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CANADA

Electrolux closes Canada plant, cuts 1,300 jobs

Swedish household appliance maker Electrolux announced on Tuesday that it will close an appliance manufacturing plant in Canada, cutting about 1,300 jobs.

Electrolux closes Canada plant, cuts 1,300 jobs

Production of cooking appliances would be moved from the facility in L’Assomption, a suburb of Montréal, to a lower-cost facility starting in 2012, Billy Benson, vice president of Electrolux Major Appliances North America’s operations, said on Tuesday.

The plant will be shuttered at the end of 2013, he added, citing “competitive factors” for the decision, and incur a total cost of about 450 million ($65.84 million), which will be taken as a charge against operating income in the fourth quarter.

Separately, Electrolux will reduce its workforce in Europe by about 800 employees in 2011 and 2012, but no factory will be closed. Changes will be implemented gradually and fully finalized in the fourth quarter of 2012, the company said in a statement.

The redundancies will incur a total cost of about 400 million kronor, which will also be taken as a charge against operating income in the fourth quarter.

The Swedish company said in October that profits had slumped 15 percent in the third quarter due to fewer sales in Europe and the US and exchange rate losses. In the July to September quarter, Electrolux posted profits of 1.38 billion kronor against 1.63 billion a year earlier, while sales fell five percent to 26.33 billion kronor.

Electrolux is the second-biggest household appliance group in the world after American rival Whirlpool. The company achieves 37 percent of its sales in Europe and 34 percent in North America, but sees its strongest growth in emerging markets.

The sector has been marked for many years by a stream of restructuring moves because global sales were easing and competition from low-cost regions rising. Electrolux has closed many sites recently in France, Italy, Spain and US, as well as Russia and in China.

Benson noted that many major appliance manufacturers have reduced their cost structures by establishing cooking product manufacturing facilities in lower-cost markets.

“Apart from the challenges of the recession, consumers are demanding competitively priced products featuring the latest technologies, requiring manufacturers to continually reinvest in product innovation while managing costs,” he said.

Electrolux began a restructuring program in 2004 that is expected to be completed next year. The total cost of the program will be about 8.5 billion kronor and the program is expected to generate annual cost savings of 3.4 billion kronor with full effect by 2013, the company said in a statement.

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ELECTROLUX

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.