Electrolux gets a deal, GE Appliance finds a home

Sep 8, 2014
HTML EMBED:
COPY

Electrolux gets a deal, GE Appliance finds a home

Sep 8, 2014
HTML EMBED:
COPY

Swedish consumer appliance company Electrolux announced its plan to buy GE Appliances for $3.3 billion. GE, parent company of GE Appliance, is probably breathing a great big sigh of relief.

GE is a very large company with subsidiaries in aviation, oil and gas with net profit margins in excess of 15 percent, whereas its appliance division is only making around 5 percent. 

“Relatively speaking, it’s been neglected for years and financial performance has been poor,” says Brian Langenberg, principal at Langenberg & Company. “General electric is selling it for at least a third less than what they should be selling it for; they just want out.”

Electrolux, on the other hand, is getting a deal.  

“It gets them into the American market, which is a market where they haven’t been much of a factor,” says Erik Gordon, professor of business law at the Ross School of Business at the University of Michigan. “That’s important because the American market is growing at 6, 7, 8 percent, but Electrolux’s main market, Europe, is not growing at all; less than 1 percent.”   

Electrolux also gets a 48 percent stake in Mexican appliance company Mabe, extending its reach in North America even further. 

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.