Sweden-based appliance-maker Electrolux on Thursday said it’s canceling plans for a major expansion at its North American headquarters in Charlotte after its failed attempt to purchase General Electric’s appliance unit.
The company on Thursday also named a new executive to lead the North American unit, completing a search that has been underway for nearly a year.
In an interview, CEO Keith McLoughlin said Electrolux has informed local leaders that it’s not moving forward with a project that would have nearly doubled its Charlotte workforce.
The Stockholm-based company announced the $85 million expansion in December 2013 but said in June 2015 that it was evaluating that plan as part of its planned GE deal. GE, however, pulled out last month in the face of regulatory opposition and found another suitor at a higher price.
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“With the GE deal being terminated, it doesn’t make sense to do the expansion right now,” McLoughlin told the Observer.
Electrolux employs about 850 people at its North American headquarters in the University City area. The company had said the expansion would add 810 workers.
The appliance-maker moved its North American unit to Charlotte from Augusta, Ga., in 2010, lured partially by $27 million in state and local tax incentives. The planned expansion was to bring an additional $34 million in incentives, but the company said those incentives were never received and now will be canceled.
The $27 million in incentives covered the company’s initial move to Charlotte and a package for building out its technology and research operations, said Peter Zeiler, Mecklenburg County’s economic development director. The third contract for new growth was put on hold after Electrolux announced its GE deal, he said.
“The bad news is there won’t be a third expansion, but the good news is they’ve done two,” Zeiler said.
McLoughlin emphasized the company’s North American headquarters will continue to be in Charlotte. Electrolux plans to continue investing in its business, but “our ability to have a substantial increase in the number of employees went with the (GE) deal being terminated,” he said.
The decision comes as Electrolux on Thursday named a new leader, Alan Shaw, to head the North American unit. McLoughlin, who is retiring Feb. 1, has been acting as interim CEO of the unit since April, when Jack Truong resigned from the position on the same day the company warned of lower-than-expected earnings.
From 2013 to 2015, Shaw was president of the Americas at Husqvarna, a Stockholm-based producer of outdoor power products that was spun off from Electrolux in 2006 and has its U.S. headquarters in Charlotte. He is also a former CEO of grill-maker Char-Broil and a former executive at Electrolux competitor Whirlpool.
McLoughlin said he will be in Charlotte on Monday to introduce Shaw to the company’s workforce and will consult with him in coming months as needed.
“He’s been a senior executive in consumer durable goods manufacturing his entire career,” McLoughlin said. “He knows the business. He knows the model. He knows how to make money.”
Electrolux on Thursday reported a narrower-than-expected fourth-quarter loss after the December collapse of the $3.3 billion GE deal.
The maker of Frigidaire and Molteni cookers posted an operating loss of 202 million kronor ($23.7 million), marred by the $175 million breakup fee paid to GE. Analysts had predicted a loss of 385 million kronor. Electrolux stock gained 5 percent, the steepest gain in five months.
Electrolux said it saw a recovery in demand across Western European markets, with the best operating margin since 2010, amid increased sales of new and more profitable products such as steam ovens. Operating income in the North American unit nearly tripled.
Jonas Samuelson, the head of the European major appliances division who is succeeding McLoughlin, pledged to extend a program to improve costs upon taking over as CEO.
“Products that have been in the market for a year or more tend to go down in price, and then, if you’re able to launch new and innovative products at a good pace, you have the opportunity to offset that,” Samuelson told Bloomberg News. “That’s the game, and will most likely continue to be the game.”
Samuelson will be replaced as head of European appliances by Dan Arler, the company said.
McLoughlin and Chief Financial Officer Tomas Eliasson, flanked by Samuelson, moved to reassure investors and analysts in a call Thursday that the company hasn’t lost pace in its hunt for acquisition targets during the 15 months it worked to secure the deal with GE.
“We are constantly in discussions with targets,” Eliasson said. “It was a decision during the GE period not to stop.”
McLoughlin has only days left in a tenure that was colored at the end by the failed GE deal. In the interview with the Observer, he said his departure was his own decision and that he left the company with strong leadership in place and a strong balance sheet. He noted that he will be returning to the United States, where his family has been living without him in recent years.
His replacement will face a potentially more aggressive competitor in the U.S., after China’s Qingdao Haier Co. agreed to step in and buy the GE unit for $5.4 billion.
McLoughlin said in the conference call that Haier’s entry into the U.S. market would have little effect in the short term.
“Long term, you could speculate that there could be changes,” McLoughlin said on the call. “We just had a Chinese competitor get bigger, so that changes the competitive landscape.”
Bloomberg News and staff writer Jonathan McFadden contributed.