Electrolux CEO Says Appliance Prices Won't Rise From GE Deal

  • U.S. seeking to block acquisition of GE's appliance unit
  • Without growth, `we're going to get crushed,' McLoughlin says

Electrolux AB Chief Executive Officer Keith McLoughlin told a Washington judge that his company will be able to keep costs down and sell ovens and other products at lower prices should it win approval to acquire General Electric Co.’s appliance business.

McLoughlin, called to the witness stand Thursday in a U.S. antitrust lawsuit seeking to block the acquisition, called the takeover “critical” to Electrolux’s ability to compete in the future and disputed the government’s position that the deal would reduce competition and lead to higher prices.

“Our cost per unit is going to go way down,” he said. Consumers are “going to get more innovative products at lower prices.”

The Swedish appliance maker is fighting the Justice Department’s claims that the combined company and Whirlpool Corp. will dominate the U.S. cooking-appliance market, leading to a duopoly that would have the market power to raise prices on consumers and home builders. Whirlpool and an enlarged Electrolux would make about 88 percent of cooking ranges sold in the U.S., the government says.

Newer Rivals

McLoughlin painted a different picture, saying the market had changed dramatically since he joined the company in 2003. Back then, Whirlpool, GE, Electrolux and Maytag -- which Whirlpool bought in 2006 -- were dominant. Today, those appliance makers face intense competition from Samsung Electronics Co. and LG Electronics Inc. as well as newer rivals like Haier Electronics Group Co., which are gaining market share, he said.

“Unless some miracle happens, this trend is going to continue,” he told U.S. District Judge Emmet Sullivan.

If Electrolux, Europe’s biggest appliance maker, defeats the government, the $3.3 billion acquisition will add brands like Hotpoint to lines that already include AEG stoves and Frigidaire refrigerators. Electrolux needs the deal to gain scale to become more efficient, McLoughlin said.

“If we stand still, we’re going to get crushed,” he said. “We have to innovate. We have to lower our costs.”

Retail Pressure

The CEO said prices are set not merely by the extent of market consolidation and supply capacity but also by raw material costs and cost pressure from suppliers and retailers like Home Depot Inc.

“We’re in the worst part of the value chain,” he said. “We’re in the wrong spot to have pricing power. We don’t have it.”

Efforts to settle out of court failed when the Justice Department last month rejected a proposal that the government said fell “well short” of replacing the competition that would be lost. Stockholm-based Electrolux called its offer a “reasonable divestiture settlement package that addressed the government’s concerns.”

After McLoughlin’s testimony, Sullivan asked both sides whether a settlement were still possible and offered to ask another judge to help broker a deal. John Majoras, a lawyer for Electrolux, told the judge that the companies were open to settling but that there’s a “fundamental difference” with the government about the competitive issues.

The case is U.S. v. Electrolux, 15-01039, U.S. District Court, District of Columbia (Washington).

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