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SKF struggling with weak demand and will cuts work force by 2500

Monday, 14 January 2013
The end of 2012 was even weaker than SKF, the Swedish ball bearings giant expected and the beginning of 2013 does not look better. The company is thus tightening its cost-cutting measures.

Demand for SKF products has slowed gradually during the quarter, especially in December, which turned to have been worse than expected, even though the company at the beginning of the fall predicted weaker demand at the end of the year.

"We had a slight weaker December month mainly in automotive applications in Europe. But also in North America and Asia, "the company's CEO, Tom Johnstone, said in relations to a press release out on Monday and continues: "We have looked at trends in December and assumed that it will continue at this lower level at the beginning of the year."

According to a strategy and the long-term financial goals, which SKF had launched in 2010 based on its initiatives for profitable growth and cost reduction in the company, today has exhibited a more challenging business environment than SKF Group has expected and thus it has decided to expand and accelerate the program of activities for cost reduction. The aim is to reduce the annual cost base by Skr3 billion by the end of 2015.

In the program the company said that it will carry out consolidation of production between cities, transfer of production from Western Europe to Eastern Europe, Asia, Latin America to serve these faster-growing markets with more local production,
Optimization and productivity improvements in the manufacturing and supply chain
consolidation and improved operation effectiveness in administration and other support functions.

The total cost of the program will amount to approximately Skr1.5 billion for the years 2012 to 2015. The costs will be fully recognized when the projects are finalized and implemented during the period. These measures will affect about 2,500 people mainly through earlier retirements and other voluntary and agreed cutbacks.

In the fourth quarter of 2012, SKF is reporting restructuring charges of Skr 200 million as a first step in the program and another Skr100 million for impairment of assets. The annual savings from this first step will be Skr150 million when fully implemented in the second half of 2013. Approximately 550 people will be involved primarily in Ukraine, Italy, Sweden, and the USA.
By Scancomark.com Team

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