Electrolux said Wednesday the CEO of its Charlotte-based North American division has resigned, and the appliance maker announced it expects the unit to incur a first-quarter loss as it works to meet tighter energy standards.
Jack Truong, the company’s public face in Charlotte since 2011, has resigned to pursue “other interests,” the company said. Keith McLoughlin, CEO of Sweden-based Electrolux, will act as interim head of Major Appliances North America as the company begins searching for Truong’s replacement. McLoughlin previously held the post from 2003 to 2007.
“What we can say is today’s announcement is around restoring business results and accelerating our plans to ensure the business results are in line with expectations,” McLoughlin told the Observer.
“It’s obviously about making sure we have skills and capabilities in place to close the GE transaction,” he said, referring to the company’s plans to acquire General Electric’s Louisville, Ky.-based home appliance business, a $3.3 billion deal announced last year.
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Truong did not immediately respond to a message seeking comment.
McLoughlin on Wednesday reaffirmed the company’s commitment to Charlotte after the GE Appliances deal is complete. Electrolux said it anticipates the deal, which requires signoff from nine countries, will be approved in full this year and will result in $350 million in cost savings.
“Once that happens, we will start to make choices and decisions around which people will be located where. What I can tell you with certainty is that the headquarters for Electrolux in North America will be Charlotte,” McLoughlin said.
Truong’s successor will also be based in Charlotte, the company said.
McLoughlin said it’s too soon to say how the deal will affect the overall employee count in Charlotte. The company employs about 925 people locally and has said it expects to increase the number to 1,600 by the end of 2017.
The company’s news Wednesday has “no implication on strategic direction for the company,” McLoughlin said.
David MacGregor, research director at Longbow Research, said given the magnitude of the GE deal, the next executive must have deep sophistication in manufacturing and engineering but also needs to be able to cultivate relationships on the client side.
“That narrows the field quite a bit, but there are players within both Electrolux and General Electric that would fit that bill,” MacGregor said.
Electrolux is the second-largest appliance manufacturer, behind Whirlpool, and its Charlotte-based North American operations are a major source of the company’s revenue.
Lower results likely
On Wednesday, however, Electrolux said it expects first-quarter earnings for its North American major appliances business will be “significantly lower than anticipated” as the company adapts to new federal energy standards for its refrigerators and freezers that were put in place during the second half of last year.
Additional expenses to ramp up production at a Memphis, Tenn., home cooking appliance manufacturing plant that opened last year also will weigh on Electrolux North America’s earnings, the company said.
“Results for the business area in the first quarter 2015 will therefore be negative,” the company said in a statement.
In a fourth-quarter earnings call in January, McLoughlin said the company is “not happy with the performance in North America.” He said the transitions to meet energy standards include using different compressors, foaming and wall thickness in its cold products.
MacGregor, the industry researcher, said the energy standards are an industrywide challenge for manufacturers, but Electrolux is particularly sensitive since refrigerators and freezers make up a bigger part of its overall sales compared with its competitors.
“A program to restore profitability and increase efficiency is underway,” Electrolux said in a statement. The company didn’t provide details but said it will take most of 2015 for the program to show effect.
Electrolux will report first-quarter earnings April 24.
The appliance maker moved its North American headquarters to Charlotte from Augusta, Ga., in 2010, lured partially by a $27 million incentives package. In 2013, Electrolux announced an $85 million expansion of its facilities in the University City area, supported by a $34 million incentives package.
Truong was the second chief executive of Electrolux’s North American major appliances unit during its time in Charlotte. Kevin Scott led the division when it relocated from Georgia. He was replaced in 2011 by Truong, a former 3M executive whose role as head of the Minnesota company’s office supplies division earned him the title “King of Post-It Notes.”
Electrolux’s shares in Stockholm fell more than 7 percent after Wednesday’s announcements. Karri Rinta, an analyst at Handelsbanken, told the Wall Street Journal this had more to do with the length of time Electrolux said it needed to improve results than with the profit warning itself, which many had expected.