Ericsson issues update on cost and efficiency program
The intended reductions in Sweden announced on Oct 4, 2016 are progressing ahead of plan. Voluntary program finalized - no further forced workforce reduction currently planned in Sweden.
Total company restructuring cost for 2016 estimated to SEK5.5–6.5 billion, compared to previous estimate of SEK4–5 billion, due to faster implementation of the cost and efficiency program in Sweden. Restructuring costs for 2017 are expected to somewhat decrease, but will be communicated in conjunction with Ericsson Q4 result in January 2017.
STOCKHOLM, SWEDEN – On October 4, 2016, Ericsson (NASDAQ:ERIC) announced the intention to reduce 3,000 positions in Sweden as part of the company's ongoing global cost and efficiency program. The reduction was to be made through a combination of a voluntary reduction program, reduction of production in Sweden, outsourcing and natural attrition during 2016. The voluntary program in Sweden has been successfully completed and 1,600 employees will leave Ericsson through the program on December 31, 2016. Currently, no further forced staff reductions are planned in Sweden beyond what has already been announced relating to production sites.
This means that the reductions in Sweden are progressing ahead of plan, resulting in an increase in estimated restructuring costs for 2016 of SEK5.5–6.5 billion, compared to the previously communicated estimate of SEK4–5 billion. This assumes that all global reduction programs are executed according to plan. Restructuring charges for 2017 are expected to somewhat decrease as a consequence of faster implementation of the Swedish reduction activities. Estimated full year 2017 restructuring costs will be communicated in conjunction with Ericsson Q4 result in January 2017. Cash outlays for the voluntary program are expected 2017-2018.
The global cost and efficiency program is tracking towards the previously communicated target to:
- reduce the annual run rate of operating expenses, excluding restructuring charges, to SEK53 billion in the second half of 2017.
- make cost of sales reductions visible in the gross margin in the second half of 2017, compared to full year 2016.