SKF to cut 2,500 jobs as European markets weaken

Mon Jan 14, 2013 7:17am EST
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By Patrick Lannin and Johannes Hellstrom

STOCKHOLM (Reuters) - SKF (SKFb.ST: Quote), the world's biggest bearings maker, is cutting 2,500 jobs to cope with weaker demand, underscoring the bleak outlook for manufacturers as Europe drives through austerity measures to reduce its debts.

The Swedish firm, whose bearings are used in a range of products from washing machines to aircraft, is seen as an early indicator of economic trends due to the breadth of its markets. These include cars and trucks, which have been hit particularly hard by a downturn in consumer and business spending.

"Demand weakened as we went through the fourth quarter and we expect it to continue at this lower level at the beginning of this year," SKF chief executive Tom Johnstone said on Monday.

The firm said it aimed to reduce costs by 3 billion Swedish crowns ($464 million) by the end of 2015, including cutting around five percent of its global workforce of about 46,000.

"The important thing here is that the company is taking a tough period in demand as an opportunity to push up profitability," said Handelsbanken Capital Markets analyst Peder Frolen.

"On a net basis this is positive, but of course it provides a short-term worry, not only on SKF, but also for other industry related stocks with a big exposure to Europe," he added, referring to SKF's warnings on the weakness of current demand.

At 1155 GMT, SKF shares were up 1.3 percent at 163.6 crowns, within a European industrials index .SXNP down 0.3 percent.

SKF's announcement came as German tyre maker Continental said it expected its growth to slow this year, and after Swedish medical equipment maker Getinge last week said it was seeing slower demand.   Continued...