Trends and developments in the white goods sector in by ryy20822

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									FOCUS no. 4




        Trends and developments
   in the white goods sector in Europe


          A working paper of the EMF

                 Documentation
2
Table of contents



      Foreword                                                        5
      By Peter Scherrer, EMF General Secretary

1.    White goods in Europe - Is relocation a fatality or a threat?   6
      Presentation by Syndex
2.    The white goods sector in Italy                                 12
      Report by FIM-CISL
3.    The white goods sector in Germany                               20
      Report by IG Metall
4.    The white goods sector in Spain                                 25
      Report by MCA-UGT
5.    The white goods sector in France                                37
      Report by FTM-CGT
6.    The white good sector in Sweden                                 40
      Report by Svenska Metall
7.    The white goods sector in Denmark                               41
      Report by IDA
8.    The white goods sector in Austria                               42
      Report by GMT
9.    The white goods sector in Hungary                               44
      Report by VASAS
10.   The white goods sector in the Czech Republic                    47
      Report by OS KOVO
11.   The white goods sector in the UK                                59
      Report by Amicus




                                                                           3
4
                                   FOREWORD


The EMF focus no. 3 “Trends and developments in the white goods sector in Europe”
is providing an overview of the white goods production, which is an important sector of
the European metal industry.
         Currently aproximately 200.000 workers are directly employed in Europe in the
production of household appliances. Under the conditions of an uncontrolled und
unregulated globalisation this industry is facing a permanent increase of worldwide
competition. The management of the leading producers of washing machine, dryers,
dishwashers etc. is reacting with massive restructuring programmes. The consequences
are often the shift of production to the new member states of the European Union and
in some cases immediately to the Far East respectively China. Thousands of jobs have
been lost in this industry during the last few years.
         Currently European politicians and the European Commission only observe this
phenomenon. Dramatic and spectacular cases like the closure of the Electrolux plants in
Fuenmajor (Spain) or AEG Nürnberg (Germany) made the headlines. Then politicians
express their solidarity, governments representatives appear and try to prevent the
worst, the plant closure and consequently the loss of jobs from happening. The problem
of the loss of one of Europe’s most traditional metal industry sectors is certainly not
appropriately addressed. If not a joint effort of all stakeholders involved in this industry
takes place very soon we have to face the danger that again an industry, which provides
products of high quality for the consumers and hundreds of thousands of jobs and a
living for workers and their families disappears.
         The future competition will be in the highly sophisticated products. A rapid
initiative on a European scale is needed to secure the basis for production of white
goods in Europe. Modern work organisation, adequate support for research and
development, increased training and education of the workforce to secure an
advantaged position in the market is urgently needed.
         The EMF Focus no. 4 shows developments and trends in the white goods sector.
It is not the result of a scientific research project. A European overview is given in the
first chapter by Syndex, a French consultant agency. The member organisations of the
EMF have contributed reports about the situation of the industry in their countries. The
aim is to highlight the most important figures and facts to give the reader basic
information at a glance. The figures are subject to constant change and the figures
mentioned give a good orientation.
         The very recent developments in the white goods sector encourages the EMF to
continue and even to reinforce the efforts to try to find European solutions for the
problems caused by the restructuring programme of the white goods producers.
         The EMF founded an ad-hoc working group on white goods. This working
group will provide further information and will co-ordinate activities like confronting
European institutions with the negative effects that uncontrolled and unaccompanied
rapid industrial change has for workers, regions and the industry itself. The working
paper is subject to further development and cannot provide a complete detailed
overview but it is a good basis to work with on the future of this important European
industry.

                                                                          Peter Scherrer
                                                                  EMF, General Secretary


                                                                                          5
            1. WHITE GOODS IN EUROPE –
     IS REALOCATION A FATALITY OR A THREAT?
     PRESENTATION MADE BY SYNDEX ON 7th NOVEMBER 2005



The Electrolux announcement

In 2004, Electrolux, leader of the white goods sector, announced that by 2008 more
than 50% of its 27 factories will have moved to low-cost countries.
What’s the situation of the European white goods sector? How to qualify the strategies
of the firms in this sector? Is there an alternative to the relocation of the West
European factories?

The white goods sector is dominated by 4 groups worldwide

At a world level, the sector is concentrated around four main manufacturers:
               Electrolux (Sweden): 13,1 billion € of sales
               Whirlpool (USA): 10,1 billion €
               BSH (Germany): 6,8 billion €
               Indesit (Italy) : 3,2 billion €
Then Arcelik in Turkey, Fagor et Brandt in Spain and Gorenje in Slovenia).
Concentration is going on in
               Fagor, n°1 in Spain, buys Brandt, n°1 in France, in May 2005
               Whirlpool may finalize the purchase of Maytag in 2006

Relocations are often minimized but we observe …

Statistical studies will often downplay the importance of relocations as well their
effects on employment. The reason why is that it is difficult to know the intra-firm
exchanges, the immaterial exchanges, the outsourcing and other organizational changes
that are linked to relocations.
In the white goods sector, before the announcement of Electrolux’ CEO, we could
observe:

… shutdowns in the West …

Decrease of the number of workers in
Germany
               1995: 80 000 workers
               2005: 55 000 workers
Sweden
               1995:12 000 workers
               2005: 6400 workers
France
               1996: 28 429 workers
               2002: 19 500 workers




                                                                                    6
Electrolux is not the only company to announce shutdowns:
               BSH: washing machine plant in Berlin
               Bauknecht/Whirlpool: dishwasher plant in Neunkirchen
               Fagor/Brandt: microwave oven plant in Aizenay

… new plants in Central and Eastern Europe

Acquisitions:
                1999: Fagor buys Wrozamet, Poland’s number one manufacturer
                2000: Merloni (Indesit) buys Stinol and becomes the first producer in
                Russia
New plants:
              In 2005 Bosch announces the construction in St Petersburg of a plant
              that should manufacture 500 000 refrigerators over a year
              Brandt announces the construction in Romania of a plant that should
              reach a capacity of 350 000 washing machines by 2007
In Poland, the number of plants of white and brown goods has increased from 13 in
2003 to 23 in 2006 (source: CECED - European Committee of Domestic Equipment
Manufacturers - Polska).

Costs, prices and competition don’t seem to justify relocation

Raw materials can make up to 65% of the total cost of a white good and in 2004, the
price of steel underwent a 22% increase and the prices of plastic rose up to 15%. This
trend has persisted during the year 2005. But raw material does not get any cheaper
once you’ve moved east.
It’s been difficult to raise the prices of white goods in Western Europe
                In large series, there is a harsh competition with products from southern
                countries like China, Korea and Turkey and, to a lesser extent, those
                from Central and Eastern Europe.
                The retailers favour « no name » products as well as their own brand, all
                of which now represent one third of the refrigerator and freezers sold in
                France.
Still, white goods remain regional products
                In most markets, you’ll more often than not see a local brand being on
                top of the sales.
                Apart microwave ovens, there are not many universal product in the
                white goods sector.

Neither do the relative dynamism of Central and Eastern European markets
The European Eastern countries have an economic growth superior in comparison with
the rest of Europe. In Western Europe, white goods are a replacement market, in
Central and Eastern Europe, it’s an equipment market
              The highest growth rates in Europe for the year 2002/2003:
                  • Romania: + 70,1% (0,7 million in volume)
                  • Bulgaria: + 40,8% (0,2 million)

Still, the main markets are amongst Western Countries [sales of CECED companies]
                2003 : Europe before enlargement : 58,5 millions of product sold



                                                                                       7
New Member States, Candidates to the EU (without Turkey) and Russia: 8,8 millions
of products sold.
Main white goods markets in Europe (millions of products sold)
                  • United Kingdom : 13
                  • Germany : 12,7
                  • France : 10,1
                  • Italy : 7,0
                  • Spain : 6,2
                  • Russia and Sweden : 6,1

Is the strategy of the manufacturers to take advantage of lower wages? The Electrolux
leadership made it very clear. They intend to take advantage of the wage differential
between Western Europe and Central and Eastern Europe.

In the company’s Half-yearly Report 2005, Electrolux’ CEO writes that “Relocation of
production from the US to Mexico and changes in production in Europe are part of our
efforts to turn unprofitable units around”.

More than dynamism of the markets, cost of raw materials and components, the issue
appears to be those differences in the level of wages between European countries that
remain important (gap of 1 and 13 between the minimum wage in en Latvia and
Luxembourg).

But then, global labour cost makes only between 15 to 20% of the cost of a white good.
Therefore, we can assert that relocation has a strong political dimension. And we can
assume that relocations in Central and Eastern Europe are nothing but a stage in a
continuous process of industrial mutations that should lead to other changes as the
wages increase in Central and Eastern of Europe.

What are the answers?
      Before relocation: anticipate the companies’ plans and propose alternative
      strategies
      In case of relocation: put forward an alternative assessment of the relocation
      project
      Discuss the projects from the citizen’s point of view: the white goods sector is
      obviously concerned with the issue of sustainable development
      Bring new tools to the trade unions at an European level




                                                                                    8
1. Anticipate the projects of the companies

Manning intensity in the      + the weight of the manning in the total cost is high, + the
products                      risk of relocation in low-cost countries is high
Level of complexity of the    + the products are standards and manufactured in large
products and process of       series, + the production is easy to transfer
manufacturing
Degree of particularity of    + the purchases are standard, + easy it is to substitute them
purchasing
                          If the logistic costs (transport + related services) associated
Weight of the logistic cost
in the final product      to the purchase circle in low-cost countries have a limited
                          weight in the total cost , the risk of relocation in low-cost
                          countries is high
                          + the size of the product is low, + the logistic costs are low
Power of negotiation with The great dependence on one customer or the existence of
the customer              numerous competitors on its market will reduce the power
                          of negotiation of the provider
Company strategy          The aggressive strategies in term of prices will tend to
                          favour the relocation of activities in low-cost countries, a
                          move opposite to the strategy or differentiation


2. Give an alternative assessment of the costs and savings

The main topics are:
              level of wages
              differences in productivity
              potential effects of a high turn-over of employees
              scarcity of skilled employees
              costs of supervision and settlement
              coordination costs
              consequences of exchange rates
              sensibility towards unpredicted changes in demand with very diverse
              markets

3. Discuss the social rationality of the relocation projects

Consider negative externalities
              Upside externalities (supplying, pollution)
              Downside externalities (water and electricity, toxic products, recycling)
              Logistic externalities linked to transportation (white goods are
              ponderous goods: impact CO2)

Opportunity costs related to not taking advantage of positive externalities in a certain
territory as far as infrastructures and services are concerned

Sustainable growth, a manufacturers’ proclaimed priority
       Whirlpool: “Customers continue to rank corporate social responsibility as an
       important driver of their brand loyalty.”



                                                                                              9
       Indesit: “Ethical responsibility towards both the environment and people is a big
       priority for Indesit Company.”
       CECED: “Achieving higher levels of energy efficiency and a wide diffusion of
       new technologies in Europe are essential to cut energy demand, reduce
       dependence on energy imports, and promote smart economic growth for the
       benefit of the environment and society at large.”
       This approach is supported by the European Commission: The EU Eco-
       Management and Audit Scheme (EMAS) is a management tool for companies
       and other organizations to evaluate, report and improve their environmental
       performance.


Evaluate advantages and costs of a relocation project: For the firm

Investments         Settlement costs
                    Restructuring costs
                    Differences in amortization of investments
                    Value of resale or rejects of equipment or facilities
Intermediary        Differences in costs linked to supplying (supplying + stocks)
consumption         Differences in hidden costs linked to quality (rejects …)
                    Differences between costs linked to outside services (electricity,
                    maintenance of the machines, subcontracting)
                    Differences between costs in logistics
Personnel           Differences in labour costs
                    Differences in productivity
                    Differences in hidden costs related to work organization
                    (absenteeism, accidents, turnover)
                    Supplementary coordination costs (management, technical support,
                    administrative support …)




                                                                                     10
Evaluate advantages and costs of a relocation project: For public authorities

Public investment           Opportunity costs/investments based on public funds

Externalities related to the Cost differences linked to pollution or degrading of natural
environment                  patrimony
Impact on employment         Mid-term effect on employment, growth in the local
                             employment market, standard of living
Market impact                Changes in prices, position of the competitors




4. Reinforce social dialogue at the European level

There should be improvements as far as the information and consultation of workers at
the firm and sector levels are concerned. There is a need for workers/management
bargaining at the European branch level.

