The combined company will benefit from the housing recovery, and plans to differentiate its well-known brands.
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Yesterday's announcement that Electrolux reached an agreement to acquire GE Appliances is a major shakeup in the home appliance industry, pairing the second and third largest companies in the industry, respectively.
We sat down with Electrolux CEO Keith McLoughlin to get a better picture of how things might shape up for both companies, and for consumers.
Until the acquisition is finalized, which is expected to happen after regulatory approval sometime in 2015, there are a number of questions about the future of both companies and corresponding brands, which include GE, Frigidaire, Hotpoint, and Electrolux.
One thing is clear: The acquisition helps Electrolux gain from the recovery of the U.S. housing market.
"Of course, GE has a very strong builder segment—much stronger than we do," McLoughlin said. "We're primarily very strong if you're looking at your replacement market, they're traditionally strong in the builder, new construction market. So that's an opportunity for us to leverage off their historical strength in that market."
He also states that GE's multiple brands—including innovation-focused GE Profile, design-centric GE Café, and upscale GE Monogram—will be positioned strategically amidst Electrolux's.
"There's now a good architecture and portfolio of brands that would allow us serve the whole market," McLoughlin said.
McLoughlin said that GE's budget brand Hotpoint will be targeted at the opening price point, and Frigidaire will be positioned as the volume seller. GE's brands will sit above Frigidaire but below Electrolux's own brand, which will be the combined company's flagship.
Most importantly, the acquisition of GE helps the global Electrolux brand become a stronger competitor in the all-important U.S. market—the second largest for home appliances after Western Europe.
"There's enormous benefits to scale and leverage through the consolidation, and that scale and leverage, with the additional assets of GE Appliances will significantly strengthen the balance sheet of the Electrolux Group," McLoughlin said.
That means benefits for Electrolux both in the U.S. and wherever the company operates.
"A strengthened balance sheet will give us three times the firepower, three times the horsepower to invest in the business, to compete globally," McLoughlin concluded.