Electrolux steps up spending for North American factory overhaul

STOCKHOLM: Electrolux, one of the world’s biggest home appliance makers, is launching an 8 billion Swedish crown (US$950mil) investment drive to modernise its factories, especially in North America, to better compete with cheap Asian competition.

The increased investments would see the group’s overall capital spending rise to around 6 billion crowns next year from an estimated just over 4 billion in 2017 and would be spread over the coming three to four years, it said.

The Swedish group, and rival of US Whirlpool Corp, has been weeding out less profitable product lines and fine-tuning production, mainly in Europe, helping it reach a long-elusive 6% operating margin in the past two quarters.

Making production nimbler and less costly is key in the white goods business which faces intense price competition from Asian rivals such as LG Electronics of South Korea and China’s Haier Group.

CEO Jonas Samuelson is now moving to modernise Electrolux’s global production footprint along the same lines as he did as head of the group’s European arm before taking the helm of the group early last year.

The latest investment push should yield annual cost savings of 3 billion crowns from 2020, Samuelson said in a presentation to investors.

The group will expand automation and modularisation – a technique that reduces complexity and allows manufacturers to raise the number of components common to a range of products – at its plants in North and Latin America as well.

“This drives a fair amount of incremental capital over the next three to four years, but with an extremely strong payback,” Samuelson said.

In its first full outlook for next year, Electrolux said it expected industry demand to rise 1% to 2% in Europe and 2% to 3% in North America. — Reuters