Small appliance division focus of cost reductions.
Just days after the proposed merger takeover of General Electric by Electrolux was called off, the company said it will cut costs and jobs at its small-appliance division. Electrolux said it will reduce costs to save an expected 120 million kronor ($14 million) annually starting at the end of next year.
However, in a phone call between Electrolux spokeswoman Eloise Hale and Bloomberg, she made it clear that the cuts are unrelated to the GE deal. Instead, she explained, it was improvements in profitability of the business which had become a focus in the third quarter.
The company said in a statement on Wednesday that costs related to the program will amount to 190 million kronor, with staff reductions and reduced operations in the US, Sweden and China.
The plan comes because of “reduced volumes in several key markets” and currency fluctuations, the company said. When completed, the small-appliance business will be able to invest in profitable products.
Electrolux will pay GE a breakup fee of $175 million, and transaction and integration costs from the failed deal will be about 175 million kronor in the fourth quarter, the Electrolux said Wednesday. Expenses related to a bridge loan will be 225 million kronor, the company said.
In Latin America and especially Brazil, Electrolux may have trouble raising prices to offset lost sales volumes and foreign exchange fluctuations. Barclays analysts said in a note Wednesday, downgrading the shares to underweight.
Meanwhile, Electrolux shares dropped 1.1% to 201 kronor in Stockholm.