INTERVIEW-UPDATE 1-Electrolux CEO says European demand falling

* Sees demand drop of 15-20 percent year-to-date in Europe

* Says North American market could have hit bottom levels

* German market still holding up

* Repeats outlook for raw materials, cost reductions

(Adds quotes, background)

By Victoria Klesty

STOCKHOLM, June 8 (Reuters) - Electrolux (ELUXb.ST), the world's second-biggest home appliances maker, sees no signs of improvement in its European appliances markets, its chief executive told Reuters in an interview.

"In Europe it started to fall by about 20 percent (this year) and it has been around 15 and 20 percent (down) since. So it is more of the same," Hans Straberg said on Monday, adding the German market was still holding up well. After several years of sliding demand in North America, sales in Europe, Electrolux's biggest market, more recently took a hit as consumers curbed spending.

Electrolux, which makes also makes appliances under brands such as Zanussi, AEG and Frigidaire, said in April demand for appliances would continue to fall this year in the worst global economic downturn in decades. Straberg repeated that view of the market. "We expect more of the same," he said on Monday.

The white goods maker, second only to U.S. rival Whirlpool (WHR.N) in volume, sees continued decline in North America, Straberg said.

"Earlier it was more of a free fall. The parachute is out, but we still can't see the ground," he said. "It could be a sort of bottom. It is hard to see that this could become even worse."

INVENTORIES

Though sales continue to drop, Straberg is not worried about building up inventories since production has been cut.

"What we saw in the fourth quarter last year was an inventory adjustment, in the U.S. and in Europe, and that effect kept going into January," Straberg said. "Since then, there is a fairly good balance between retail sales and our deliveries. So I'm not worried about building inventories in our industry."

Electrolux, which makes consumer durables such as refrigerators, freezers, dishwashes and washing machines, has, unlike the vehicles markets, no second hand market to compete with, and the order backlog is about two or three weeks long, making cancellations very rare.

"The delivery chain has over the years become more and more transparent. We can see fairly well where there is inventory build-up," Straberg said.

He said Electrolux was not planning to cut output further during the summer due to the lower demand, as he believed the production rate was already low enough.

The company has gone through several restructuring programmes during the past decade. The most recent programme, expected to be completed and take full effect in 2010, is on track, Straberg said.

He said prices were holding up, and repeated the company's outlook for direct material costs, expected somewhat lower this year than the 23 billion Swedish crowns ($2.9 billion) in 2008. Straberg said the Swedish crown's recent weakness would hamper positive effects from lower material costs in the second quarter.

(Editing by Dan Lalor)

($1 = 7.929 Swedish crowns)

((victoria.klesty@thomsonreuters.com ; +46 8 700 1022, Reuters Messaging: victoria.klesty.reuters.com@reuters.net)) Keywords: ELECTROLUX/

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