European Works Councils could analyze strategies and evolution of industrial groups
and make alternative proposals on industrial policies.




                                                                                       11
           2. THE WHITE GOODS SECTOR IN ITALY
                              REPORT BY FIM-CISL



The electrical household appliance industry involves 620 factories and employs 57,567
people. This figure covers the manufacturers of larger electrical household appliances:
refrigerators, washing machines, dishwashers and cookers. If we consider also those
employed in firms serving the major manufacturers and those involved in the
manufacture of smaller electrical household appliances, the figure rises to 200,000
employed. Thus it is a very important sector in Italy both on the industrial level and in
employment and social terms.

          EMPLOYMENT TREND IN THE INDUSTRY 1981/2001
                   (excluding service industry)
1981                1991                        2001
80,697 EMPLOYED     50,110 EMPLOYED             57,567 EMPLOYED

After the major downturn in the eighties, the number of jobs rose between 1991 and
2001, though the increase began to level off in subsequent years. Employment
problems have begun to surface in the more recent period, on the other hand, due to
either current or planned relocation towards other countries with lower labour costs.

Numerous mergers have taken place in the industry since the eighties, to the point
where all the brands and factories are now concentrated in the hands of a very small
number of companies.

                                     FACTORIES
1981                          1991                          2001
924                           758                           620

Mergers have accounted for a gradual decrease in the overall number of factories.
Multinational companies Electrolux, Whirlpool, Indesit and Candy top the bill in terms
of size, importance and number of staff. Yet the component industry is very important
too, with its 500 companies most of which were first set up as suppliers to a single
customer but which have experiences considerable growth in the export market over
time.

The merger trend in this industry is confirmed by the figure for the average number of
employees per company, which rose in the nineties, unlike what occurred in virtually
every other area of manufacturing in the metalworking industry.

Figures for production through 2003 tell of an expanding industry enjoying constant
growth both in terms of overall output and turnover. That trend turned negative in the
latter part of 2004 and remained so throughout 2005, when output took a downturn and,
above all, many businesses' profit margins began to shrink.




                                                                                      12
         TURNOVER TREND IN THE INDUSTRY FROM 1997 TO 2003
YEAR                             TURNOVER
1997                             7,992
1998                             8,183
1999                             8,695
2000                             9,026
2001                             9,298
2002                             9,490
2003                             9,775

Right through the end of 2003 turnover in the industry rose constantly. Emerging
countries, in particular within the 25-strong EU, are bringing a great deal of
competitive pressure to bear; and companies in the industry are making huge
investments in the establishment of new factories in these countries, where the
technological level is good but labour costs are lower.

               Electrical household appliance industrial output index
                               Trend (in %)


 12
  9
  6
  3
  0
 -3 Ap Ma Ju Jul Au Se Oc No De Ja Fe Ma Ap Ma Ju Jul Au Ae Oc No De Ja Fe Ma Ap
    r- y- n- - g- p- t- v- c- n- b- r- r- y- n- - g- p- t- v- c- n- b- r- r-
 -6
    03 03 03 03 03 03 03 03 03 04 04 04 04 04 04 04 04 04 04 04 04 05 05 05 05
 -9
 -12
 -15
 -18




Output experienced a major downturn in the last quarter of 2004. To date Italy is still
one of the main manufacturers of electrical household appliances on the international
scene and it is still an important exporter, but in the early years of the 21st century
electrical household appliance manufacturers from East Asian countries won increasing
market shares in Italy too, as well as competing on the export market.

The trade balance with respect to countries from that region was heavily negative in
this period, although Italian manufacturers continued to enjoy a positive trade balance
with all the other regions of the world. We can state that industrial output, turnover and
export in the industry showed a positive growth trend from 1990 through 2003. But all
the indicators have been pointing down since the third quarter of 2004.

Businesses complain that their main difficulties include also the high cost of raw
materials, in particular the cost of plastic and of steel.
All of this makes global competition in the electrical household appliance market
increasingly difficult and jeopardises this important sector in a big way.




                                                                                       13
The leading companies have asked the trade union organisations to redefine working
hours in an attempt to build new and greater flexibility into production, in such a way
as to take best advantage of all the opportunities that the market offers. In this context
that points up the difficulties inherent in competing on the cost aspect of the product
with countries with such different regulatory and cost environments from those in
Western Europe, there is also an attempt on businesses' part to renegotiate existing
agreements and to remodel the whole system of relations with the trade unions by
trying to destroy the negotiating role that they have built up over the years.

The trade union organisations, on the contrary, are aware that competition must be
based above all on top-of-the-range products with a high quality standard and capable
of fully meeting the new standards that are beginning to come into force in the EU in
the field of energy saving and of the recycling of materials. That is why it is necessary
to work on employees' skills, also in conjunction with universities, on research and on
the development of innovative products, so that competition with other countries is not
restricted simply to a matter of labour costs but, above all, to the nature of the product
itself.

Yet above and beyond any understanding of the problems and identifying potential
strong points, right now cost comparison and falling profit margins have prompted two
of the four major multinationals to make the decision to cut back on staff.

Whirlpool is planning to cut staff in its factories in the province of Varese, while
Electrolux intends to cease manufacturing a refrigeration item made in the province of
Florence, cutting back on staff in a big way. If these measures are adopted, there would
be an immediate impact also on other industries serving these companies.

In this high-risk environment for the industry's prospects, we have begun an
institutional debate with the Industry Ministry and the Regional Authorities most
concerned; and this, not only in a defensive function where many jobs are at risk but
also in an effort to address the issue of the future of the electrical household appliance
industry that has provided jobs and profits from the sixties to the present day.




                                                                                       14
        Italian electrical household appliance industry: manufacturing areas


                                   BRANDT                 ELECTROLUX PROFESSIONAL
                   ALI GROUP                   RIELLO
                                       CANDY
                                                 ELECTROLUX HOME PRODUCTS ITALY
                        WHIRLPOOL
                                                       DE LONGHI
                 HAIER                                       BAXI
                         IAR                         SMEG
                        SILTAL                      IMMERGAS
                                                        INDESIT COMPANY
                           SAECO                            MERLONI TERMOSANITARI
                           ANGELO PO                   FABER    ANTONIO MERLONI
                                                       ELICA




        TERRITORIAL DISTRIBUTION OF THE INDUSTRY IN ITALY
Region                                                             %
Piedmont                                                             5
Lombardy                                                            38
Veneto                                                              12
Trentino Alto Adige                                                  2
Friuli Venezia Giulia                                                3
Emilia Romagna                                                      13
Tuscany                                                              3
Marche                                                               7
Abruzzi                                                              3
Others                                                              14
Total                                                              100



 The factories are mostly located in the north of the country, in particular in the Veneto
 and in Lombardy. The factories located in the Friuli Venezia Giulia and Marche
 regions are very important in terms of numbers of job, and thus of their social impact.




                                                                                       15
                            Geographical spread of component part suppliers

       Most of the factories are concentrated in northern Italy: mainly in Lombardy, in the Piedmont and
       in the Veneto.




                                                         76.4% North


                                                                16.7% Centre



                                                                        6.9% South




                         Impact of each sector on the overall turnover
                         of the electrical household appliance industry


                                            Heating 11.3%


                                                                         Small appliances 13.5%
White goods 68.4%                              Other 20.3%

                                                                            Extractor hoods 5.7%

                                                                             Air conditioning 1.1%



      "White goods" represent almost 70% of Italy's total turnover in the electrical household
      appliance industry.




                                                                                           16
Leading multinational companies in the industry in Italy

Electrolux
The group in Italy manufacturers white goods (cookers, dishwashers and washing
machines) and gardening equipment in 10 factories with a staff of about 10,000.
Three factories are engaged in the gardening sector (in the provinces of Lecco, Brescia
and Legnano) with a staff of about 400 people.

Seven factories manufacture electrical household appliances:
       In Solaro (province of Milan)
dishwashers are manufactured and about 1,250 people are employed.
       In Forlì
cookers, ovens and hobs are manufactured and about 1,400 people are employed.
        In Porcia (province of Pordenone)
washing machines are manufactured and 2,500 people are employed.
        In Susegana (province of Treviso)
refrigerators are manufactured and about 1,800 people are employed.
        In Scandicci (province of Florence)
refrigerators are manufactured and 750 people are employed.
        In Villotta di Chions and Valloncello (province of Pordenone)
professional catering appliances are manufactured and about 1,000 people are
employed.

Output remained stable in 2004 but operating margins dropped on account of falling
prices, competition and the rising cost of raw materials. Reorganisation is currently
under way involving investment in product and manufacturing processes. In particular,
the refrigeration sector looks set to be problematic.

INDESIT MERLONI
The group manufactures white goods in all four sectors (washing machines, cookers,
dishwashers and refrigerators). It employs about 5,000 people in eight different
factories.
        In Albacina, Ancona, it manufactures hobs and employs 596 people.
        In Refrontolo, Treviso, it manufactures cookers with a staff of 269.
        In Brembate, Bergamo, washing machines with a staff of 561.
        In Comunanza, Ascoli, washing machines with a staff of 704.
        In Teverola, Caserta, washing machines with a staff of 577.
        In Carinaro, Caserta, refrigerators with a staff of 764.
        In Melano, Ancona, refrigerators, then hobs, with a staff of 645.
        In None, Turin, dishwashers with a staff of 649.
Increase in permanent employment. Investments both in the product and in the
manufacturing process were made in 2004, and further investments are planned for
2005. Output dropping in the washing machine, dishwasher and refrigerator sectors;
rising output forecast in the cooker sector.




                                                                                    17
CANDY GROUP
Employment in the Italian group stands at 1,957, with a downward trend, albeit with
differences in the various factories.

       In Brugherio (Milan) washing machines and washer-dryers are manufactured
       and 900 people are employed.
       In Santa Maria Hoè (Lecco), in the Bessel factory, dishwashers and washing
       machines are manufactured and 300 people are employed.
       In Erba (Como), built-in ovens, built-in hobs and free-standing cookers are
       manufactured and 190 people are employed.
       In Cortenuova (Bergamo) refrigerators, fridge-freezers and freezers are
       manufactured and 450 people are employed.

Reorganisation and restructuring with recourse to social shock absorbers have been
under way for several years.

Turnover and output
2004 ended more or less on an even keel, with turnover 3% up. Output rose
considerably, by 7%. Profit margins dropped as a result of the rising cost of raw
materials (steel and plastic) and of a drop in retail prices due to competition among the
various (particularly non-European) manufacturers. The Candy Group saw an
improvement in its market position. Several different dynamics can be seen in this
context: an impressive increase in the washing machine sector, the cooker sector is
stable, and the refrigerator sector dropped by a whole 10% more than forecast.
Investment in Italy is planned to run at around 20m to 25m euro, directed mostly
towards maintenance, rekeying manufacturing processes, and updating also a number
of products to meet higher quality and energy saving standards. Where global strategy
is concerned, Candy has confirmed its approach based on aiming to seize opportunities
for expanding into eastern markets, also as a way of keeping costs down.

WHIRLPOOL
Present in Italy in the refrigerator, washing machine and cooker sectors with four
factories and a staff of 5,900.

       3,700 people are employed in Cassinetta - Varese - where refrigerators and
       cookers are manufactured.
       850 people are employed in Naples where washing machines are manufactured.
       900 people are employed in Trento where refrigerators are manufactured.
       450 are employed in Siena where freezers are manufactured.

In 2005 Whirlpool set in motion a staff downsizing program for 783 employees in its
factory in Varese following a decision to cease manufacturing bottom-of-the-range
cookers and refrigerators. Negotiations with the trade union organisations led to an
agreement on the non-traumatic handling of the serious manufacturing and employment
problems, with the use of social shock absorbers (special wage supplement fund and
mobility) and training as an attempt to devise a future for the manufacturing site.

Cookers: The cooker market has been impacted by bottom-of-the-range
development involving growing commercial aggressiveness on the part of the so-
called "no brand" firms, in other words companies that manufacture without using


                                                                                      18
any particular recognisable brand name. This has prompted Whirlpool to focus on
the middle and top-of-the-range markets, but without loosening its grip on the range
of more economical models.

