooking appliances plant in Memphis, TN, in October 2011 - but the plant is not actively under construction yet. Electrolux scaled down the original size of the plant and began looking for a new general contractor, according to a Memphis Commercial Appeal report, after construction costs exceeded estimates.

In a statement to the media after the Capital Markets Day, Electrolux said it intends to continue construction in Memphis and is "on track" to add more than 1240 jobs in the area.

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