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A slump in demand for household appliances has prompted Swedish manufacturer Electrolux AB to scale back its North American operations in a move that affects as much as 8% of its 50,000-strong workforce.
The job cuts of 3,500 to 4,000 employees form part of a cost reduction problem that was announced alongside Electrolux’s third-quarter earnings. The company, which makes cookers, hobs, microwave ovens, freezers and dishwashers among other appliances, said it will take a restructuring charge of between 1.2 billion kronor ($109 million) and 1.5 billion kronor in the final three months of the year.
Worsening Outlook
Appliance makers such as Electrolux and Whirlpool Corp are struggling to drum up business amid a worsening economic outlook that includes surging inflation and deteriorating housing markets. As cash-strapped consumers struggle to make ends meet each month they are reducing spending on non-essential items and large purchases. Last month, the Stockholm-based company issued a profit warning owing to weakening conditions in its North American and European divisions.
Electrolux said most of the targeted cost savings will be realized in its North American division. Total savings from the program are estimated to be more than 7 billion kronor.
“Regarding business area North America, I am obviously very disappointed with our performance,†Chief Executive Officer Jonas Samuelson said in the report.
Operating Loss
Last week, Electrolux reported an operating loss in the third quarter of 385 million kronor.
The company’s third quarter was a “disaster in North America, solid elsewhere,†according to Karri Rinta, an analyst at Handelsbanken Capital Markets, adding that the cost-saving targets are “clearly more ambitious than we had expected.â€
“Solid third-quarter results outside North America, coupled wth the ambitious cost-saving targets are expected to drive positive revisions in consensus estimates, most likely already from 2023 but definitely from 2024,†he said.
—Bloomberg