FAIRFIELD, Conn – September 8, 2014 – GE [NYSE: GE] announced today it has signed a definitive agreement to sell its Appliances business to Electrolux for $3.3 billion
Electrolux is buying an appliance division. Electrolux is a Multi-National appliance company, based in Sweden. Electrolux and its lower-tiered brand, Frigidaire, have grown substantially in the United States over the last 10 years, but trail Whilrpool and GE domestically. Nevertheless, Electrolux is consistently #2 in regards to worldwide appliance volume to Whirlpool Corporation. GE appliances, on the other hand, represent only 2% of revenue in one of the World’s foremost industrial companies. GE appliances primarily support the multi-family and lower-priced single family homes. The reason GE wants to sell their appliance division is the same reason it makes so much sense for Electrolux to buy it: they can’t complete with Whirlpool without it happening.
If you’re a homebuilder, remodeler, or multi-family construction company building with Electrolux or GE appliances, how will this affect you?
For the next 9-12 months, not at all. The deal is still pending government approval and won’t close until 2015, likely toward the later half. Until then, it’s business as usual down at GE Appliance Park. Even after the transaction is final, integration of GE into the Electrolux brand will take years. In the contract it is written the GE brand will be protected for at least 20 years. Products will still be broadly available and warranty obligations honored by Electrolux.
– Keith McLoughlin, Electrolux CEO
Nevertheless, two companies are being brought together. The next 18 months or so thereafter will be creating accounting, reporting, systems and personnel basis for an ongoing business. Integration is complex, the last thing the companies want to do is make volatile changes to products and brands out of the gate – it’s highly unlikely there will be any immediate impact or changes to either Electrolux or GE appliance brands, distribution, servicing, etc. In fact, there’s opportunity for great synergies in the union.
For starters, Electrolux is introducing Factory Service, something GE has been doing for years. Moreover, the Frigidaire brand has been working to get into National Multi-Family deals that have been owned domestically by Whirlpool and GE.
As for product quality and innovation, for now we can only speculate however, GE’s Chairmain and GEO, Jeff Immelt, insists the shared principles and near decade history in home appliances make Electrolux the ideal partner to continue the GE Appliance legacy.
“Electrolux is the right global business for our customers, consumers and employees.” said Immelt. “GE Appliances’ people, valuable home appliances brand, products, distribution, and service capabilities make it a perfect fit with Electrolux and its goal of accelerating growth in the U.S.”
Finally, and arguably the most important, is the argument on cost of appliances. There are two schools of thought on this. On one hand, GE has been preparing for this sale since 2008, and its prices are high, i.e. margins are solid to the bottom line. Surely Electrolux wouldn’t want to disrupt that margin-making machine. On the other hand, nothing helps keep costs down like good old competition. Whirlpool no doubt is working diligently to plan for potential disorganization within the new GE’Lectrolux. It seems plausible that GE appliances are more price-friendly to the homebuilding community in the coming months/years.
One thing is certain – the appliance business is always changing. Like when Whirlpool bought Maytag. And Maytag is still viable.
By Travis Gulbis
Factory Builder Stores President, Dallas-Fort Worth