Business

Electrolux-GE deal would drive up prices, judge told

An Electrolux staffer shows off the wash cycle of a new washing machine during a tour of appliance-maker Electrolux's new fabric care research and development facility in Charlotte in 2014.
An Electrolux staffer shows off the wash cycle of a new washing machine during a tour of appliance-maker Electrolux's new fabric care research and development facility in Charlotte in 2014. dtfoster@charlotteobserver.com

Customers will pay more for home cooking if Electrolux AB is allowed to buy General Electric Co.’s appliance business, a government lawyer told the judge presiding over the trial in Washington of a lawsuit aimed at blocking the deal.

The public is saving money because of fierce competition between the makers of kitchen stoves and washing machines, Ethan Glass, a U.S. Justice Department attorney, told U.S. District Judge Emmet Sullivan in Washington, who is hearing the nonjury trial.

“GE is the one that is beating up on Electrolux, and Electrolux is the one beating up on GE, and consumers are the ones who are benefiting,” Glass said Monday in his opening statement. Electrolux has its North American headquarters in Charlotte.

The combined company and Whirlpool Corp. would dominate the U.S. cooking appliances market, according to the government. Whirlpool and an enlarged Electrolux would make about 88 percent of cooking ranges sold in the U.S., Glass said. The situation would create a duopoly, a situation in which a market is dominated by two companies, the U.S. says.

The Justice Department’s case is focused on retail sales to consumers and sales to homebuilders and property managers.

After opening statements by an Electrolux lawyer, the judge will begin hearing evidence.

Settlement Rejected

Efforts to settle the case out of court failed when the Justice Department last month rejected an accord that the government said fell “well short” of replacing the competition that would be lost. Electrolux, based in Stockholm, offered to sell assets, calling its proposal a “reasonable divestiture settlement package that addressed the government’s concerns.”

“I’m convinced the only proposal, the only remedy, the government would find acceptable would be for Electrolux to essentially divest itself of its entire business in the United States,” Joe Sims, an attorney for the Swedish company, said last week on a conference call with reporters. “That obviously would not be a solution that would preserve the value of the transaction.”

Karri Rinta, an analyst at Stockholm-based Handelsbanken Capital Markets, said selling lower-end GE brands like Hotpoint and more expensive lines like Monogram makes more sense than selling factories. But it might not satisfy the U.S. government, Rinta said.

With the acquisition, Electrolux, Europe’s biggest appliance maker, would add brands like Hotpoint to lines that already include AEG stoves and Frigidaire refrigerators.

Electrolux’s position is that price pressure in the appliance market protects customers, Bjrn Enarson, a Danske Bank analyst in Stockholm, said by phone.

The Swedish appliance maker has also said the Justice Department’s opposition to the acquisition is “wholly inconsistent” with the government’s 2006 decision to approve Whirlpool’s acquisition of Iowa-based Maytag, a home and commercial appliance manufacturer.

Electrolux employs about 900 people at its operation on David Taylor Drive in Charlotte’s University City area. CEO Keith McLoughlin has said the headquarters will remain in Charlotte after the GE deal, but the company is determining whether to move ahead with a planned expansion to double the Charlotte headquarters’ size.

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