On the basis of these considerations, the company has illustrated its product
innovation strategy which involves the launch of new projects over the period from
2005 through 2008, with the addition of a new purpose-designed platform for the
manufacture of products aimed at the "top of the range."

Refrigeration: The best prospects for growth appear to be in the built-in products
sector and top-of-the-range goods; thus Whirlpool, in an effort to boost its chances
of success, is putting its money on recovering competitiveness in its refrigerator
factory, on top-of-the-range products (both free-standing and built-in) and on every
single cost component factor. Radical change is planned in the factory's layout and
organisational structure.

The company has illustrated its strategic plan which provides for the addition of new
articles to the top of the range. These articles will gradually replace its traditional
free-standing products. In particular, it plans to introduce 20 new projects over the
period from 2005 to 2008. These new projects include also the addition of a new
product platform and of new sales policies designed to further enhance the
company's presence in the "top-of-the-range" end of the market.




                                                                                          19
       3. THE WHITE GOODS SECTOR IN GERMANY
                            REPORT BY IG METALL



1. History of white goods production

The Federal Republic of Germany used to enjoy an international reputation for
producing a high volume of household appliances. In fact, as recently as the late 1980s
Germany was still responsible for churning out around one third of all household
products manufactured in the European Community. Compared with the overall output
of the USA, Japan and Western Europe, German suppliers accounted for just under
15% of production. At the time, Germany was in third place behind the USA and
Japan. In the late 1980s some 75,000 people were still employed in the white goods
sector there (as opposed to the current total of 55,000).

In Germany's new federal states (the former GDR), when the Berlin Wall came down
there were still remains of a household goods industry, with approximately 2,000 staff
employed by regional kitchen cupboard manufacturer Foron, which manufactured the
first HCFC-free refrigerators. All that remained of this manufacturer was a
development centre, which has since been taken over by a Japanese group. Bosch
Siemens’ household goods division in Nauen, Brandenburg, which turns out washing
machines, (though originally it also manufactured driers), made the only investments in
the household goods industry in eastern Germany.

A final remark on the history of the white goods industry in Germany is as follows:
Since the 1960s there has been marked concentration, accompanied by extensive
rationalisation, and numerous bankruptcies and sales of companies. As a result, only a
handful of groups are now active in the domain, compared with the large number of
manufacturers there used to be.

2. The industrial groups involved

a. Bosch and Siemens Hausgeräte GmbH (BSH)

This is the leading group in Germany and Europe, with sales in excess of 6 billion €
and roughly 14,000 employees in Germany (roughly 35,000 worldwide) and seven
production sites.

The company was founded in 1967 as a joint venture between Bosch and Siemens.
Today, BSH manufactures its products in 40 factories around the world. As a result of
the drop in turnover in its main market, Germany, the output and capacity utilisation of
the German production sites have steadily declined in recent years. By contrast, there
have been clear rises elsewhere in Europe.

The production sites in Germany are Nauen and (still) Berlin for washing machines and
driers, Dillingen for dishwashers, Bretten and Traunreut for ovens and Giengen for
refrigerators and freezers. Vacuum cleaners are produced in Bad Neustadt and
Traunreut also produces water heaters.



                                                                                     20
The locations and numbers of employees of these factories are as follows:
       Bad Neustadt, roughly 400 employees; there is a risk that vacuum-machine
       production may be relocated to China.
       Berlin, roughly 1,100 employees; The closing down of the Berlin plant, which
       was originally planned for 31st December 2006, will not occur thanks to tough
       resistance by BSH employees in Berlin and strong solidarity on the part of the
       BSH workforce in the whole of Germany. As the workers’ demands for a social
       plan in case of redundancy would have cost management about 130 million €,
       the company gave up its original plan to close down the plant and decided to
       negotiate a programme of cost reduction with the works council and IG Metall.
       Bretten, roughly 1,100 employees; the factory is sue to be refitted by a producer
       of bulk articles to manufacture goods of special sizes.
       Dillingen, roughly 2,500 employees; here an agreement has been concluded to
       safeguard the production site until 2010. Dillingen's rival production sites -
       Lodz (Poland) and Cherkesköy (Turkey) are going to be expanded.
       Giengen, roughly 2,000 employees; here an addendum to the collective
       agreement was adopted, guaranteeing the production site's survival until 2010
       within the context of a reinvestment in a series of fitted appliances, subject to an
       extra hour of working time per week. Once this agreement expires the plant will
       return to a 35-hour week.
       Nauen, roughly 380 employees; drier production has been shifted to Lodz, and
       the manufacture of so-called top-loaders has also been relocated. The plant
       gained a contract for the production of a new range of washing machines and
       has thus benefited from an investment of 90 million €.
       Traunreut, roughly 2,300 employees; the plant's capacity is well utilised with
       ovens and hotplates; however, its production of water heaters is under severe
       threat from Chinese exports, affecting some 60 jobs.

b. AEG Hausgeräte GmbH/Electrolux

AEG Hausgeräte GmbH has its registered office in Nuremberg and two production
plants, in Nuremberg and in Rothenburg, mostly turning out large-scale freestanding
electrical appliances and fitted appliances. AEG Hausgeräte GmbH is a wholly owned
subsidiary of Electrolux, based in Stockholm, Sweden. It employs around 4,300 staff.
In terms of its output, Electrolux ranks second in Europe and third in the world. The
Electrolux group's turnover worldwide is in excess of 13 billion €, and it employs
roughly 75,000 people.

AEG Rothenburg, roughly 1,100 employees; good capacity utilisation re fitted ovens
and hotplates, but construction of an oven factory in Eastern Europe and the loss of
free-standing appliances. A new management policy entails setting up two legally
hived off production lines manned by agency workers paid at below the collectively
agreed rates.

AEG Nuremberg, roughly 1,700 employees; production of driers and washing
machines. The plant will be closed down as a result of internal benchmark
comparisons. Production should be relocated to two new firms in Poland. Employees in
the plant went on strike on 20th January 2006. They want to obtain a reasonable
settlement, an early retirement arrangement for older workers and retraining for all
those not yet eligible for pensions.


                                                                                        21
c. Bauknecht Hausgeräte GmbH/Whirlpool

Bauknecht was founded in 1919, but errors committed by its management led to its
filing for bankruptcy in 1982. Since 1991 Bauknecht has been a wholly owned
subsidiary of Whirlpool Cooperation, USA. Bauknecht Hausgeräte GmbH currently has
two production sites: Schorndorf for washing machines and Neunkirchen for
dishwashers. The production site in Calw (refrigerators and freezers) was closed down
in 1999, affecting 380 jobs. All production was shifted to Italy.

Schorndorf, roughly 1,400 employees; producing a washing machine with a capacity of
9 kg exclusively for the American market. The existence of the production site depends
entirely on whether next model of this washing machine is also manufactured in
Schorndorf. That decision will be taken in 2006.

Neunkirchen, roughly 550 employees. Steady decrease in the number of units going to
the production site in Poland. An agreement on short-time work is currently in force.
When the Wroclaw plant starts turning out some 950,000 units - as will probably be the
case in 2008 or 2009 - the Neunkirchen production site will be under serious threat.
Under a site selection agreement guarantees have been given that the plant will
continue until at least 2008 as a new generation of built-in apparatus will be produced
in Neunkirchen.

d. Miele & Cie

Miele was founded in 1899 and has been in the possession of two families ever since.
The company is currently being managed by the third and fourth generations of these
two families. Miele manufactures top-quality electrical household appliances, both for
professional use and fitted kitchens. The Miele group also owns Imperial, which
manufactures and distributes its own fitted appliances. Of all the companies producing
electrical household goods in Germany, Miele boasts the greatest vertical range of
manufacture. It still develops and produces its own electronic controls, drive units and
so forth. Miele has nine production plants in Germany, the biggest being in Gütersloh
(washing machines, driers, distribution centre, central spare parts store) and in
Bielefeld (dishwashers, vacuum cleaners).

The German plants had to announce short-time work in 2005. An agreement has been
concluded to safeguard the production sites until the end of 2007. After that, the group
plans to shed some 1,000 jobs (in a socially acceptable manner). From 1 March 2005
onwards, a 34-hour working week was introduced which will apply for the full duration
of the agreement.

       Bielefeld, roughly 1,800 employees; 18 million € is being invested here in the
       manufacture of a new dishwasher.
       Gütersloh, 4,800 employees; 13 million € is being invested here in a new press.
       Oelde, roughly 600 employees; roughly 7 million € is being invested in oven
       production here.
       Miele, which primarily manufactures appliances in the top price range, is
       investing heavily in new ranges of goods, which will hit the market this, and
       next year and hopefully help to secure the jobs in Germany in the long term.
       The group plans to invest a total of 155 € million during the 2005 financial year.


                                                                                      22
3. Delocalisation of white goods production and its impact on the industrial
structure of the regions affected

The constant strides made by the policy of delocalisation practised by individual groups
are having a serious impact on the regions affected. For instance, the threatened closure
of Bosch Siemens Hausgeräte GmbH's washing machine factory in Berlin must be
seen against the backdrop of 30% unemployment in the metalworking and electrical
goods sector in the city. The compensation for these job losses in industry, which
leading politicians had hoped would take the form of fresh employment in the services
sector in Berlin, has failed to materialise. So the city remains dependent on the
continued existence of its traditional industrial sectors. Moreover, the further migration
of industrial jobs away from the capital is heightening its current financial crisis.

The closure of the Nuremberg plant was decided by Electrolux despite the profits it
generates. This plant closure will considerably weaken a region that is already
structurally weak. The region of Franconia has the lowest rate of industrial jobs in
Bavaria. The entertainment industry that used to be settled there (e.g. Grundig) has
almost completely disappeared. The loss of tax revenue associated with the further loss
of around 1,700 jobs will pose a major problem for the city of Nuremberg.

The Neunkirchen dishwasher plant run by Bauknecht/Whirlpool, which is also
threatened with closure, is also in a structurally weak region. Industrial activity in the
federal state of Saarland used to be dominated by the coal and steel sectors. The
region's structural change to new industries (the automotive and automotive supplies
sectors) has only been partly successful. Saarland suffers from very high
unemployment. In this context, the closure of the Neunkirchener plant would be
another catastrophe.

The region of Eastern Westphalia, where Miele has based its production, is
characterised by an industrial mono-structure, i.e. dominated by the kitchen furniture
and household goods industry. Miele's management is continuing to back the
production sites located there. Any change in this policy would deal the region a fatal
blow.

4. Development of the market in the past and expected future developments

In 2002 the turnover achieved by companies manufacturing household goods in
Germany peaked at 13 billion € and has been steadily declining ever since. Sales in
2005 are expected to total less than 12 billion €. Since 1985 the foreign share in these
sales has risen steadily from 3,4 to 6.2 billion €. During the same period, domestic sales
sank from 8,2 to 5,8 billion €.

Prices in the German market have been seriously eroded, though this trend will
probably start levelling out. The corresponding figures for individual segments are as
follows: washing machines - over 22%, dishwashers - 9%, refrigerators and freezers -
8%, ovens - 6%. The primary causes of this erosion are weak domestic demand, the
sway over demand held by major chains, and the advent of cheap production at plants
located in China, Korea and Turkey. The demand for high-quality appliances in
Germany has dipped sharply. One noticeable trend in the household goods sector is
towards the forced acceptance of broad wage cuts by the respective workers.


                                                                                       23
The German white goods market is highly saturated the figures for individual segments
being as follows: washing machines - 95%, electric cookers - 84%, refrigerators and
freezers - 99%. The dominant factor is the need for use, whereas driers and dishwashers
still boast growth potential.

The decline of the private housing market in Germany is having a major knock-on
effect in the household goods sector, with demand for new appliances and kitchens
decreasing noticeably. If state subsidies for private home building are abolished as
planned, demand will sink even further.

Further delocalisation of household goods production can be expected in the future.
The manufacture of small household appliances (like irons, mixers, toasters, kettles,
and so on) has already come to an end in Germany. The same will happen to large
household appliances unless something is done to turn the current trend around.

5. Employment in the white goods sector in Germany

Over the past decade, the employment figures have been as follows:
1995: 80,000 employees
2000: 63,000 employees
2003: 59,000 employees
2005: 55,000 employees

This trend will continue, with the fall becoming even steeper and even more jobs being
lost each year unless suitable countermeasures are taken and prove successful.

