Appliance maker Electrolux to cut up to 8% of 50,000 staff

A SLUMP in demand for household appliances has prompted Swedish manufacturer Electrolux to scale back its North American operations in a move that affects as much as 8 per cent 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 krona (S$154 million) and 1.5 billion krona in the final three months of the year.

Electrolux’s shares initially fell as much as 5.9 per cent but almost immediately recovered and were trading 3.3 per cent higher at 10.13 am local time.

Appliance makers such as Electrolux and Whirlpool 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 realised in its North American division. Total savings from the programme are estimated to be more than 7 billion krona.

“Regarding business area North America, I am obviously very disappointed with our performance,” chief executive officer Jonas Samuelson said in the report.

On Friday, Electrolux reported an operating loss in the third quarter of 385 million krona.

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.”

“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