Electrolux 2007 Annual Report Download - page 36

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The appliances industry is undergoing major changes. Whereas
plants were previously located close to end-users in Europe and
North America, a large share of production is being moved to low-
cost countries. The basic driver for the change is consumer
demand for better products at lower prices.
Competitive production footprint as of 2010
The restructuring program initiated in 2004 is aimed at making the
Group’s production competitive in the long term. The costs of the
program are estimated at approximately SEK 8 billion. When it is
fully implemented in 2010, more than half of production of appli-
ances will be located in low-cost countries in Eastern Europe, Asia
and Latin America. Savings will amount to approximately
SEK 3 billion annually. Relocation of the Group’s production of
vacuum cleaners has already been completed.
Every decision regarding relocation of production is preceded
by careful analyses of a number of factors, including current and
future cost levels, conditions for transport, access to suppliers,
and proximity to future growth markets. Such analyses have been
the basis for establishing new plants in Poland, Hungary, Mexico,
China and Thailand.
More than half of the restructuring program has now been com-
pleted. Today, approximately 50% of production is located in low-
cost countries, which means that the Group is quickly approach-
ing the goal of 60% by 2010. The cost of the program to date
amounts to approximately SEK 6 billion. Savings are in accor-
dance with plans, and amount to date to approximately
SEK 1.5 billion.
Electrolux is continuing to work on increasing efficiency, but it is
not expected that a program on the scale of the one being cur-
rently implemented will be required within the foreseeable future.
Program for greater production efficiency
While production is being relocated, the Group is implementing
the Electrolux Manufacturing System (EMS), a global program for
more efficient production. The EMS was launched in 2005 and is
based on a number of tested methods for improving production
efficiency that have been developed both within and outside the
Group. Production safety and working environment are improving
and product quality is rising. The EMS has been introduced with
great success in virtually all Electrolux plants.
In order to create long-term competitiveness, Electrolux is implementing a compre-
hensive cost-cutting program for both production and purchasing that involves
relocating production to low-cost countries and increasing purchases from them.
Made by Electrolux
Restructuring 2007 Electrolux manufacturing footprint by 2010
Plant closures and cutbacks
Torsvik Sweden Compact appliances
Fredericia Denmark Cookers
Nuremberg Germany Dishwashers, washing
machines and dryers
Adelaide Australia Dishwashers
New plants
Juarez Mexico Washing machines
Authorized restructuring
Spennymoor UK Cookers
LCC, 60%
Why keep plants in HCC?
No net-present value case
Efficient and profitable plant
Declining demand
HCC 40%
20%
10%
10%
In 2010, Electrolux will have 60% of its plants in low-cost countries (LCC).
The remaining 40% will be in high-cost countries (HCC) due to economical
reasoning: Net-present value is negative for a transfer of production to LCC;
The plant is efficient and proftible; Demand for the products manufactured is
declining.
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strategy | cost efficiency