Electrolux, the world’s leading domestic appliance maker, has put 27 plants on an “at risk” list as it speeds up moves to switch production to low-cost countries to maintain its global competitiveness.
Its factory at Spennymoor in County Durham, which employs 600 people and makes conventional cookers, is among plants in Australia, the US and western Europe that will be reviewed as the group moves more of its manufacturing to eastern Europe, Mexico and Asia.
Almost half the plants on the list could be closed between now and 2008 as part of a 10bn Swedish crown (£750m) rationalisation, according to Electrolux.
“It is the consumers who are doing this to us. They are not willing to pay extra for products produced in specific countries. We need to move production to other countries to be competitive,” said a spokesman.
The review of production sites is part of a radical restructuring of the Swedish group which includes spinning off its outdoor products business, which makes lawn mowers and chain saws under the Flymo and Husqvarna labels, into a separately listed company.
Electrolux is also cancelling its listing on the US Nasdaq exchange because the bulk of trading in its shares takes place in Stockholm and London.
Last year Electrolux announced a series of plant closures in the US, Australia, France and Denmark as it struggled with increased costs and competition. Yesterday’s announcement marks an acceleration in the group’s programme of shifting manufacturing to low-cost locations.
“If you compare Sweden to Hungary, salaries are around one tenth in Hungary. If you go to Asia the figure is even lower,” the spokesman said.
He added that a number of factors would determine which of its factories would be earmarked for closure. “It’s about profitability, flexibility, competition, a whole range of things.”
Electrolux employs 72,000 people, including 11,000 in the outdoor products business. Yesterday it declined to comment on how many jobs might be lost. “We don’t have that kind of information. It depends on how big or small the relocated factories are and we will have to hire more people in other countries.”
The group expects the relocations to save it up to £265m a year by the time they are completed in 2008.
News of the accelerated relocation programme came as Electrolux announced that profits fell sharply last year. Net income was down from SEK7.2bn to SEK4.7bn.
The group said it expected demand for home appliances in Europe and North America to show some growth this year compared with 2004 but operating profits would have to bear some of the rising costs of raw materials.
The group has been hit by rising steel and plastic costs but it said yesterday that price increases of 5% to 10% in the US were holding and it was hopeful that it would have similar success elsewhere.
“In the US we see that price increases are sticking. In Europe we see a gradual implementation during the first and second quarters and I’m hopeful it will be the same here,” said the chief executive, Hans Straberg.
Electrolux said that the implementation of the EU’s waste electrical and electronic equipment directive, under which appliance manufacturers will be made responsible for recycling their own products when they are scrapped, will cost about SEK600m a year. The directive comes into force this year. However, the company conceded the estimate was “highly uncertain” and could vary.
From The Gaurdian