Summary

Bearing in mind this trend, IG Metall's policy in the sector entails:
       Counting on a resurgence of domestic demand
       Pressing head as fast as possible with product innovation

German companies cannot compete with cheap foreign producers in terms of prices,
since the hourly wages of 1€ paid in, say, China are unbeatable. The only way to
achieve a competitive edge is through innovation. Examples of innovations that will
soon be viable are computer-controlled appliances for the elderly that are designed to
be recycled and the exploration of possible applications involving micro- and
nanotechnologies. More research and development is required, being crucial for
securing the future of production sites. R&D synergies should also be sought with the
established academic infrastructure. This too would promote the survival of jobs in
industry. In view of the current problems faced by the white goods industry, an
appropriate industrial and structural policy in Germany and at European level must be
applied to alleviate the situation and provide the necessary backing.




                                                                                    24
        4. THE WHITE GOODS SECTOR IN SPAIN
                        REPORT BY MCA-UGT



CONTENTS

1.   INTRODUCTION
2.   STRUCTURE OF THE SECTOR
     2.1.   DEFINITION
     2.2.   DEVELOPMENT AND STRUCTURE
3.   MARKET
     3.1.   DEVELOPMENT
     3.2.   PRODUCT LINES
            3.2.1. Refrigeration
            3.2.2. Cooking
            3.2.3. Washing
4.   DEVELOPMENT OF EMPLOYMENT




                                             25
1. INTRODUCTION
The white goods sector is composed of all companies that manufacture domestic
equipment and appliances from the following product lines: washing and drying of
clothes and dishes, cooking food and refrigeration and freezing.
Although, strictly speaking, these are consumer goods, the manufacture of white goods
can be analysed along with the electrical machinery sector given the similarity of the
production process, the primary materials and components used, the final product and
the applicable industrial policies.
In Spain, this sector emerged in the early 1960s and was represented by a group of
small companies producing a diverse range of products. That decade was marked by a
continuous increase in demand driven by the switchover to domestic services powered
by electricity, the attention given to this equipment in the media and the fact that hire-
purchase schemes were becoming more widespread.
The economic crisis of the 1970s along with the higher level of market saturation
resulted in a major slump in demand. This weakened the sector's position and its
inadequate structure, which was characterised by high financial costs, an insufficient
commercial policy and a lack of competitiveness, was unable to cope.
The situation meant that virtually all the companies were forced to implement various
reindustrialisation and reconversion plans, which began in 1980, were the most
productive under the Law on Reconversion of 1984 and expired on 31 December 1988.
A few dates should suffice to demonstrate the scale of the restructuring undertaken
during this period. The 18 companies that underwent reconversion ended up as three
large groups and a few small companies.
Following the completion of the plan, the companies experienced positive
development, broadened their product range and included new designs, thereby
adapting to demand.
In the 1990s, the large European companies in the sector stepped up the pace of the
processes for the integration of assets and/or for cooperation at both national and
international level.
At European level, internationalisation policies and the opening of new markets in
Asia, Africa, South America, and Eastern Europe and so on became more widespread.
At this level, during the 2003 financial year, the outlook changed somewhat due to the
fact that consumption prospects started to falter. It was forecast that demand for many
electrical appliances would only be a demand for replacements. Nevertheless, it is
important to point out that if the European economic cycle enters a new phase of
expansion and the international economy regains its levels of activity, innovative
products with a low level of saturation will see opportunities for growth.
2004 was a good year for Spain that was helped along by a growth market for all its
products, probably the result of excellent development in the construction sector.
Generally speaking, manufacturers took the opportunity to reorganise their structures
again with the aim of creating increasingly productive organisations.
Forecasts for 2005 made by Market Vision are very optimistic for our national market.
Predicted growth is based on a development of around 4% for tumble dryers,
dishwashers and washing machines.



                                                                                       26
2. STRUCTURE OF THE SECTOR

2.1. DEFINITION
The white goods sector, as mentioned in the introduction, is comprised of companies
that manufacture domestic equipment and appliances run on electricity or gas, which
fall within one of the following business lines: washing and drying of clothes and
dishes, cooking food and refrigeration and freezing.
According to the National Classification of Economic Activities of 1993 (CNAE-93),
this sector corresponds to heading 29.7, which refers to the manufacture of domestic
appliances and includes:
29.71:
         Manufacture of electric domestic appliances.
         Manufacture of electric machines, appliances and devices for domestic use.
         Manufacture of electro-thermic appliances for domestic use.
29.72:
         Manufacture of non-electric domestic appliances for heating and cooking.

2.2. DEVELOPMENT AND STRUCTURE
In 2003 and 2004, the macroeconomic context was conducive to the development of
the sector, mainly since it fostered domestic consumption.

However, various economic sources, including the Bank of Spain, indicate that the
strength of domestic consumption is based on the increase household disposable
income, which is likely to be rather more moderate in the future due to the high level of
indebtedness of the population. This means that savings used to pay off the debt could
have an impact on consumption.

Another factor that could affect the future of the consumption of electrical appliances is
the price, which could be affected by the increase in prices of hydrocarbons, the cost of
some primary materials and the European directive on waste electrical and electronic
equipment.

It is also necessary to mention the phenomenon of industrial relocation in this
overview. Arguments advanced in favour of this strategy by the multinationals are
based on a loss of competitiveness and lower production costs in third countries.

The key to this phenomenon, in which decision-making centres are situated outside the
national territory, lies in the influence which foreign presence has on the national
structure of the sector.

Companies in which the degree of foreign ownership is equal to or greater than 50%
created approximately 73% of the turnover generated by the sector in the last three
years. Spanish companies contributed 27%.

The Spanish market for white goods is currently dominated by three groups which,
financially speaking, control approximately 60% of the domestic market.

For this sector, the Spanish group Fagor is the market leader with a share of almost
25%, the German holding company Bosh-Siemens has a 21% market share and the
Swedish group Electrolux has a share of approximately 14%.


                                                                                       27
FAGOR ELECTRICAL APPLIANCES
Out of the three largest groups, this is the only one which is really Spanish, with all of
its sites located in the País Vasco region. It is part of the Mondragón Corporación
Cooperativa, which absorbed the companies Fagor Clima and Fabrelec. In 1990, it set
up an Economic Interest Group called Temfa together with France's Thomson
Electromanager, the UK's General Domestic Appliances and Italy's Ocean
Electrodomestici.
The company's products are sold under the following brand names: Aspes, Edesa,
Fagor and White-Westinghouse.
The Cooperativa's activity has been very dynamic. At the beginning of 2004, the
company floated on the stock market in order to find resources that would enable it to
fund some of its projects. This method of issuing debt yielded €60 million.
Another extremely important decision taken by the company was to sell its 50% stake
in the Argentinean subsidiary Mclean, confirming the company's existence as a
manufacturer from Argentina.

In mid-2004, the company expressed a keen interest in Eastern Europe and
strengthened its position in Poland via the company Wrozamet.

Also in 2004, Fagor embarked on a new adventure by becoming a shareholder of the
French company, Brandt, the leader in the white goods sector.

The new feature in the company's strategic plan for 2005-2008 is the purchase of the
French company that doubled the company's turnover. Fagor currently has 16
production plants and 12 brand names.

Fagor has also set up its business further afield in Russia by means of a local group
called Gasmash that makes boilers.

In business terms, the most important strategic decision was the withdrawal of its
'White Westinghouse' catalogue, a decision that enabled the company to focus on its
other brand names.

Finally, Fagor set up an individual structure for its home automation business,
transforming it into a business area that could yield great benefits on its income
statement.

BOSCH-SIEMENS
This German multinational set up shop in Spain in 1989 through the acquisition of
Balay and BS Electrodomésticos (formerly Safel), to which it contributed technology,
management, financing and an external distribution network. At present, the group has
plants in Cantabria, Navarra and Aragón. It belongs to the BS Interservice group,
through which it provides standardised technical support.
The main brand names the group uses to market its products are: Balay, Bosch,
Gaggenau, Lynx, Crolls, Siemens and Superser.
Over the last two years, the German group has reorganised it business activities in
Spain and restructured the company and its brands.



                                                                                         28
In 2003, three subsidiaries (BSH Fabricación, BSH Balay and BSH Interservice)
merged under the name of BSH Electrodomésticos España. They retained their own
legal structure.

In 2004, the group decided to take control of the production of air conditioning in its
Estelle site (Navarra) by transforming BSH and Fedders International Air Conditioning
into BSH Home and Air Conditioning at the same time as approving its merger within
BSHE-E.

As regards products, the group has introduced its new range of cooking equipment
(ovens, glass ceramics and extractor hoods), although the most prominent launch was
the 'dressman' ironing robot under the Siemens brand.

ELECTROLUX
The Swedish group has four production facilities in Spain, two of which are used for
the production of white goods and the other two for compressors.
The Electrolux group in Spain is structured as follows.
Electrolux España, SA (holding company): is responsible for the manufacture of
compressors under the name of Unidad Hermética. Five other companies are currently
dependent on it:
       Electrolux Home Products España, SA
       Electrolux Home Products Operations España, SL
       Electrolux Proffesional, SA
       Electrolux Industrial, SA
       Electrolux Financiera, SA
The brands of the Electrolux group are: Zanussi, AEG, Corberó and Electrolux.
Following two years during which sales fell, the Swedish company managed to
increase its turnover in 2003, thereby reversing this trend.

The company implemented a new three-year management plan (2004-2007) with which
it is hoping to earn itself one of the privileged positions in the sector. One of the
approaches on the drawing board is aimed at combining the commercial and production
units.

In 2005, the first AEG teams including the Electrolux logo are extremely prominent.
The decision to associate the local brand with the company logo is similar to the
approaches already pursued in France and Italy.

The company intends to promote the brands where added value is greatest, such as the
Zanussi brand.

The company recently announced its intention to look into the viability of various
European plants including the site in la Rioja. It seems that the decision could lead to
transferring production from the site in la Rioja to an Eastern European country.




                                                                                     29
GEOGRAPHICAL DISTRIBUTION

The companies producing domestic appliances are located throughout the country (with
the exception of Extremadura, Ceuta and Melilla) although we can pick out four
autonomous communities with a higher than average concentration: Cataluña (33.5%)
well above the rest, País Vasco (15.8%), Comunidad Valenciana (10.4%) and Madrid
(9.0%).


                                        No
  Autonomous communities                       1-19        20-49   50-99   100+   Total
                                     employees
 Andalusia                                   6        15      4       0       1     26
 Aragon                                     14         8      0       1       5     28
 Asturias (Principado de)                    1         0      1       0       0      2
 Balears (Illes)                             0         3      0       0       0      3
 Canaries                                    0         1      0       0       0      1
 Cantabria                                   3         3      1       1       2     10
 Castilla y León                             2        10      2       0       0     14
 Castilla-La Mancha                          1        13      1       0       1     16
 Cataluña (Catalonia)                       31        76     19       6      10    142
 Comunidad Valenciana                       12        25      4       2       1     44
 Extremadura                                 0         0      0       0       0      0
 Galicia                                     3         3      1       0       0      7
 Madrid (Comunidad de)                      11        22      2       1       2     38
 Murcia (Region of)                          1         9      1       0       0     11
 Navarra (Comunidad Foral
                                                 2     3      1       0       3      9
 de)
 País Vasco (Basque
 country)                                   11        34      9       4       9     67
 La Rioja                                    1         3      2       0       0      6
 Ceuta y Melilla                             0         0      0       0       0      0
                 National total             99       228     48      15      34    424

Source: INE Central Companies Directory, 2004.

As we can see from the table, there were 424 companies producing white goods in
Spain in 2004. This marked a 7.6% reduction on 2003, which corresponds to a
reduction of 35 companies.
As regards the size of the companies in 2004, 23% had no employees, 54% had
between 1 and 19 workers and 23% had over 20 workers.

3. MARKET
Data expressed in product units were obtained from the National Association of White
Goods Manufacturers (Asociación Nacional de Fabricantes de Electrodomésticos de
Línea Blanca - ANFEL) and data expressed in euro was obtained from Market Vision
magazine.




                                                                                      30
For ANFEL data, it should be noted that data for 2001, 2002 and 2003 do not include
the market in Canarias. Data for these years can therefore not be compared with data
from 2004 in which Canaries is included.

