Alfa Laval Cutting Costs To Mitigate COVID-19 Impact

- Mar 18, 2020-

Swedish engineering group Alfa Laval is planning to launch a cost reduction program to address the expected weaker market conditions in the next few quarters stemming from the outbreak of coronavirus and its impact on the global economy going forward.

The program is expected to start having an effect from April 1 and gradually reach fixed cost savings of above SEK 1 billion (USD 100 million) on twelve months rolling basis.

It includes several key components; work time reduction initiatives, aggressive reduction of travel costs, as well as other discretionary spending, and external consultants by putting initiatives on hold.

The company added it would adjust its capacity and variable production cost to prevailing market conditions.

“After a three-year period of major investments in our manufacturing footprint, in a new product program, and in strengthening our global service organization we are prepared to meet a more challenging business environment,” says Tom Erixon, President and CEO of the Alfa Laval Group.

“Our priority at this point will be to continue to serve our customers and to protect our strong global team of employees. Our cost reduction program is designed with this focus.”

 “In the next quarters, several Alfa Laval employees around the world will participate in various work time reduction initiatives,” Tom Erixon continued.

“Consequently, they will also experience a reduction of their compensation package during a transition period. In this context the members of Group Management have decided to implement a reduction of 10 percent of their fixed compensation during the period the cost program is in place.”

Alfa Laval noted that it expects the program implementation to be swift and largely without restructuring charges.

A new assessment of the cost reduction program is planned for the third quarter of the year.