Electrolux is initiating a cost reduction program on the back of weaker-than-expected market demand and weak earnings in the third quarter. The cost measures are expected to result in a material positive earnings contribution in 2023. In combination with supply chain imbalances resulting in significant production inefficiencies and increased costs, the third quarter earnings for the Group are expected to decline significantly compared to the second quarter 2022 also excluding the one-time cost to exit the Russia market. This has been driven mainly by Europe and North America. Business Area North America is expected to report an operating loss in the third quarter exceeding the loss in the second quarter.
Since market demand for 2023 is expected to continue to be weak in both regions, the Board of Electrolux has decided to initiate a Group-wide cost reduction program addressing both variable and structural costs. The program, which starts immediately, will focus on reducing variable costs, with special attention to eliminating cost inefficiencies in the company supply chain and production. The structural cost reductions will primarily take place in Europe and North America and include prioritization and efficiency measures leveraging recent organizational changes. The measures include increasing productivity in operations as well as optimizing the R&D portfolio, administration, sales and marketing activities.
In business area North America, the strategy to strengthen and broaden Electrolux product offering with consumer experience innovations remains. However, the production transformation with two new facilities and several new product platforms, in combination with the particularly challenging supply chain conditions in the region, require additional measures to return to stability and profitability. A turnaround program will therefore be conducted under the leadership of Ricardo Cons, who has been appointed new Head of Business Area North America. Ricardo Cons has successfully led the transformation of the Electrolux business in Latin America over the last six years. He succeeds Nolan Pike, who takes up a new position continuing to report to Anna Ohlsson-Leijon. A new leader of Electrolux Latin America is anticipated to be appointed shortly.