Swedish Firm Speeds Up US Factory Closure
The world's number one bearings maker, Swedish SKF, is speeding up plans to close down a factory in Kentucky, moving production to Mexico as the financial markets turmoil has hit hard the automotive industry, SKF CFO Tore Bertilsson told CNBC.com on Tuesday.
SKF was planning to close its wheel and bearing factory, which employs 250 people and, in two years but now the process will take place in the second quarter next year, to cope with falling demand in the sector, Bertilsson said.
The company, which has a wide range of customers in the industrial and automotive sectors all over the world, beat market expectations with its second-quarter pretax profits on Tuesday and said it saw overall demand rising in the third quarter despite the global economic slowdown.
"We see strong underlying demand. The automotive market has big problems but industrial business continues well," Bertilsson told CNBC.com in a telephone interview.
General MotorsChief Executive Rick Wagoner is set to announce further steps on Tuesday morning to cut costs in the face of slumping sales.
SKF shares rose 6 percent on Tuesday, bucking the general European markets trend.
Its quarterly pretax profit rose to 1.98 billion Swedish crowns ($332 million) from 1.96 billion crowns a year earlier and versus 1.92 billion crowns expected by analysts.
The price of steel, the main raw material used by SKF, has seen strong increases since last year and in the first half of this year, more than doubling the input cost, but "as it seems, now it has levelled out," Bertilsson said.
SKF, which recently signed an agreement to buy Chinese firm Peer in a deal worth around $100 million, said the Swedish company was on the lookout for further acquisitions, mainly in Europe and North America.
So far, the effect of the global credit crunch on SKF has been limited, with the interest rate on some debt issued in the first half raising by only between 25 and 35 basis points compared with last year.
But its impact is still clouding the company's outlook. "The financial turmoil, the possible effect spreading further, that's something we all have to worry about," Bertilsson said.