3.1. MARKET DEVELOPMENT
As mentioned previously, the market for white goods has seen a positive development
in recent years.
The table below (ANFEL data) presents this development for the period 2000-2004 for
product units sold.


                                 White goods market
                       Year      Units         Change (%)
                       2000        6,552.9          5.0
                       2001        6,653.5          1.54
                       2002        6,778.3          1.88
                       2003        7,226.1          6.61
                       2004*       7,957.8          -.-

                      Source: ANFEL (own representation). Data in thousands.

In the period 2000-2003, the number of units sold increased by 10.27%, reaching
7,957,800 in 2004. This increase in sales, as has emerged from the data set out above,
is essentially due to the development recorded in 2003 (6.61%) which is much higher
than that recorded for previous years.

As for 2004, the upward trend seems to be continuing although we are unable to
compare data, as explained above, since Canaries is included.
If we analyse the domestic electrical appliance market in terms of its economic value,
we can see that the annual percentage increase is greater than the annual percentage
increase for product units, which peaked in 2003 with a 9.07% increase.


                               White goods market
                      Year      €000s           Change (%)
                      2001        1,789,889
                      2002        1,888,788        5.53
                      2003        2,060,036        9.07
                      2004        2,213,678        7.46
                  Forecast 2005 2,302,225          4.00
                   Source: Market Vision (supplement No. 138 – March 2005)

As regards the forecast for 2005, a 4% increase on 2004 is predicted which is lower
than that recorded for previous years.




                                                                                      31
    3.2. PRODUCT LINES

    3.2.1. REFRIGERATION

    In 2004, this product group posted sales of 2,188,700 units, which corresponds to
    €717,758,000 (although sources differ).
    Development since 2000 has been far from consistent. There were no sharp increases or
    decreases except in 2003. An increase of 11.17% in product units sold was recorded in
    2003.
    This group includes refrigerators and freezers, which represent 82% and 18% of the
    sales in this product group respectively.




                                          18%




                                                                           82%


                                                Refrigerators   Freezers




    The table below presents the data for the market for refrigerators and freezers in
    product units.

                            Market for refrigerators and freezers (units)

                    2000             2001             2002            2003        2004
PRODUCT               Change           Change           Change           Change
              UNITS (%) UNITS (%) UNITS (%) UNITS (%) UNITS
Refrigerators 1,544.9     2.18 1,524.7    -1.31 1,50.,1    -1.02 1,680.5   11.36 1,804.9
Freezers        287.2    -1.47 299.6       4.32 308.8       3.07   340.4   10.23   383.8
TOTAL         1,832.1     1.59 1,824.3    -0.43 1,817.9    -0.35 2,020.9   11.17 2,188.7

    Source: ANFEL (own representation). Data in thousands.


    By analysing the development of the two products that compose this group, we can see
    that given the importance that refrigerators represent in demand (82% of sales in this
    business line), these are the products that shape the overall trend.
    Since 2001, freezer purchases have been on the up, achieving their maximum increase
    in 2003 (10.23%) and sales of 2,188,700 units in 2004.


                                                                                       32
The study of this market from a financial perspective (in € thousands) shows a different
trend to that previously analysed, indicating growth throughout the period. This study
highlights in particular the increase in 2003 for refrigerators (13.17%) and in 2004 for
freezers (13.08%).

                  Market for refrigerators and freezers (€ thousand)

PRODUCT              2001   2002             2003              2004
                               Change           Change            Change
               €000s   €000s            €000s             €000s
                                 (%)              (%)               (%)
Refrigerators 516,372 534,061     3.43 604,380     13.17 652,070      7.89
Freezers       50,876 54,745      7.60 58,091       6.11 65,688      13.08
TOTAL         567,248 588,806     3.80 662,471     12.51 717,758      8.35
Source: Market Vision (supplement No. 138 – March 2005)


3.2.2. COOKING
This section groups together traditional cookers, ovens and hobs.
The percentage represented by each of these products for the sales of this product group
is shown in the graph below. Hobs represent the largest proportion of the sales of this
group (53%).




                                              7%

               40%




                                                           53%




                             Cookers     Hobs      Ovens




Sales of cooking appliances remained virtually constant for the period between 2001
and 2003 displaying no significant changes (approximately 1%).




                                                                                      33
                                   Sales of cookers, hobs and ovens

                 2000             2001             2002            2003         2004
PRODUCT             Change           Change           Change          Change
            UNITS     (%) UNITS        (%)    UNITS     (%)   UNITS     (%)    UNITS
Cookers       233.2    2.73   211.6     -9.26   185.9 -12.15    173.5    -6.67   175.5
Hobs        1,210.0    5.86 1,215.3      0.44 1,242.9    2.27 1,253.2     0.83 1,416.0
Ovens         895.4    4.36   913.0      1.97   933.8    2.28   964.6     3.30 1,082.6
TOTAL       2,338.6    4.96 2,339.9      0.06 2,362.6    0.97 2,391.3     1.21 2,674.1

     Source: ANFEL (own representation). Data in thousands.


     The thing that stands out in the overall development of these three products is cooker
     sales, which have decreased per product unit every year since 2001. More specifically,
     during the period 2000-2003, cooker sales fell by 25.60%.
     Hobs and ovens however have experienced moderate growth over the last four years.
     This trend seemed to remain the unchanged for the 2004 financial year since the
     inclusion of the Canaries market is barely noticeable.

                            Market for cooking equipment (€ thousand)

                        2001            2002                    2003               2004
     PRODUCT
                                           Change                  Change             Change
                       €000s       €000s                   €000s              €000s
                                             (%)                     (%)                (%)
     COOKING          488,585     508,397     4.05        537,427     5.71   570,597     6.17
     Source: Market Vision (supplement No. 138 – March 2005)


     To analyse the overall market trend for cooking appliances, the only data we have
     available is general data (in € thousand). Increases in sales values have grown every
     year. Specifically, 2004 saw a 16.79% increase in sales values compared to 2001.


     3.2.3. WASHING
     This section includes washing machines, tumble dryers and other washing appliances
     such as dishwashers. Washing machines account for 59% of the entire market;
     dishwashers represent 27% and tumble dryers 14%.




                                                                                          34
                                       14%




                      27%                                                    59%




                           Washing machines      Dish washers    Tumble dryers




       Sales for this product line have been marked by growth with an increase of 18.12%
       between 2000 and 2003. 3,095,000 product units were sold in 2004.


                     Sales of washing machines, tumble dryers and dishwashers

                    2000                     2001                    2002                2003               2004
PRODUCT                 Change                   Change                  Change              Change
               UNITS     (%)            UNITS     (%)           UNITS     (%)       UNITS     (%)       UNITS
Washing
                 1,538.6        4.29     1,549.8       0.73      1,578.1     1.83   1,654.3     4.83        1,829.4
machines
Dishwashers       214.5        25.81         641.7   199.16       688.9      7.36     749.0     8.72         834.6
Tumble
                  629.1         12.2         297.8   -52.66       330.8     11.08     410.6    24.12         431.0
dryers
TOTAL            2,382.2        7.96     2,489.3       4.50      2,597.8     4.36   2,813.9     8.32        3,095.0

       Source: ANFEL (own representation). Data in thousands.


       In the analysis for each product, you can see few similarities in market behaviour.
       Washing machines had a tendency for growth over this period increasing by 7.52%
       between 2000 and 2003. The moderate growth recorded in previous years seemed to
       continue in 2004 with 3,095,000 units being sold.
       As regards dishwashers, sales shot up – in 2003 a 249% increase in sales was recorded
       compared to 2000 – which was the result of a major boost during 2001. In 2001, sales
       increased by almost 200% compared to 2000.
       The most recent data we have available for the sale of dishwashers (2004) shows unit
       sales of 834,600.
       Tumble dryers are the only product unit in this product group that have seen their sales
       figures decline over the entire period (down 34.73%). Whilst it is true that 2001 was the
       only year in which a drop in sales was recorded (down 52.66%), sales were still not



                                                                                                       35
able to get back up to levels registered in 2000 despite large increases in 2002 and
2003.

    Market for washing machines, tumble dryers and dishwashers (€ thousand)

PRODUCT             2001            2002                     2003                   2004
                                       Change                   Change                 Change
                   €000s       €000s                    €000s                  €000s
                                         (%)                      (%)                    (%)
Washing
machines          461,728     489,531          6.02    531,381        8.55   567,750     6.84
Dishwashers       209,639     224,542          7.11    238,712         631   255,579     7.07
Tumble
dryers             62,689      77,512        23.65      90,045       16.17   101,994    13.27
TOTAL             734,056     791,585         7.84     860,138        8.66   925,323     7.58
Source: Market Vision (supplement No. 138 – March 2005)


In the table above, you can see the development of this market in terms of its value in
euro. We can see that, in this case, there is not as much disparity between the different
products with all three products maintaining an upward trend, with tumble dryers
curiously enough standing out.


4. DEVELOPMENT OF EMPLOYMENT
Available data for employment in the white goods sector has been obtained from the
Industrial Companies Survey compiled by the INE (National Statistics Institute), which
collects data on people employed in section 29.7. Manufacture of domestic appliances.

Employment in this sector during the period between 1999 and 2003 can be split into
two different stages (see table below).

The first stage covers the first two years of the period, a time when there was strong
employment growth. But from 2001 onwards, employment rates began to fall and then
continued to decrease more and more each year.

                    YEAR         No. OF WORKERS                   Change (%)
                     1999              20,645                        3.47
                     2000              23,002                       11.42
                     2001              22,953                        -0.21
                     2002              22,292                        -2.88
                     2003              21,481                        -3.64
Source: Industrial Companies Survey (INE) (own representation).




                                                                                           36
         5. THE WHITE GOODS SECTOR IN FRANCE
                             REPORT BY FTM-CGT



Over the past 10 years in France the volume of white goods has increased:
       Cooking appliances have driven the main growth in the sector, up 1.3 million
       units in 9 years.
       Washing appliances have also performed well, up 900,000 units.
       Growth in the refrigeration and freezing appliances segment has been less
       vigorous, up 400,000 units.

As a rule, demand is shifting towards products that are more ergonomic, economical
and easier to use. However, the household appliances sector is becoming an
increasingly hostile environment in which to develop.

This sector is facing a drop in prices resulting from:
       Tougher competition and the arrival of new entrants on the market from low
       labour-cost countries;
       Pressure exerted by distributors, e.g. competition between 'discount' dealers;
       Buyer behaviour.

The economic situation has also aggravated the phenomenon, due to:
       An explosion in the cost of materials (petroleum derivatives and steel) and
       components which represent 70% of production costs;
       Exchange rates: the rise of the euro compared to the dollar and other currencies.

The main manufacturers are no longer represented in France. Four groups share the
market for large household appliances in Europe:
       World leaders - Electrolux, Whirlpool.
       BSH (top of the range) and Indesit.

This already concentrated sector could expand in the coming years:
        To restore the balance with distributors and certain suppliers;
        As a result of opportunities for buyouts that may arise in both Eastern and
        Western Europe. (Fagor's recent takeover of Elco-Brandt confirms this trend).

This industry has become a huge, constantly changing market characterised by repeated
restructuring and relocations:
        Whirlpool: delocalisation of the Amiens washing-machine factory to Slovakia -
        225 jobs lost.
        Electrolux: closure of the Reims factory (cooking appliances) - 224 jobs lost.
        Merloni (Indesit): Restructuring at the Thouville site and transfer of the
        production of cooking appliances to Italy and countries in the East - 200 jobs
        lost.
        Elco-Brandt: closure of the Lesquin site (refrigerators) - 150 jobs lost.

In 1996, the sector employed 28,429 people in France. By 2002, the number of staff
employed had dropped by almost 9,000 to around 19,500. This sector still has 10 or so



                                                                                     37
production sites in France (representing more than 5,000 jobs), which are threatened by
strategies geared towards boosting group competitiveness by constantly trying to cut
costs, e.g.:
        By using subcontractors;
        By imposing pay freezes;
        By demanding greater flexibility.

Total number of employees in the sector:
       Whirlpool Amiens: 580 workers
       Elco-Brandt: Vendôme: 321 workers
                     Aizenay: 257 workers
                     La Roche/Yon: 691 workers
                     Lyons: 737 workers
                     Orléans: 758 workers

       Rosières: Lunery: 350 workers
       BSH (Gaggenau) Lipshein: 400 workers
       Indesit: Thionville: 200 workers
       Electrolux: Revin: 738 workers.

