Keith McLoughlin

Keith McLoughlin
President and CEO

AB Electrolux

Keith McLoughlin holds a bachelor of science in Engineering. He joined Electrolux as Head of Major Appliances in North America and Executive Vice- President of Electrolux in 2003. Prior to that, he was 22 years and held senior management positions with Du Pont. He is also a Board Member of Briggs & Stratton Corp.

 

Quotes

Keith McLoughlin

Keith McLoughlin

President and CEO, AB Electrolux

About 65% of our demand comes from mature markets. But five years ago, 85% of our demand originated in the mature markets.

Keith McLoughlin

Keith McLoughlin

President and CEO, AB Electrolux

A recovery could begin sooner in Europe than in the US.

Keith McLoughlin

Keith McLoughlin

President and CEO, AB Electrolux

Our goal is to maintain market share in the mature markets. Those markets generate a lot of earnings so we have no plans to shrink our presence there. On the other hand, we are planning to invest substantially in the emerging markets.

Keith McLoughlin

Keith McLoughlin

President and CEO, AB Electrolux

When R&D, marketing, and design work independently of one another, we do have some successes. But we don’t get the same sort of amplifying effect like we do when they work together in the innovation triangle.

Keith McLoughlin

Keith McLoughlin

President and CEO, AB Electrolux

Manufacturing products isn't the real sustainability issue. It’s actually the ongoing use of the product by the consumer where the energy consumption becomes significant.

Keith McLoughlin

Keith McLoughlin

President and CEO, AB Electrolux

You have to adjust and make sure that your job offers are tailored to meet these new expectations. That doesn’t mean you don’t have to be competitive in wages. You do, but it’s not just about wages anymore.

Keith McLoughlin

Keith McLoughlin

President and CEO, AB Electrolux

We firmly believe that by applying advanced technology we can make more resource-efficient appliances available and affordable to more people around the world. And that will have a significant impact in terms of sustainability.

Keith McLoughlin

Keith McLoughlin

President and CEO, AB Electrolux

Companies with the best talent win. So the question is how do you attract, develop and retain the best talent? You have to adjust and make sure that your job offers are tailored to meet these new expectations

 

Read interview transcript

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How would you characterise the markets in which Electrolux operates?

At the moment, the mature markets are slow-growing or in decline with respect to high ticket consumer durables. In North America, the housing collapse and high unemployment have combined to create one of the lowest levels of consumer confidence in decades - which means discretionary purchases get postponed. There are similar consumer constraints in Western Europe as a result of the banking crisis and sovereign debt issues. But one also has to note the dissimilarities among the regions of Europe. Northern Europe appears to be relatively stable. Eastern Europe is actually growing - albeit at a slower pace than it had been. Unfortunately, Southern Europe is in quite difficult times for the moment.  Australia is doing quite well because of its iron ore exports to China - but still, the consumer purchasing patterns there are down despite full employment and the robust export market. So, overall, I would say that the mature markets are not in good shape.

Now, does the economic contraction impact our business? Of course it does. About 65% of our demand comes from mature markets. But five years ago, 85% of our demand originated in the mature markets. So today Electrolux has greater revenue diversification as a result of our presence in the emerging markets. The contraction in the mature markets is something we have to cope with - but we continue to generate free cash flow through productivity gains.

What is your guess as to when the mature markets might begin to recover?

We believe that the turnaround in the US will take longer - but once it begins, it will have significant strength. We think things will not improve much in North America in the near term - the near term being the next four to six quarters.  But longer term, the housing market will have to come back strongly simply as a consequence of the predictable rise in household formation. Historically, the American housing market represents five or six percent of US GDP. Today the American housing market is around one percent of US GDP. So the housing market has a significant multiplier effect on the rest of the economy.

And Europe?

Again, it will take time to recover. But at the end of the day, the European governments will make the decisions that are necessary to preserve the Euro.

What about growth for Electrolux over the mid-term?

In the mature markets we foresee growing at 1% in Western Europe; 2-3% in North America; and 1-3% in Australia. And that’s OK. That’s fine. Those are big markets.  If we can grow one, two, or three percent in the mature markets that’s very healthy for us.

And when you look at emerging markets, what sort of growth do you see?

We see long-term sustainable growth across Eastern Europe, the Middle East, Northern Africa, Latin America, and Southeast Asia in the range of 4-6%. In China and India we’re expecting growth in the 7-9% range.

Our goal is to maintain market share in the mature markets. Those markets generate a lot of earnings so we have no plans to shrink our presence there. On the other hand, we are planning to invest substantially in the emerging markets.

How are recessionary conditions affecting your strategy?

Our strategy is focussed on building greater innovation into our products and services at an ever faster rate. And that strategy sets the agenda for what we call our innovation triangle, which is a combination of and collaboration among our R&D, marketing, and design units. That’s a different approach than having, say, an engineer come up with an idea for a product or a designer who wants to add a design flourish here and there. When R&D, marketing, and design work independently of one another, we do have some successes. But we don’t get the same sort of amplifying effect like we do when they work together in the innovation triangle.

Describe the Electrolux approach to sustainability.

