Home appliances maker Electrolux Lehel Kft last week announced 2003 sales that outstripped original plans, while revealing details of future production at its new factory to open in Nyregyh??za in 2005.
In addition, parent company Electrolux AB announced that rising costs and unfavorable exchange rate movements had led it to consider moving all its vacuum cleaner production to Hungary.
Speaking to the press on the announcement of the Hungarian subsidiary’s 2003 results, local CEO J??nos Tak??cs stated that over the course of the year Electrolux Lehel produced four million refrigerators and vacuum cleaners at its factory in J??szber©ny, and sold 550,000 appliances in Hungary. Refrigerator production at the J??szber©ny plant totaled 2.2 million, the first time the firm has surpassed two million units in Hungary. The company beat its own target by recording record sales of Ft 113.4 billion (€434.5 million) over last year, up from Ft 97.2 billion in 2002.
Electrolux will open a new plant in Nyregyh??za, in northeast Hungary, in 2005. The foundation stone was laid a month ago, and when completed the new factory will boost refrigerator production by 560,000 units per year. Tak??cs added that this will mean that once the plant is fully operational, nearly 10% of all Electrolux refrigerators worldwide will be built in Hungary.
The new factory will cost around €64 million, and the company stated that most of the funding will come from its own profit reserves.
Talking to the Bloomberg newswire about the 2003 group results, Electrolux AB CEO Hans Strlberg stated that the company had taken a close look at its cost position and was planning to continue its drive to increase the sourcing of components from low-cost countries. He also stated that Electrolux may take the decision to shift production of vacuum cleaners to Hungary from its plant in V¤stervik, Sweden, to further reduce expenses “within a couple of months.” Closing the Swedish factory and shedding 500 jobs there would cost approximately 200 million Swedish krona (€21.7 million), but would lead to yearly savings of 150 million krona per year, the company stated.
An official press release explained the reasoning behind the possible shutting of the Swedish plant. “Global competition on the vacuum cleaner market is forcing the industry to decrease its costs. In Europe, Electrolux manufactures vacuum cleaners in two factories, one in Sweden and one in Hungary. In terms of capacity, one factory is sufficient. A first analysis shows that a move of production to Hungary would result in substantial savings,” said the release.
Speaking to the BBJ from Stockholm, Jacob Broberg, head of corporate communications for Electrolux AB, said no final decision had yet been made, but added that only three possibilities are under consideration, namely shifting production from Hungary to Sweden, or vice versa, or moving it to China.
“Wages in Hungary are a tenth of those in Sweden, so all roads are currently pointing to Hungary,” he said.
Should the move go ahead, it would not be the first time the Hungarian operation has benefited from the group’s global cost cutting. Back in 2002, part of Electrolux’s refrigerator production was transferred from Fuenmayor, Spain, to Hungary. Over the course of 2004, Electrolux Lehel is planning investments in Hungary worth nearly Ft 13 billion. This will be the company’s largest investment since 1991, and is mainly the result of the outlay on the Nyregyh??za project.
In the breakdown of its sales results, Electrolux increased sales in Hungary by 10% in 2003 over 2002, both nominally and in terms of value. According to the 2003 figures, large household appliance sales by Electrolux gave the company 43.9% of the total domestic market, placing it firmly in the position of market leader, as it was in vacuum cleaner sales, claiming 19% of the market. Last year, the Electrolux group manufactured a total of 55 million household appliances worldwide.
From The Budapest Journal