The current monthly salary paid in this sector after 15 years of service is €1,400 per
month.

Volume of white goods on the French market from 1996 to 2004:
      Refrigeration and freezing: 1.7% growth per year
      Washing: 3.1% growth per year
      Cooking: 3.4% growth per year

The total market for white goods increased by 2.9% per year.
Turnover (billion £):
       Electrolux down 2.8%
       Whirlpool up 8.6%
       BSH up 9%
       Indesit up 5.6%




                                                                                    38
Main production sites and distribution of workers for the entire white goods sector by
Region

Manufacturers       Workers       Production

Whirlpool           583           cooking, refrigeration

Electrolux          738           washing

Indesit             200

BSH                 400

Rosières            350

Elco-Brandt:

Vendome             321              cooking

                    257              cooking

                    691              washing

                    758              cooking

                    737              washing

The Elco-Brandt group has recently been taken over again by a new buyer, Fagor
(Spain).




                                                                               39
        6. THE WHITE GOODS SECTOR IN SWEDEN
                       REPORT BY SVENSKA METALL



The white goods sector in Sweden has for the past ten years gone through a dramatic
change and downsizing. The big change for this sector started when the new "market"
in former East - Europe was opening. Then the white goods companies started to open
factories in these countries and of course also move production/factories and jobs from
Sweden.

For ten years ago approximately 12.000 people were working in the white goods sector
in Sweden (that means white and blue collar workers in total). If you go back longer
there were many more people working in this sector. Today, in 2005, it is about 6400
people working in the domestic white goods sector.

In Sweden today its only two domestic white goods companies in this sector, it is
Cylinda and Electrolux (about 6000 people in Electrolux and about 400 people in
Cylinda). Cylinda manufactures washing machines and refrigerators for the domestic
market. Electrolux in Sweden manufactures, cookers, refrigerators, freezers, washing
machines, tumble driers, compact products like washing machines and outdoor
products like chains saws and lawn mowers (Electrolux own company called
Husqvarna)

On the commercial side Dometic has 800 employees – who make refrigerators for
hotels and mobile homes.

The jobs have dispersed; and either been sold to other white goods companies or
moved to low-cost countries, in former East - Europe or Asia, for example China, today
there is more "new" white goods companies in the market. The competition for the
"old" white goods companies is much harder.

There are many new brands for example washing machines, cookers and vacuum
cleaners. These "new" companies are manufacturing in China, Poland and Hungary, for
example are selling their products for very low prices everywhere in the whole world.

The change or downsizing for white goods sector in Sweden and Europe is ongoing and
the end has not yet been reached.




                                                                                    40
       7. THE WHITE GOODS SECTOR IN DENMARK
                                  REPORT BY IDA



As mentioned at the EMF meeting on June 10th 2005, Danish white goods production is
no longer anything worth boasting of, although we in the late 1980’s and early 1990’s
had a fairly large national production of white goods with well established brands like
Volund (washing machines and dish washers), Voss (Stows, cookers, ovens and
ventilators), Gram and Vestfrost (refrigerators and freezers). Further back several other
brands were around. Today as Electrolux is closing its production of large washing
machines (for industrial and laundromat purposes) in Nyborg, laying off 250
employees, only Vestfrost remains. Until recently even Gram had a production plant
(in Vojens), but Gram has been sold to foreigners and production has been moved
abroad, although Gram maintains some research and development and some marketing
activities in Denmark. Vestfrost are really the only company with a Danish production
worth mentioning. At their production facilities (outside Esbjerg) 1,100 employees
produce refrigerators and freezers (for both household and industrial purposes) worth
160 million Euro (around 90% of the production is exported). By the way, Vestfrost is
now a Danish owned company since Electrolux sold their 50% shares in 2003.

Far below 2000 Danes are involved in white goods production in Denmark. It is
unclear how many are involved in service activities etc. Of course it would be noticed
if Vestfrost moved from Esbjerg, being one of the largest employers in the area. Gram
in Vojens does not nearly play the same role.

Denmark is experiencing a good economical evolvement right now and a lot of white
goods are being sold to the Danish consumers, but as you can understand not many
Danish products are among them. Neither is it a much notified production area as it
was 15 years ago when the first lay offs hit the sector. However, it should also be
stressed that Danish industry is heavily involved in supplying the white goods sector
with compressors and thermostats (Danfoss), but it has not been hit so far. Although
white goods production has been moved, customers apparently still rely on their Danish
subcontractors.




                                                                                      41
          8. THE WHITE GOODS SECTOR IN AUSTRIA
                                      REPORT BY GMT



    1) Statistics- Development

NACE-Code 2971: Electrical and electrothermic consumer goods

                                           Employees
October 2005                2.Quarter 2005    1.-2.Quarter 2005      2004
3.499                       3.512             3.599                  3.668


                                     Total Turnover (in 1000 €)
June 2005                   2.Quarter 2005       1.-2.Quarter 2005   2004
52.870                      148.201              290.349             539.232
Source: Statistic Austria



    2) Companies in the white goods sector in Austria

After the closure of the “Elektra Bregenz” production site per 31 July 2003 with some
400 employees, belonging to the insolvent French company group Brandt-Moulinex, in
the Tyrol (western federal province of Austria) only two companies have remained.
During the process of insolvency of the company the Turkish Acalik Group bought
Elektra Bregenz at the end of 2002. Acalik produces now former Elektra Bregenz
household appliances in Turkey, advertising them as Austrian branded goods. The
redundant “Elektra Bregenz” employees could benefit from a generous redundancy
plan, including the establishment of a so-called labour foundation for re-qualification
and emplacement.

Firma Liebherr Haushaltsgeräte Lienz GesmbH.
A member of the international Liebherr Group at the production site in Lienz (Eastern
Tyrol) produces about 630.000 refrigerators and freezers annually for domestic and
commercial purposes. Currently the total staff is 1.315, including 178 salaried
employees. Firma Liebherr operates a production site for freezers in Bulgaria
(workforce 550) and constantly threatens to relocate production to Bulgaria. The
Liebherr Group’s holding company is Liebherr-International AG in Bulle, Switzerland,
which is entirely owned by members of the Liebherr family. Besides domestic
appliances Liebherr produces cranes, wheel loaders, cargo handling, and mining
equipment. Group turnover 2004: 4.5 Million €, workforce 2004: 22.245




                                                                                    42
Company E.G.O. g
GesmbH. Heinfels is owned by the international E.G.O group, a worldwide supplier to
manufacturer of household appliances (heating and regulating components), with its
headquarters in Germany. At the production site in Austria it produces hotplates for
cookers and employs a workforce of 313, including 35 salaried employees. The
company group has locations all over the world, in Australia, China, Germany,
England, Finland, France, Greece, Italy, Japan, Croatia, New Zealand, Norway,
Slovenia, Spain, South Africa, Switzerland, Turkey and USA. Hence, relocation is a
constant threat to intimidate works council and union.

Both companies in the Tyrol have not yet implemented the collectively agreed common
pay system for white and blue-collar workers due to the fact that the majority are blue-
collar workers who would benefit from the new system. The additional labour costs
arising due to the new equal pay and grading system will therefore fall due not earlier
than at the beginning of May 2006. At that very moment it is expected that intensified
threats to relocate or shift production lines will be announced.

Company AHT Cooling Systems in Rottenmann (Styria)
AHT predominately operates within the industrial chilling and freezing area. Major
business segments are supermarket equipment, ice cream cabinets, bottle coolers,
service. Currently the Austrian production site employs a workforce of 350. The history
of AHT Cooling Systems goes back to the 15 century, when in Rottenmann (an iron ore
rich region) ironworks was established. In the 1950’s Bauknecht produced household
appliances, in 1983 the owner changed and AHT re-established production. In 2002
foundation of AHT Asia, a Joint Venture (JV) with SFA Company in Turkey was
established. According to the information by our local union officer, a massive
financial investment into Turkish production site is ongoing, adding to the fear that the
ice cream cabinets division might be relocated to Turkey.




                                                                                      43
       9. THE WHITE GOODS SECTOR IN HUNGARY
                                 REPORT BY VASAS



Historical overview of the white goods industry

In Hungary, a white goods industry simply does not exist. Those very few factories
producing items from a statistical point of view belong to the processing industry and
they are even not regarded as a sub-branch of industry of any kind.

Moreover, white goods belong to the electric engineering and instrument
manufacturing industry; the manufacturing of electric engines; transformers and power
station instruments are also part of this sector.

In the union’s opinion, the development of this industrial area is rather contradictory.

Before the metamorphosis of the politico-economic system, the main assignment of this
branch was to supply both the domestic and international markets with refrigerators,
washing machines, centrifuges, electric-stoves, water-heaters, etc.

The extra capacity of the industry was used for enlarging dollar-related export
possibilities. According to this sort of expectations the Hungarian companies have been
securing the domestic supply, making efforts beyond that to appear with modern, up-to-
date and qualitative goods on the western markets. This have been mainly achieved by
buying licences like Bosch licence for manufacturing washing machines or providing
delivery services for big store-chains, i.e. Quelle.

After the changes of the system, these firms (with one exception) have transferred to
foreign ownership, going through deep changes as well. This kind of transformation
also occurred at the only single company that became the property of a bunch of
Hungarian private investors. Hajdúsági Ipar Művek-HIM-: manufacturer of washing
machines, centrifuges, water-heaters, etc.

Having followed the politico-economic changes, the market has been enlarged and
customers started to buy western brands of goods, while the market has been saturated
with imported items, resulting in a gradual streamlining process, concerning both
companies and their products.

The main example in this process was Electrolux, which by buying up the Lehel
refrigerator works also transformed its scale of products, initiating at the very
beginning a lay off of its employees, while from the mid 90s, a continuous increase of
personnel was witnessed, concurrently, transplanting the manufacture of some of the
goods from eight West-European economies.

Coincidently most of the western companies are conducting only business activities in
Hungary, putting it otherwise, not producing consumer goods at all, i.e. Whirlpool,
Bosch-Siemens, Hausgerat, etc. Due to the fallback in the domestic manufacturing




                                                                                           44
capacities, the production value-importance of white goods branch decreased, today, a
growing trend is seen in selling imported goods.

White Goods manufacturing companies in Hungary
Electrolux
Type of product: refrigerator- and deep freezers, vacuum cleaners both manufacturing
and selling as well as forest and gardening tools.
No. of employees as of 01.07.2005: 3830 pax.
Investments: 44 bn HUF during 14 years.
The biggest investment of the pas few years is the founding of the Nyiregyháza plant,
sided with continuous product- and technology development.

Hajdúsági Ipar Művek
HIM, Nationality: Hungarian.
Type of products: hot water systems, storing instruments, household electric-gas
boilers, agitator-disk washing machines, centrifuges, gas-boilers, flat radiators, and
solar-energy produced hot water systems.
No of employees: 946 pax.
Activity: Continuous item-technology development. /Environmental care/ in the past
few years, remarkable developments took place in technologies like: surface treatment,
heat isolation and painting.

SVT Wamsler Household Goods Mfg. Ltd. Co
Type of goods: Non-electric household appliances, gas- oil- and solid material burners,
fireplaces, and moulding goods.
No. of employees: 1022 pax.
Investments, activities: Procurement of CNC machines, laser-cutters, acid teraters,
plasma-cutters, providing facilities for enamelling.

Elekthermax Ltd. Co. /Dutch/
Type of products: Large-kitchen and household gas devices, gas-convectors,
manufacturing household dishwashers, pipe heating-bodies, electric cooking ovens,
smoothing irons, etc.
No. of employees: 402 pax.
No important size investing took place, the company struggles for survival, markets
diminishing, topped with employment concerns.

Geographical sub-division of plants
        Electrolux
Town of Jászberény Plant
3200 pax.
Location: Mid-Hungary.
Economic-social effect: In that given area-mainly at the town it is the largest employer,
having essential role in the social, employment and economic performance of the
county.
        Electrolux-Nyiregyháza
630 pax.
Location: East-Hungary.
Rate of unemployment is about 20% in that area, therefore, the socio-economic
repercussion of the plant carries extraordinary importance.