Sustainability begins with the way we operate our own facilities. Globally, Electrolux has reduced the energy use in its operations. So far, we have reduced it by 25% since 2005.  But candidly, in terms of the total life-cycle impact of Electrolux products, manufacturing products isn't the real sustainability issue. It’s actually, the ongoing use of the product by the consumer where the energy consumption becomes significant. So a big part of our opportunity to positively affect the environment is to develop more resource-efficient products. That may mean manufacturing products that require less water or less electricity during use; or building products using either less material or more recycled and recyclable content. We don’t cut down trees in order to put out press releases that describe our sustainability agenda. But we firmly believe that by applying advanced technology we can make more resource-efficient appliances available and affordable to more people around the world. And that will have a significant impact in terms of sustainability. Right now, if you wanted to buy the most energy-efficient appliance you’d have to pay a premium for it. Our vision is to use technology to invert that equation so that the more efficient appliances are also the most affordable appliances. And in that paradigm, the consumer says, “Of course I want the more efficient energy appliance.  It costs less and it’s cheaper to use.” So that’s the challenge and the opportunity that we’re focussed on.

Is that’s quite a challenge?

It is. But you can imagine the level of energy and inspiration created in our organisation when we say that we’re going to run Electrolux as an enterprise that creates value for our customers, shareholders and employees without compromising the well-being of future generations.

Has talent become a strategic issue for you?

Ultimately, it’s all about talent, it’s all about people. You can have a great strategy and the best facilities and an outstanding balance sheet. But in the end, it’s all about talent and people. So do demographic trends - whether it’s in Western Europe with a declining birth rate or in the US with the retiring baby boomers - does that present a challenge to the system?  I think the answer is, it obviously does. Having said that, what's interesting to me and what I find hopeful is the attitudes and values of the youngest generation of workers.

They're motivated by different kinds of rewards. To me, they seem to have a more holistic view of where value is - and where value can be and should be created. What motivates them is the quality of the experience that that they have at their workplace. They want to find meaning in the work that they do. Does it have a purpose? Can they make a difference?  Can they have fun?  Can they can they lead a life that includes work and family equally? The younger generation has an agenda unlike the one that was common when I was growing up.  Then you worked for the same company for 30 years to get a pension and make as much money as you could. For young workers, that’s no longer sufficient reward.

How can you meet the expectations of these younger workers?

To keep young workers engaged you have to change the corporate culture, change the work environment, and constantly create opportunities. Companies with the best talent win. So the question is how do you attract, develop and retain the best talent? You have to adjust and make sure that your job offers are tailored to meet these new expectations. That doesn’t mean you don’t have to be competitive in wages. You do, but it’s not just about wages anymore.

And you can’t just redecorate the lobby and say, OK - this is now a cool place to work.  You can't fool the young generation of workers. The changes you make have to be real. Today businesses have to be built around a higher-order purpose. Yes, we’re going to maximise earnings and deliver shareholder value. But in addition to financial objectives, there has to be a goal that speaks to what a company can and should be doing to contribute to society. At Electrolux, we are very, very fortunate in that the nature of our work allows us the opportunity to make products that directly impact consumers in a positive way. As a company, we can do that. The key for us - with respect to the war for talent - is how do we align a societal purpose with a business agenda?  A lot of what we do directly benefits society. It’s not a second order effect. What we do for a living actually contributes to the quality of people’s lives. For example, in the emerging markets we give people the ability to shift their diet from grain to dairy and meat by inventing the sort of appliances that they can afford and don’t require excessive power or water to operate. In the developed markets, we create products that connect with people’s values - whether its time-saving appliances that allow parents to spend more time with their children; or energy-efficient appliances that help people reduce their own carbon footprint; or beautifully designed appliances that provide aesthetic pleasure.

This has been your first year as CEO of Electrolux. How have you spent your time?

During the first half of the year, I had to spend most of my time on strategy development. Do we have a clear, cogent path and direction and do we know how we going to get where we want to go?  Now most of my time is shifting very much over into operational issues -executing our strategy. Since I took on my new role, the three areas where I spend most of my time -strategy, operations, and people-related issues -I would say that my focus on strategy has decreased, the operational work has increased, and the people work has stayed steady throughout the year.

Given Electrolux’s strong balance sheet, I assume you don’t need to spend as much time on matters related to financing as many other companies do.

That’s right. In terms of our financial health, Electrolux has two advantages. First, many of our shareholders are investors for the long-term and they worry less about quarterly earnings than they do about maximising long term shareholder value. So we’re fortunate in that regard. Second, partly through execution, partly through good board governance, we’ve been able to maintain a strong balance sheet. And a strong balance sheet allows one to have a more expansive agenda. We have the running room to consider broad, strategic questions. Are we investing in profitable growth regions?  Are there any attractive acquisitions opportunities for us? What sorts of restructuring activities could we be taking to unlock further value?  How do we maximise our shareholder dividend and what should our share repurchase policy be? Those are the sort of issues on our agenda. Companies that don’t have strong balance sheets have got very different issues to worry about - such as raising capital and protecting their bond rating.  It’s a whole different agenda.  So we’re fortunate in that our agenda is more of the former than the latter.