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Electrolux Fight To Take On Samsung And LG In Appliance Market

Electrolux Fight To Take On Samsung And LG In Appliance Market

The US Justice Department has sued to block the $3.3 billion deal with GE, arguing it would increase consolidation and suppress competition in the cooking-appliances market.

Electrolux Chief Executive Keith McLoughlin took the witness stand on the eighth day of the trial where U.S. District Judge Emmet G. Sullivan is deciding whether to block the acquisition.

“This acquisition has nothing to do with pricing,” Mr. McLoughlin said, responding to government questions. The GE deal, he said, would give Electrolux increased scale, allowing the company to cut costs and invest more in research and development.

Consumers “are going to get more innovative products and lower prices,” Mr. McLoughlin said.

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Department lawyer Steven Kramer attempted to demonstrate that Mr. McLoughlin’s company through statements over several years, including from financial reports and earnings calls, has said consolidated markets give it more control over prices.

Mr. McLoughlin said recent-year Electrolux price increases were attributable to rising costs of raw materials, a trend that has now abated. 

The CEO said the industry was consolidated at all levels, with appliance makers such as Electrolux stuck between powerful suppliers of raw materials and a handful of large retailers that sell most appliances to consumers.

“We’re in the wrong spot in the industry to have pricing power,” he said.

The Justice Department’s Mr. Kramer sought to counter arguments from Electrolux that new and growing entrants in the U.S. appliance market, such as Samsung Electronics and LG Electronics will keep the industry competitive and prices in check.

Mr. Kramer said Electrolux had been able to make recent price increases stick, despite periods of lower consumer demand and the presence of Samsung and LG. 
Judge Sullivan questioned Mr. McLoughlin directly about whether a larger Electrolux after the GE acquisition would “facilitate more price increases.”

Mr. McLoughlin said it wouldn’t, adding the company could expect to lose some market share after the GE deal as competitors tried to pick up more business.

If that is the case, the judge asked, “is that a prudent decision, then, to merge?”

Mr. McLoughlin said Electrolux faced dire consequences without the transaction because of increasing pressure from global competitors. “This is absolutely critical for us,” he said.

Later in the day the Electrolux chief executive fielded friendlier questions from his legal team, saying the appliance market would remain intensely competitive because there were now 10 significant companies aiming for a big piece of the appliance-market pie.

“If we stand still, we’re going to get crushed,” he said.