                                                                                      45
         Hajdúsági Ipar Művek
Location: East-Hungary.
Rate of unemployment in that region is approx. 20%; consequently, the socio-economic
effect of the plant is extraordinarily remarkable.
         SWT Wamsler
Location: North-Hungary.
This is the biggest employer in County Nógrád, positioning itself among the number
one companies there.
         Elekthermax
Location: West-Hungary.
Its role in that region is rather unimportant.

Business perspective
       Electrolux
Past: Successful privatisation, up-to-date goods and manufacturing standards.
Future: To maintain it’s market leading position.

        Hajdúsági Ipar Művek
Past: Market leader in electric boilers, water-heaters, agitator-disk washing machines
and centrifuges in the domestic markets.
Future targets: To increase production efficiency, discover market bottlenecks in order
to secure business profitability.

       SWT Wamsler Ltd.
Past: Having privatised, majority of ownership German. Considerable markets in
Hungary. Producing for exports as well.
Future: Maintain its market position; introduce the company at the Stock Exchange.

       Elekthermax:
Past: Used to be a market leader in manufacturing electric-stoves, - fireplaces.
Future: The company struggles for survival, markets narrowed down, and problems
with employment.


                       Changes in employment in this branch

                      1991                  2005                   Future
Electrolux            5100 pax              3830                   to hold this standard
Hajdúsági Ipar        3300                  946
Művek
SWT Wamsler           2030                  102
Elekthermax           1700                  402                    decrease of
                                                                   personnel




                                                                                     46
                 10. THE WHITE GOODS SECTOR
                     IN THE CZECH REPUBLIC
                             REPORT BY OS KOVO



Characteristics of the branch

The branch – Manufacture of machinery and equipment (NACE 29) belongs to the
most important branches of the national economy. The branch includes manufacture of
machinery for a very general scope of use. Its products create components of
production technologies in all branches of the manufacturing industry, civil
engineering, and agriculture and mining activity and in the production of electrical
power. They are used in the army, police and transport sectors and also in the
households.

In the year 1998 till the year 2002 in this branch 159 bankruptcies and liquidations
happened of companies with at least 10 employees, which have impact on 24200
employees. If we include all the entrepreneurs subjects (including private persons) 303
companies went through bankruptcy procedure or through liquidation, employing at
that time 24527 employees. Due to the stability of proportionate indexes it is evident
that the companies that went through the bankruptcy procedure or through liquidation
didn’t expire completely, they were restructured, sold and they continue to function
including some transfer of majority employees. Based on gathered experiences,
knowledge and skills new companies were created. More and more important are the
SME´s, which are not only able to absorb employees from companies which through
bankruptcy procedure or through liquidation, but which are also able to react on
consumer demands.

The branch, according to the Classification of Economic Activities NACE, comprises
of the following seven groups:

29.1 Manufacture and repairs of machinery for production and use of mechanical
power, except aircraft, vehicle and cycle engines (internal combustion engines, ship
engines, locomotive engines, turbines, pumps, compressors, valves, gearboxes,
crankshafts, gears and bearings).

29.2 Manufacture and repairs of other machinery and general-purpose machinery
(furnaces, driers, refuse incinerating plants, burners, lifting, transport and handling
equipments, cooling, ventilating and air-conditioning equipments, packing machines).

29.3 Manufacture and repairs of agricultural and forestry machinery (tractors, garden
tractors, ploughs, planters, harvesters, milking systems).

29.4 Manufacture and repairs of machine tools and forming machines (metal, wood,
stone and concrete-working machine tools, presses, power hammers, pulling stands,
welding, solder and braze equipment, power tools).




                                                                                    47
29.5 Manufacture and repairs of other special purpose machinery (mining,
metallurgical, construction and earth-moving machines, rubbers and plastics processing
machines, food, textile and publishing and printing industries machines, leather, glass
and tobacco industries machines).

29.6 Manufacture and repairs of weapons and ammunition (weapons and
ammunition for army, police, hunting and sport).

29.7 Manufacture of household appliances and equipment (electric and non-electric
devices for household).


 Shares of the groups in receipts from sales of own products and services in 2003




                                                                                    48
Regional structure of the branch


           Shares of regions in the main production indicators in 2002




Main economic indicators

              Price development




Since 2001 a permanent growth of products´ and services´ prices has been obvious in
the CPA 29.1 – Machinery for the production and use of mechanical power, CPA 29.2
– Other machinery and general – purpose machinery, CPA 29.3 – Agricultural and
forestry machinery and CPA 29.5 – Other special – purpose machinery. In the groups


                                                                                49
CPA 29.4 – Machine tools and forming machines, and CPA 29.6 – Weapons and
ammunition, after the yearly enhancement of prices a moderate decrease of prices has
been registered. It was caused by the worldwide recession, which manifested namely in
the machine tools, forming machines, weapon and ammunition manufacture; the
influence of removal of the international tension on the European continent is surviving
as well as the termination of exports into countries, which are risky with respect to
safety. In the CPA 29.7 – Household appliances and equipment, after moderate
decreasing of prices caused by the competition pressure lasting several years, the prices
have been already stabilised.


Main production indicators

                  Receipts from sales of own products and services
                   in current and constant prices in 2000 – 2003




Manufacture of the entire branch expressed in receipts from sales of own products and
services, in current and constant prices, had been growing in the period from 2000 –
2003. In 2002, however, the growth of the entire branch was not too pronounced and
the groups 29.1 – Manufacture and repairs of machinery for the production and use of
mechanical power, 29.4 – Manufacture and repairs of machine tools and forming




                                                                                      50
machines, and 29.7 – Manufacture of household appliances and equipment, did not take
share in it.
In 2003 a turnover was already registered in the majority of groups inn the branch,
namely in the group 29.1 – Manufacture and repairs of machinery for the production
and use of mechanical power, and 29.5 – Manufacture and repairs of other special-
purpose machinery.

The development of the value added in the period from 2000 to 2003 has similar
outline as the indicator of receipts from sales of own products and services. In the
decline of production in 2002 namely the group 29.1 – Manufacture and repairs of
machinery for the production and use of mechanical power and the group 29.4 –
Manufacture and repairs of machine tools and forming machines, took share. A basic
turnover was already registered in 2003. The largest value added in the last several
years created the group 29.2 – Manufacture and repairs of other machinery and general-
purpose machinery and the group 29.5 – Manufacture and repairs of other special
purpose machinery.

             Value added in current and constant prices in 2000-2003




                                                                                   51
The number of labour forces in the entire branch has been continuously decreasing
every year and it was amounted to 93,7% of the 2000 level. In comparison with 2002
the number of workers declined by 2,6%. An increase in the number of workers was
registered only in the group 29.1 – Manufacture and repairs of machinery for the
production and use of mechanical power.


                      Number of employees in 2000 – 2003




Development in main production indicators in 2000 – 2003

                   Total costs in current prices in 2000 – 2003




The total costs in NACE 29 are inter-annually growing by about 3%. They increased
by 10.1 % in the last three years.




                                                                               52
The labour costs in the NACE 29 inter-annually increased by 1.6% only, when the
largest increase of 8% was recorded in 2001. At the decreased number of workers it
means that the wages were higher in 2003.

                  Labour costs in current prices in 2000 – 2003




Labour productivity and labour costs
                     Labour productivity from value added
                 in current and constant prices in 2000 – 2003




                                                                               53
Labour productivity from value added in current prices has been inter-annually
increasing since 2000, except the year 2002. In the whole branch this value increased
by 25.9% as compared with 2000. In 2003 it was amounted to CZK 391.8
thousand/employee.

The share of labour costs showed in the individual groups of the NACE 29 branch an
irregular development. The entire NACE 29 branch has provided a stable value with a
local increase of the share in 2002. The labour costs in 2003 were amounted to two
thirds of the total costs (66.7%).


       Share of labour costs in value added in current prices in 2000 – 2003




                                                                                  54
Foreign trade

                Development in foreign trade with NACE 29 products,
                         in current prices in 2000 – 2003




                                                                      55
Development in foreign trade – NACE 29 in current prices, in 2000 – 2003




                                                                           56
Territorial structure of foreign trade

Export territories in 2003




Import territories in 2003




                                         57
Investments

Tangible investments
Since 1997 the yearly investments in this branch have maintained the level exceeding 7
billion, except the year 1999, which was extraordinary week in investments. In 2003
almost CZK 10 billion were invested, which was by CZK 2 billion and by 25.6% more
than in the foregoing year. It means that investors are awaiting and economic growth
and are preparing its utilisation.

          Development in tangible investments in 2000 – 2003 (NACE 29)




Foreign direct investments

                       Foreign direct investments – NACE 29




The effect of abroad investments in the branch is for its development without any
doubts positive.


Summary and perspective of the branch
29.7 – Manufacture of household appliances and equipment – there is great competition
in this group. The market is controlled by the large marketing chains, which are selling
goods under the “very” hard conditions for the manufacturers. The Czech
manufacturers that are smaller are withstanding this pressure with large difficulties. A
perspective development on the CR territory cannot be expected.




                                                                                     58
        11. THE WHITE GOODS SECTOR IN THE UK
                              REPORT BY AMICUS



Introduction

The UK white goods market covers sectors such as home laundry appliances,
refrigeration equipment, cooking appliances, microwave ovens and dishwashers. The
total market value for household appliances (white goods) reached GBP £2.81bn
(3.93bn €) in 2004, only a 1.9% increase from 2003. The UK market for such goods is
one of maturity where only the categories of dishwashers and tumble driers have much
potential to increase volume sales. The main opportunity to increase the value of the
white goods market is through technological innovation.

The mature white goods sector employs 20,000 people and has an annual turnover of
£799 million (1200 million €), of which £173 million (260 million €) around one fifth
of total production is exported.

The largest sector by value is home laundry appliances and dishwashers with a 37 per
cent (37%) share of the white Goods total market.

The state of the economy and of the housing market are particularly important to the
demand for white goods, since purchases may often be deferred, consumers can opt for
cheaper items than they may have wanted and it is a move to a new house that
frequently triggers the purchase of household goods, whether for the first time or as a
replacement.

Service and repair of White Goods is also a major aspect of the sector, (circa 3500
service engineers employed in sector) however with the price of appliances ever
decreasing only the expensive appliances are usually repaired unless an extended
guarantee or insurance policy has been purchased.

The white goods market is dominated by a small number of multinational
manufacturers with well-known brands. Consolidation among them continues, with the
most recent re-shaping being the UK operations of General Domestic Appliances Ltd
(ex GEC and Marconi Company) and Merloni Domestic Appliances Ltd, which came
together as Merloni Elettrodomestici UK Ltd, part of the Italian Merloni Group, now
renamed the Indesit Company Globally and in the UK the Indesit Company UK
Limited.

Major Companies in the UK White Goods sector

Indesit Company
Set up in 1975 as Merloni Elettrodomestici, Indesit Company is the youngest of the
sector’s world leaders and is one of the top 3 European white goods producers. Ariston
and Indesit are the Group’s two “historic” brands, which are sold throughout Europe
and lead the built-in and freestanding segments respectively.




                                                                                    59
Hotpoint (originally manufactured electric Irons in USA by General Electric
Appliances that heated right to the point hence Hotpoint) is the brand leader for
washing machines in the UK with the manufacturing plant located in Kinmel Park in
Wales. There are also 3 other manufacturing sites for tumble driers (undergoing major
investment), refrigeration and cookers.

Service in the UK is a major aspect of white goods and The Indesit Company UK
Service Division has around 1600 employees.

The Indesit brand itself is not that well known and as such the name Hotpoint will
continue to be used, supplemented by other branding as required.

The other distinctive regional brands - Scholtès and Stinol – are amongst the leaders in
the France and Russia, respectively.

Through its 20 production facilities and 22 commercial establishments throughout the
world, Indesit Company applies a model of sustainable development that aims to
further social progress wherever it operates. Significant in this context is the
Company’s commitment to creating industrial districts in emerging nations such as
Poland, Russia and, recently, China. Indesit Company has 20.000 employees
worldwide and 20% are UK based.


