Electrolux 2008 Annual Report Download - page 40

The appliance industry is undergoing major changes. A large
share of production has been moved to low-cost countries. Still,
some plants will remain in high-cost countries due to economical
reasoning, such as high transportation costs as well as strategic
factors. The basic driver for the change is consumer demand for
better products at lower prices.
Final phase of restructuring program
Electrolux is now in the final phase of the comprehensive restruc-
turing program that was started in 2004. By the time it is comple-
ted in 2010, approximately 60% of the Group’s appliances will be
produced in low-cost countries, and savings will amount to
approximately SEK 3 billion annually. More than half of production
is currently in low-cost countries. All Group vacuum cleaners are
already produced in low-cost countries.
Every decision to relocate production is preceded by careful
analyses of a number of factors, including present and future
labor-cost levels, transportation parameters, access to suppliers,
and closeness to future growth markets. Such analyses have
resulted in decisions on new production facilities in, e.g., Poland,
Hungary, Mexico, China and Thailand. In 2008, Electrolux opened
a large, new plant in Juarez, Mexico, for production of washing
machines and tumble-dryers for the North American market. This
plant and the plant for refrigerators that was opened in 2006 in
Juarez now employ about 2,700 people.
Program for more efficient production
Since 2005, the Group has worked through the Electrolux
Manufacturing System (EMS), a global program for increasing
production efficiency. Based on a number of proven methods for
improving production that were developed both externally and
in-house, EMS has been implemented in virtually all Electrolux
plants, with great success. Safety and the working environment
have been improved, and so has product quality. The success
of EMS has led to linkages with other major investments and
projects within Electrolux, such as purchasing and product
development.
Managed by Sustainability Affairs, energy-reduction targets are
coordinated through EMS. To date, substantial CO2 emissions
reductions and cost savings have been achieved. The Group’s
over 50 factories are responsible for emitting 90% of direct CO2
emissions. The goal is to reduce total energy consumption by
15% between 2005 and 2009. This will generate cost savings of
approximately SEK 100m annually.
annual report 2008 | part 1 | strategy | cost efficiency
Plant closures Closed
Torsvik Sweden Compact appliances Q1 2007
Nuremberg Germany Dishwashers, washing Q1 2007
machines and dryers
Adelaide Australia Dishwashers Q2 2007
Fredericia Denmark Cookers Q4 2007
Adelaide Australia Washing machines Q1 2008
Spennymoor UK Cookers Q4 2008
Authorized restructuring Estimated closure
Changsha China Refrigerators Q1 2009
Scandicci Italy Refrigerators Q3 2009
New plants
Juarez Mexico Washing machines 2007–2008
Restructuring, 2007–February 2009
At the same time as production is being relocated to low-cost countries,
the Group is implementing several programs designed to increase
efficiency and quality in terms of products and production. A number
of other activities are aimed at reducing the costs of materials.
Electrolux manufacturing footprint by 2010
LCC, 60%
HCC, 40%
Why keep plants in HCC?
No net-present value case
Efficient and profitable plant
Declining demand
HCC 40%
20%
10%
10%
In 2010, approximately 60% of Electrolux plants will be in low-cost countries
(LCC). The remaining 40% will be in high-cost countries (HCC) due to econo-
mical reasoning: Net-present value is negative for a transfer of production to
LCC; The plant is efficient and profitable; Demand for the products manufac-
tured is declining.
Made by Electrolux
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