The strategy and the long-term financial targets which were launched by the SKFGroup in 2010 were based on initiatives for profitable growth and costreductions in the business. Based on today’s more challenging businessenvironment the SKF Group has decided to expand and accelerate the programme forcost reduction activities aiming at reducing its annual cost by SEK 3 billion bythe end of 2015.
The cornerstones of the programme for cost reduction activities are:• consolidation of production between sites• transfer of production from West Europe to East Europe, Asia, Latin America inorder to serve these faster growing markets with more local production• optimization and productivity improvements in the manufacturing and demandchain processes• consolidation of and efficiency improvements in administration and supportfunctions• reduction in purchasing cost mainly through standardization andrationalization of the supplier base.
The total cost for this programme will be approximately SEK 1.5 billion for theyears 2012 to 2015 and will be recorded as projects are finally approved andimplemented during the period. This will impact some 2,500 people primarilythrough early retirement and other voluntary and agreed reductions.
"When we launched our financial targets in the autumn of 2010 we identified costreduction as one of the key initiatives and the activities we have now announcedand those which are underway are part of this. We will also continue toaggressively drive our initiatives focussed on profitable growth which can beseen for example with the new investments we are making in faster growingregions and industries, our increased investment in research and development andthe acquisitions which we have made," says Tom Johnstone, President and CEO.
"Demand weakened as we went through the fourth quarter and we expect it tocontinue at this lower level at the beginning of this year. Manufacturing wastherefore reduced more than planned to reflect this, resulting in inventoriesbeing lowered by over 600 MSEK," Tom Johnstone continues.
In the fourth quarter 2012 SKF will report restructuring cost of SEK 200 millionas the first step of the programme and in addition SEK 100 million forimpairments and write down of assets. The annual savings from this first stepwill be SEK 150 million when fully implemented in the second half of 2013. Some550 people are affected primarily in Ukraine, Italy, Sweden and USA.