THE rising value of the Australian dollar is putting enormous pressure on Orange’s largest employer, the Electrolux fridge factory, forcing it to find new ways of cutting costs from its business to remain globally competitive.
The dollar has appreciated in value some 30 per cent in the past 12 months. It is now hovering around the US 74 cents mark, after trading at US 56 cents last December.
As the value of the dollar rises, Australian-made goods become more expensive to purchase in overseas markets, causing export sales to drop. Conversely, imported products become cheaper for Australians to buy.
The major concern for Electrolux is that if the dollar continues to rise, export orders may drop and products made by its major competitors such as LG and Samsung will become cheaper in the domestic market.
In May this year, when the dollar was fetching about US 65 cents, the general manager of Electrolux’s Orange plant, Scott Ostini, told the Central Western Daily: “It [the dollar] has been tipped to go to 75 cents. If it does that it could have a big impact on Orange operations.”
The Sydney head office of Electrolux Home Products now says that US 75 cents mark is not so critical. A spokesman said it was very much “a moveable feast for Electrolux these days – things can be said in May that don’t apply in December”.
The company’s managing director, Trevor Carroll, said the rising Australian dollar favoured importers, but Electrolux was now a major importer of materials and components for its Australian-based manufacturing plants, including its Orange fridge factory.
“When a situation like this occurs, Electrolux intensifies its efforts to source its components from low-cost countries in an effort to keep the cost of finished products at competitive levels.
“At times like this, Electrolux is driving efficiencies hard to cut costs out of the business, but at this point there is no major impact on the Orange plant. “There are good stable export orders in place for that plant.”
However, the company is so concerned about the potential negative impacts of a strengthening Australian dollar it has appointed an executive whose main role will be to source the cheapest possible components and materials from around the world for inclusion in the Orange production line. Daan Hekma, who currently works for Electrolux in the United Kingdom, will move to Sydney in the new year to take up a position as director of operations and logistics.
A spokesman said Mr Hekma, who will report to Mr Carroll, will have a focus on materials management and will work closely with Mr Ostini “to ensure the process of putting together fridges in Orange gets much more competitive”.
“In order to keep the Orange plant competitive, more and more materials will have to come from cheaper sources.”
Electrolux has invested $60 million into new plant and equipment at the Orange factory since it took over the business from Email in February 2001. The whole focus of the investment has been to significantly increase output and to develop Orange as a hub for its exports to Asia and Europe. Mr Ostini said as the dollar had appreciated, the company had focused more on “reducing costs to ensure our products remain competitive in the marketplace”.
The higher dollar had allowed it to obtain some cheaper imported inputs, but it had also “given a leg-up” to the company’s competitors in the domestic market.
“It does impact on our exports. but it also means we have to work harder to reduce our costs to remain competitive and that is exactly what we are doing,” he said.