Electrolux slashes 3,000 jobs globally

Swedish white goods maker Electrolux said on Monday it plans on cutting 3,000 jobs worldwide, adding that declining demand would likely result in the company failing to meet operating profit targets for 2008.

Electrolux slashes 3,000 jobs globally

“As a result of weakening demand for appliances in the two last weeks of November and in December, Electrolux will not reach its outlook for the full year of 2008,” the company said in a statement.

“In light of the sharp market decline, Electrolux is reducing the number of employees by more than 3,000 in the fourth quarter of 2008 and in 2009,” it said.

“The weak market has had a negative impact on Electrolux sales volumes and product mix during the fourth quarter,” it said, adding it was “no longer possible” to achieve an operating income in 2008 of 3.3 to 3.9 billion kronor ($415 to 491 million).

As of November 2008, the company’s operating income was about 2.7 billion kronor for the year.

It remains unclear exactly how the cuts will affect Electrolux employees in Sweden.

“It’s going to have an effect on Swedish operations, but it’s too early to say exactly how big it will be,” said Electrolux spokesperson Anders Edholm to the TT news agency.

“In Sweden, there will be more white-collar workers than blue-collar workers who leave. Even the headquarters is included.”

In addition to its headquarters in Stockholm, Electrolux has operations in Ljungby in southern Sweden, Mariestad and Motala in central Sweden, and near Lilla Edet in the west of the country.

The company had 56,900 employees at the end of 2007.

The Electrolux share price plunged on the news, falling by 7.05 percent in opening trading on the Stockholm stock exchange to 69.25 kronor, in an overall market up by 1.28 percent.

The group has for more than a year been in the process of restructuring its business to reduce production costs, moving factories to countries where labour is cheaper.

It also raised prices in order to compensate for rising raw material prices.

The company reported a net loss in the first quarter of the year before bouncing back into a slim profit in the second quarter.

In the third quarter, the company posted an 11.2 percent rise in net profit to 847 million kronor, as sales remained stable.

But its operating profit fell by 72 percent to 254 million kronor during the quarter, a drop attributed to a costly product launch in North America that negatively impacted earnings.

“In December, demand for appliances in Europe and North America continues to show a sharp decline. As sales in December are seasonally low, there is a risk that operating income for the month will be slightly negative,” it said.

Electrolux said the measures announced Monday would cost some 1.2 billion kronor, and would be charged against operating income before items affecting comparability in the fourth quarter of 2008.

“The savings are expected to amount to approximately 1.1 billion kronor on a yearly basis, with full effect as of 2010,” it said.


Sweden’s Electrolux sees big US deal stopped

UPDATED: Shares in Swedish white goods giant Electrolux plummeted on Monday morning after US firm General Electric, which was poised to sell its appliance division to the Nordic firm, cancelled the agreement.

Sweden's Electrolux sees big US deal stopped
Electrolux's office in Kungsholmen, Stockholm. Photo: Fredrik Persson/TT
Electrolux, which sells brands including Frigidaire, AEG and Zanussi as well as its own name, is already the world's second-largest home appliance maker after Whirlpool.
It announced a year ago that it wanted to buy part of General Electric (GE).
But the US firm said on Monday that it has decided to cancel the agreement to sell its appliance division to the Swedish group which had offered last year to buy it for $3.3 billion.
The US Department of Justice had threatened to sue Electrolux and GE over concerns the deal would create a duopoly and hand Electrolux a US market share of some 40 percent.
Electrolux said it had made extensive efforts to obtain regulatory approval, and said it “regrets” that GE had terminated the agreement while the court procedure was still pending.
“Although we are disappointed that the acquisition will not be completed, Electrolux is confident that the Group has strong capabilities to continue to grow and develop its position as a global appliances manufacturer”, said Keith McLoughlin, President and CEO of Electrolux in a statement.
Shares in Electrolux — one of Sweden's most famous brands — initially dropped by 14 percent after the decision was announced, and remained 12 percent lower by mid-morning.
The failed deal has already cost the company millions of kronor in preparatory work and General Electric has requested a termination fee of $175 million.
GE revealed in a statement that it was still interested in selling the appliance division.
Monday's announcement took some analysts by surprise.
“I was surprised this deal was contested by the Justice Department, but then when we saw what their concern, which was the creation of duopoly in a part of the appliance market, it began not to look so good,” said Karri Rinta, an analyst with Handelsbanken Capital Markets.
“It's back to square one for Electrolux in North America. This is a deal that would have made them much stronger in the US especially against Samsung and LG,” he said.