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At a time when the European economy as a whole continues to decline and corporate layoffs at a loss become the norm, Electrolux is in a worse position.
The latest news shows that Electrolux’s loss in the fourth quarter of 2023 widened from the same period last year due to high costs, intensified price competition and weak demand in North America.
Under the pressure of Chinese brands in the European and American markets, Electrolux seems to have no power to fight back. As reported by Australian media, in Australia and the United States, Electrolux faces resistance from Chinese brands such as Fisher & Paykel, Haier and Midea.
If Electrolux can’t find a receiver in 2024, it is very likely that the losses will be even worse. In the home appliance market, Electrolux’s competitiveness is gradually torn apart. In such a situation, it is obviously an unrealistic fantasy to expect a subversive change in Electrolux.
For Electrolux, the most decent and best outcome is to find the most suitable buyer while Electrolux still has brand value.
The much-rumored Midea Group merger and acquisition case in 2023 has not yet come to fruition. 2024 may be a crucial year, and if this year’s mergers and acquisitions do not come to an end before the end of the year, it will definitely be a bad thing for Electrolux.
First of all, Electrolux’s downward trend cannot be reversed, and the longer the loss, the more market share declines.
According to official sources, on February 2, Electrolux will release a full quarterly report, expecting an operating loss of about 3.2 billion kroner ($311 million) in the fourth quarter of 2023, compared with a loss of 2 billion in the same period in 2022, with sales largely unchanged.
The main reasons for the loss came from several sources: first, in October last year, Electrolux estimated the restructuring cost at 2 billion to 2.5 billion crowns;
Second, sales in North America were hindered and market share declined. The main reasons for the loss in North America were last year’s Black Friday and increased price pressures and weak demand;
Third, the cost of Guoxin’s stove plant and the cost of transferring production from another plant to that plant also affected the performance in North America;
Fourth, the 1.2 billion kroner write-down related to the US tax credit also had a negative impact on the Group’s profit.
This sign seems to be difficult to improve in the short term. North America, which was once an important market for Electrolux, has deteriorated in recent years, with rising costs and inflationary pressures further eroding Electrolux’s competitive advantage, in addition to weak demand.
Second, the product competition is not as good as that of Chinese brands, and Haiermei is diluting Electrolux’s share in North America.
Electrolux’s predicament will have a ripple effect. From the perspective of the supply chain, although Electrolux has more than 100 years of well-known brands, factories and partners around the world, these are all in the past. With the continuous improvement of China’s home appliance supply chain in the world, the advantages of Chinese home appliance brands have become more prominent.
Australian media reports suggest that in the U.S., just as in Australia, consumers are turning to other brands such as Haier, while in the U.S., which accounts for about a third of the group’s sales, Electrolux’s underlying loss in the fourth quarter of 2023 increased to 1.4 billion kroner from 1.2 billion kroner a year ago. With brands such as Fisher & Paykel taking away premium market share from Electrolux, Electrolux is also struggling to retain its share of the premium segment.
In the low-end market of North America, Electrolux has a competitive advantage over China’s products. At the same time, Whirlpool, as a local brand in the United States, Electrolux also gradually lost its advantage when it directly confronted it.
For example, in direct price competition, Chinese brands have obvious advantages, while Electrolux cannot follow the price war. Once the price is exchanged for the market, Electrolux’s losses will increase further.
The two forces in North America, Whirlpool and Chinese brands, are the most lethal to them.
Third, layoffs and structural adjustment are still the main theme, and Electrolux is eager for Midea’s help.
Electrolux has been executing on a group-wide cost reduction and North American turnaround plan. Jonas Samuelson, CEO of Electrolux, had said in 2023 that he expected prices in the fourth quarter (2023) to also be negative for the group as a whole.
As a last resort, Electrolux had no choice but to streamline operations and lay off employees, which was the most effective and helpless way to reduce costs.
This involves a change in the original structure. The new organizational structure, reportedly at the group level, will be restructured into three regional business areas and two global product lines, which are expected to affect around 3,000 jobs.
Electrolux smacked of being a bit sick and rushing to the doctor. In order to improve business activities, senior management in some countries has been replaced. For example, in Australia, a new director will be appointed in 2023.
However, the new directors do not seem to be able to stop the sharp decline. In fact, the current situation of Electrolux is by no means solved by replacing the senior management team, but by systemic problems and overall strategy.
In theory, this European brand, which is more than 100 years old, has a stronger insight into the market. However, under the influence of the external environment, the disadvantages of product structure adjustment and technology iteration have slowed down by half a beat, rising costs have raised operating costs, and incompatibility with consumer demand has gradually emerged.
The aging Electrolux is gradually tearing off the glory of the past, but they do not want to completely lose the brand of Electrolux, which has influenced generations in Europe, the United States and even the world. Therefore, they are more anxious to find a pick-up man.
In 2023, there have been several rumors of mergers and acquisitions with Midea, but there is still no official clear reply. However, Electrolux’s partners seem to be more attentive to Midea’s M&A.
According to Australian media reports, at the end of CES in the United States, in the Qantas lounge, the question between competitors and retailers is “how long will it take for the Chinese home appliance giant Midea to make another takeover offer?”
It seems that, in addition to Electrolux itself, those partners and even competitors are closely watching Electrolux’s every move.
This merger and acquisition case may affect the whole body.
