Cutting costs and layers amid softer demand

By Alan Wolf, YSN

In a major structural overhaul, Electrolux has consolidated its global operations into three regional business areas and two main product channels in an effort to cut costs, reduce organizational layers and improve efficiencies.

The “simplification” of its business comes amid what the company described as a challenging macroenvironment marked by weak demand, increased sales promotions and a consumer shift toward lower-priced products, which has put added pressure on margins.

Electrolux’s marketplace assessment mirrors that of Whirlpool, which painted a similar picture last week in its third-quarter earnings report.

To help counter those conditions, the Swedish appliance giant has combined its Europe/Asia-Pacific and Middle East/Africa operations into one geographic business area under Anna Ohlsson-Leijo, the former European region head who was named chief commercial officer last year under a previous reorganization. The North America and Latin America operations remain unchanged under the leadership of Ricardo Cons and Leandro Jasiocha, respectively, while Ohlsson-Leijo receives the additional title of group executive vice president, with responsibility for group consumer direct interaction development and product line wellbeing, the company said.

Electrolux has also reduced its product portfolio to two core categories: product line taste and product line care, headed respectively by Dan Arler and Ian Banes.

In addition, the company has been reorganized into four global functions: operations, under Carsten Franke; technology & sustainability, under Elena Breda; finance, legal & IT, under Therese Friberg, and people & communications, led by Lars Worsøe Petersen.

Electrolux said the reorganization will result in the loss of about 3,000 jobs.

The announcement followed a disappointing third-quarter for the company, which saw net sales slip 5% and the key North American market post an operating loss of SEK 440 million. Electrolux CEO Jonas Samuelson said a turnaround program in North America, which includes innovative new “modular product architectures” and new freestanding cooking products, significantly narrowed the operating loss and helped drive sales of higher margin appliances. But the effort was undercut by “high promotional activity” spurred by a mended supply chain and a consumer who’s shying away from discretionary purchases amid a backdrop of high inflation and interest rates.

Besides the organizational slimdown, Samuelson said the company is stepping up its cost-reduction efforts through “intensified sourcing and cost-engineering initiatives,” and will pin its growth on select mid- and premium product categories.

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