Electrolux Cuts Costs, Jobs After GE Appliance Deal Failsby
Swedish company says small-appliance cuts unrelated to GE
Electrolux says cuts address lower volumes in some markets
Electrolux AB will cut costs and jobs at its small-appliance division, a move that comes after the collapse earlier this week of the Swedish manufacturer’s $3.3 billion deal to buy General Electric Co.’s household goods business.
Electrolux will reduce costs to save an expected 120 million kronor ($14 million) annually starting at the end of next year, the Stockholm-based company said in a statement Wednesday. Costs related to the program will amount to 190 million kronor, with staff reductions and reduced operations in the U.S., 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.
The cuts are unrelated to the GE deal, Electrolux spokeswoman Eloise Hale said by telephone. Improvements in profitability of the business became a focus in the third quarter, she said.
The GE deal would have allowed Electrolux, the maker of Frigidaire appliances, to better compete with Whirlpool Corp. and Asian manufacturers. GE said Monday it was abandoning the accord because of opposition from U.S. antitrust regulators, who had sued to block the transaction. A judge had begun hearing arguments from both sides at a trial in Washington.
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 Swedish company 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.
Electrolux shares dropped 1.1 percent to 201 kronor in Stockholm.