Products Marketed                           Brands Marketed
Cookers                                     Ariston
Dishwashers                                 Cannon
Fridge/Freezers                             Creda
Hobs - Built-In                             Hotpoint
Microwave ovens                             Indesit
Ovens - Built-In
Refrigerators
Spin Dryers
Storage Heaters
Tumble Dryers
Upright Freezers
Washer Dryers
Washing Machines


Factory Locations
Cookers                                     Washing Machines
Grindley Lane                               Royal Welch Avenue
Blythe Bridge                               Kinmel Park
Stoke on Trent                              Bodelwyddan
Staffs                                      Clwyd
ST11 9LJ                                    LL18 5TY

Employees at site: 807                       Employees at site: 610




                                                                                     60
Refrigeration                         Tumble Driers
Morley Way                            Yate
Peterborough                          Bristol
PE2 9JB                               BS37 5HR
Employees at site: 578                Employees at site: 637

Head Office
lndesit Company
Morley Way
Peterborough
PE2 9JB
Turnover in the UK: 300m £ (450m €)
Employees in the UK: 5515

MP                                    MEP
Dr Helen Clark MP                     Mr Robert Sturdy MEP
House of Commons                      European Parliament
London                                Rue Wiertz
SWIA OAA                              1047 Brussels
Labour MP – Peterborough              Belgium
                                      Conservative MEP -Eastern

Mr Robert Flello                      Mr Michael Cashman
House of Commons                      Terry Duffy House
London                                Thomas Street
SW1A 0AA                              West Bromwich
Labour MP – Stoke on Trent            B70 6NT
                                      Labour MEP

Chris Ruane                           Mr Graham Watson
House of Commons                      Bagehot’s Foundry
London                                Beards Yard, Bow Street
SW1A 0AA                              Langpot
Labour MP – Vale of Clwyd             Somerset
                                      TA10 9PS
                                      Liberal Democrat MEP

Steve Webb                            Mrs Jill Evans
House of Commons                      Basement Rear
London                                23 High Street
SW1A 0AA                              Chancery Lane
Liberal Democrat MP – Northavon       Cardigan
                                      SA43 1HD
                                      Plaid Cymru MEP




                                                                  61
Electrolux Group
The Electrolux Group has two business areas, Indoor Products and Outdoor Products,
both of which include products for consumers and professional users. With sales of
SEK 121 billion, Electrolux is the world's largest producer of appliances and equipment
for kitchen, cleaning and outdoor use (Flymo and Husqvana). Electrolux is also one of
the largest producers in the world of similar equipment for professional users. In 2004,
Indoor Products accounted for 77% of Group sales and Outdoor Product for the
remaining 23%.

Products Marketed                           Brands Marketed
Chest Freezers                              AEG
Dishwashers                                 Electrolux
Fridge/Freezers                             Moffat
Refrigerators                               Onyx
Tumble Dryers                               Parkinson Cowan
Vacuum Cleaners – Cylinder                  Tricity Bendix
Vacuum Cleaners – Upright                   Zanussi
Vacuum Cleaners 2 in I                      (Flymo and Husqvarna)
Washer Dryers
Washing Machines
(Outdoor equipment)

Electrolux Ltd
Head Office:
Electrolux Ltd
Cornwall House
55-77 High Street
Slough
Berkshire
SL1 1DZ
Turnover in the UK: 300m £ (450m €)
Employees in the UK: 3567

Factory Location:
Electrolux Ltd
Merrington Lane Trading Estate
Spennymoor
Co Durham
DL16 7UU

Employees at site: 800
MP                                                  MEP
Mr Kelvin Hopkins MP                                Ms Eryl McNally MEP
House of Commons                                    European Parliament
London                                              Rue Wiertz
SW1A OAA                                            1047 Brussels
Labour MP - Luton North                             Belgium
                                                    Labour MEP - Eastern




                                                                                     62
Rt. Hon. Derek Foster MP                         Mr Stephen Hughes MEP
House of Commons                                 European Parliament
London                                           Rue Wiertz
SW1A OAA                                         1047 Brussels
Labour MP - Bishop Aukland                       Belgium
                                                 Labour MEP - North East

Mr Syd Rapson MP                                 Mr James Provan MEP
House of Commons                                 European Parliament
London                                           Rue Belliard 97-113
SWIA OAA                                         B-I 047 Brussels
Labour MP - Portsmouth North                     Belgium
                                                 Rue Belliard 97-I 13
                                                 B-I 047 Brussels
                                                 Conservative MEP – South East
Mr Kevan Jones MP
House of Commons
London
SWIA OAA
Labour MP - Durham North

Ms Fiona Mactaggart MP
House of Commons
London
SWIA OM
Labour MP – Slough

Rt. Hon. Tony Blair MP
House of Commons
London
SW1A OM
Labour MP - Sedgefield


Hoover/Candy Group
Hoover is a subsidiary of Candy, the parent company of CDA. Candy acquired it from
Maytag Corporation of the USA in 1995.

Hoover, founded in 1906, has a plant in Merthyr Tydfil, South Glamorgan,
manufacturing white goods and another in Cambuslang, Strathclyde, and
manufacturing non-white goods products.

These include vacuum cleaners (vacuuming is often referred to as hovering in the UK
due to extensive marketing campaigns), which in 1992 were subject to an over-
subscribed free flights promotion. This eventually cost the company (then under
Maytag ownership) some £48 million.




                                                                                 63
Products Marketed                                  Brands Marketed
Dishwashers                                        Candy
Floor Polishers                                    Hoover
Freezers                                           Iberna
Refrigerators                                      Kelvinator
Steam Cleaners                                     Otsein
Tumble Dryers                                      Zerowatt
Vacuum Cleaners - Cylinder
Vacuum Cleaners - Upright
Vacuum Cleaners 3 in 1
Washer Dryers
Washing Machines

White Goods Factory Location: Same address as Head Office.
Factory workers on site: 550
Parent Company: Candy Spa (Italy)
Turnover in the UK: £212m (318m €)
Employees in the UK: 1761

Hoover Ltd
Head Office:
Hoover Ltd
Pentrebach
Merthyr Tydfil
Mid Glamorgan CF 48 4TU

MP                                                 MEP
Ms C Russell MP                                    Mrs Glenys Kinnock
House of Commons                                   Labour European Office
London                                             The Coal Exchange
SW1A CM                                            Mount Stuart Square
Labour MP - City of Chester                        Cardiff
                                                   CF10 6EB


Bosch Siemens Home Appliances Ltd
BSDA (registered in 1985 and based at Hayes, Middlesex) is a wholly-owned
subsidiary of Bosch-Siemens of Munich, Germany, itself jointly owned by Robert
Bosch GmbH and Siemens AG. Two other German white goods manufacturers owned
by Bosch-Siemens, Neff GmbH of Bretten and Gaggenau Werke GmbH of Gaggenau,
have UK subsidiaries, Neff and Gaggenau (UK) Ltd.

BSDA supplies reference white goods in the UK under the brand names Bosch,
Siemens and Neff. They are all imported from Bosch-Siemens and manufactured by the
two parent companies. In some cases the same model is supplied under all three brand
names. Another BSDA subsidiary, Appliance Care Ltd, handled all after-sales servicing
for the group.

All BSDA products are relatively highly priced. Neff deals almost entirely with the
built-in market and does not supply tumble driers. Gaggenau, acquired in January 1995,
supplies mainly high- specification cooking equipment and its sales of reference goods
are very small. At present it is separately managed and sources its products from its
own immediate parent company.


                                                                                   64
Products Marketed                                   Brands Marketed
Air Conditioning                                       Bosch
Cookers                                                Gaggenau
Dishwashers                                            Neff
Food Preparation                                       Siemens
Freezers                                               Superser
Gas Fires
Heating Products
Hobs - Built-In
Irons
Kettles
Microwave ovens
Ovens - Built-In
Refrigerators
Toasters
Tumble Dryers
Vacuum Cleaners - Cylinder
Vacuum Cleaners - Upright
Washing Machines

Turnover in the UK: £145m (217m €)
Employees in the UK: 460

Head Office
BSH Home Appliances Ltd
Grand Union House
Old Wolverton Road
Wolverton
Milton Keynes
MK12 5PT

MP                                                 MEP
Dr Phyllis Starkey                                 Mr James Elles
House of Commons                                   Disraeli House
London                                             12 Aylesbury End
SW1A 0AA                                           Beaconsfield
Labour MP – Milton Keynes
South West Bucks
HP9 1LW


Dyson Ltd
James Dyson established his business in the UK initially with a bag less vortex vacuum
cleaner, which was also manufactured in the UK. However in 2002 all UK production
was ceased the factory closed and the product is now manufactured in the Far East with
only the design process & marketing carried out in the UK.

Products Marketed                                  Brands Marketed
Vacuum Cleaners                                    Dyson
Washing Machines




                                                                                    65
Head Office
Dyson Limited
Tetbury Hill
Malmesbury
Wiltshire
SN16 ORP

Turnover in the UK: £277m
Employees in the UK: 1200

MP                                                   MEP
Mr James Gray                                        Dr Caroline Jackson
House of Commons                                     14 Bath Road
London,                                              Swindon
SW1A 0AA                                             Wiltshire
Conservative MP – North Wilshire                     SN1 4BA
                                                     Conservative MEP


Crosslee Plc
Crosslee of Halifax, West Yorkshire, is a manufacturer of tumble driers, and a supplier
to the UK market under its White Knight brand. It was formed in 1986 following a
management buy-out of the UK tumble drier facilities of Philips (which later sold its
other UK white goods interests to Whirlpool).

In addition to direct sales of its White Knight brand, Crosslee supplies tumble driers to
Emaco (under the Zanussi and Tricity Bendix brands), MDA (Indesit and Ariston
brands although currently under notice as Indesit intends to produce all models at ex
GDA Hotpoint factory), Whirlpool, Candy and Servis, and a Thor brand that is sold by
an independent distributor of that name in Northern Ireland. It exports 60 to 70% of its
output.

Crosslee also supplies a very small number of washing machines and dishwashers in
the UK under its White Knight brand; these are imported from Spain. Its White Knight
products are sold mainly to multiples.

Products Marketed                                    Brands Marketed
Fridges                                              Hostess
Deep Freezers                                        Royal Cozyfire
Electric & Gas Fires                                 White Night
Hostess Trolleys
Spin Dryers
Tumble Dryers




                                                                                      66
Head Office
Crosslee Plc
Lightcliffe Factory
Hipperholme
Halifax
West Yorkshire
HX3 8DE

Turnover in the UK: £50m (75m €)
Employees in the UK: 730

MP                                                   MEP
Mr Gerry Sutcliffe MP                                Mr Richard Corbett
House of Commons                                     2 Blenhiem Terrace
London                                               Leeds
SWIA OAA                                             LS2 9JG
Labour MP - Bradford South                           Labour MEP


Evolution and Developments of the Sector

The white Goods market has to adapt along with technological evolution where ‘built
in’ appliances are being demanded to fit in with the modern household.

No longer will consumers just accept white box shaped appliances, but demand design
features and colour coordination.

The ability to place products at the right price with all the required innovations is the
challenge for the sector, as then growth could become achievable.

The ‘value’ end of the market is very competitive where instead of repairing the
product consumers opt to replace especially if the price point is below £140 (200 €)
whereas higher value may well be repaired.

To remain competitive and also produce goods that offer a return on the investment the
UK mature market is moving towards the mid to high end price point where additional
features can command a higher price.

The idea of a refrigerator having Internet access or a cooker being able to download
recipes seemed science fiction. However these are features already available as
convergence even in domestic appliances becomes available.

Washing Machines with higher load capacities are also being developed for the home
market whereas previously these were purely commercial products for guesthouses or
hotels.

Without evolution, innovation and added value producing low cost high volume
products alone would leave the UK and indeed Europe’s producers at risk of low cost
Far East Globally and Eastern Europe (non EU and new EU entrants) have producers
both new and established names who have relocated and who are intent to continue to
dump low cost products into the UK and the EU in general.


                                                                                      67
To defend manufacturing within the UK is a priority for Amicus as without a
manufacturing base the whole economy is at risk. The sector provides employment for
thousands, with the associated infrastructure distribution, servicing.

If the sector diminished it would be unlikely that it would ever return, skilled and semi
skilled employment would be lost, and the balance of payments deficit (Gross
Domestic Products or GDP) would undoubtedly increase to the detriment of all citizens
of the UK and indeed Europe in general. Even consumers who may well see price
reductions in the short term will also loose out in the long term, as economic instability
does not just affect the sectors employees.




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