SKF Cuts 2,500 Jobs to Reduce Costs Amid Weakening Demand
SKF AB (SKFB), the world’s largest maker of bearings, will cut more costs and move production to faster- growing regions to counter weakening demand.
The company now targets cost reductions by 3 billion kronor ($464 million) by the end of 2015, Gothenburg, Sweden-based SKF said today in a statement. Some 2,500 people may be affected with the main focus being on early retirements and other voluntary solutions.
The company is expanding a program unveiled in October 2010 when the company set new financial targets such as reaching an operating margin of 15 percent and reducing fixed costs. Today’s extension also includes consolidating production between plants and moving output from western Europe to eastern Europe, Asia and Latin America to better serve these fast growing markets with local products.
“Demand weakened as we went through the fourth quarter and we expect it to continue at this lower level at the beginning of this year,” Chief Executive Officer Tom Johnstone said in the statement. “Manufacturing was therefore reduced more than planned to reflect this.”
The stock rose 0.4 percent to 162.90 kronor as of 9:39 a.m. Stockholm trading, valuing the company at 74.1 billion kronor.
The total cost of 1.5 billion kronor for the program will be booked between 2012 and 2015, the company said.
The move of production from western Europe may involve closing down entire plants or just move parts of the production, SKF spokeswoman Ingalill Oestman said by phone. SKF may also opt to sell, she said. The company will disclose which units are affected after talking to the staff first.
SKF will book restructuring costs of 200 million in the fourth quarter and book 100 million kronor in impairments and writedowns of assets. In a first step, some 550 people will be affected, mainly in the Ukraine, Italy, Sweden and the U.S., SKF said.
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