Business

South Carolina offered big money in bid to lure Electrolux, records show

Gov. Pat McCrory presents Jack Truong, then-CEO of Electrolux in North America, with a plate with the seal of North Carolina after Electrolux announced its expansion in Charlotte in December 2013.
Gov. Pat McCrory presents Jack Truong, then-CEO of Electrolux in North America, with a plate with the seal of North Carolina after Electrolux announced its expansion in Charlotte in December 2013. tsumlin@charlotteobserver.com

When Swedish appliance company Electrolux was considering expanding its North American headquarters in Charlotte two years ago, South Carolina made a big-money play to lure the company across the state line.

Newly released public records from the N.C. Department of Commerce show South Carolina offered a package of tax breaks worth almost $67 million, nearly double what North Carolina was offering.

The Observer requested the records soon after the December 2013 announcement that Electrolux would double the size of its Charlotte headquarters, but it did not receive them until this week.

The behind-the-scenes wrangling over the high-profile expansion code-named “Project Cupcake” shows how aggressive South Carolina can be in attempting to lure companies a few miles away from Charlotte.

South Carolina has won thousands of jobs by persuading companies such as Lash Group and LPL Financial to relocate south of the state line, to sites in York and Lancaster counties with the promise of tax breaks.

And at a time when North Carolina’s business-luring incentives are up in the air – the legislature has yet to agree to renew the program – the episode shows how hard North Carolina must sometimes fight to keep a company.

The documents show North Carolina officials feared South Carolina was trying to lure not only the expansion, but existing jobs as well.

“This appears to be South Carolina’s play to get all of Electrolux’s R&D functions, including those that currently exist in Charlotte,” N.C. Commerce Department officials wrote in September 2013. South Carolina said it would offer even more incentives if Electrolux moved 1,000 jobs there, not just the 810 under consideration, according to the documents.

Electrolux ultimately chose Charlotte, lured in part by an incentives package totaling $34 million worth of state and local tax breaks.

A source with knowledge of the deal told the Observer that Electrolux decided to pair the expansion with its existing Charlotte headquarters, to foster collaboration across all departments and spur innovation. Also, the company had just relocated from Georgia to new facilities in Charlotte’s University City area in 2010, and another move so soon wasn’t an attractive option.

Eloise Hale, a spokeswoman for the company, said this week that Electrolux decided to expand in Charlotte instead of South Carolina for several reasons.

“Charlotte has an outstanding workforce; great access to road, rail and air transportation; is a center for business, finance, technology, and cultural and recreational activities,” she wrote in an email. “It also has strong local and state universities and community colleges.”

Electrolux’s new facilities, an $85 million investment bringing 810 jobs and a new research and development center, were supposed to open early next year. But the company’s $3.3 billion pending acquisition of GE Appliances has thrown a kink into the plans. GE Appliances has a massive R&D center in Louisville, Ky.

Electrolux has said it is committed to keeping its North American headquarters in Charlotte, but the company is evaluating what to do with the expanded R&D facility. And now the GE Appliances deal itself is uncertain, after federal antitrust regulators moved to block the combination. A trial is set for November.

“We are fully committed to completing the acquisition as soon as possible,” Hale said. “As we’ve disclosed since September 2014 when we announced the acquisition, we are currently evaluating how this space will be used once we are operating as one company. We won’t know more until after we close the deal.”

Competing packages

Electrolux made a big splash in Charlotte when it relocated from Augusta, Ga., five years ago. The company brought hundreds of high-paying jobs – wages averaged $111,000 – and the North American headquarters of a major appliance maker. Known for refrigeration, cooking and washing machine brands such as Frigidaire and Westinghouse, Sweden-based Electrolux also brought a prominent international company to Charlotte.

The company received a $27 million incentives package for that move. Such packages are typically structured as local property tax breaks and refunds for a portion of the company’s income taxes, based on payroll. The grants are usually tied to hiring and investment targets and are paid out over a number of years.

By 2012, Electrolux was already looking to expand and centralize its R&D departments. The company wanted to create a unified center for those functions, along with marketing, administrative and associated executive jobs.

The N.C. Commerce Department got involved in July 2013, when then-Secretary of Commerce Sharon Decker flew to Charlotte to meet with company officials, the documents show. Electrolux was considering Charlotte, Memphis, Tenn., and a site in York County on Carowinds Boulevard.

State officials quickly put together a package of incentives, the biggest portion of which was an offer to refund 75 percent of the company’s payroll taxes for 12 years. Combined with local property tax rebates of $6.1 million, North Carolina’s offer totaled almost $34 million.

But South Carolina assembled a much bigger package: almost $67 million, with tens of millions more dangled as a possibility if Electrolux moved 1,000 jobs to South Carolina. That would likely have involved shifting hundreds of existing Charlotte jobs to York County, in addition to the 810 new jobs Electrolux was proposing.

Although Commerce Department staff supported pursuing Electrolux, the records reflect ambivalence about the amount of resources North Carolina should commit to “border wars” with South Carolina.

In a September 2013 email, Commerce Department official Stewart Dickinson noted that Art Pope, then serving as Gov. Pat McCrory’s budget director, was wary.

“His concern is whether and how much the state should spend on a project that is competitive with a border county and in this case less than a mile south of the N.C. border,” Dickinson wrote. He said Pope had noted that many of the employees would likely still live in Charlotte.

In a November email, Dickinson said Russell Proctor, a member of the Economic Investment Committee that decides which projects will get incentives money, would support the grant but had reservations.

“He had concern about the ‘border’ projects and how much resource can be allocated to situations like this,” wrote Dickinson. Proctor didn’t return a message seeking comment Wednesday.

But by December 2013, Electrolux had decided on Charlotte. The company had a few more conditions, documents show, including a clause that its Charlotte incentives wouldn’t be tied to maintaining its manufacturing plant in Kinston or its distribution plant in Asheville.

On Dec. 20, the company held a triumphant news conference in Charlotte to announce its decision.

“These jobs are real jobs for North Carolina,” McCrory said during the ceremony. “Thanks to everyone for making it happen.”

A few days later, North Carolina economic development officials closed their file on “Project Cupcake.” The project’s status: “Won.”

Ely Portillo: 704-358-5041, @ESPortillo

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