Electrolux Faces Battle in Tough Appliance Market

AB Electrolux of Sweden won a skirmish with White Consolidated Industries by persuading the Cleveland-based appliance maker to accept its sweetened, unsolicited takeover bid. But Electrolux’s real battle has only started.

In deciding to expand its role in the U.S. market for major appliances, Electrolux now must face the market’s two giants, General Electric and Whirlpool.

By acquiring White, the nation’s third-largest appliance maker, Electrolux will instantly obtain about 15% of the market. But GE and Whirlpool each control between 25% and 30% of the business, industry analysts estimate, and both companies are aggressively working to retain their leading roles.

Hence, some observers said, Electrolux--Europe’s largest appliance maker with about $5 billion in annual revenue--might have to settle for protecting White’s existing business while trying to improve its lagging profitability.

“White before had an uphill battle, and they probably will continue to have an uphill battle to reach” GE and Whirlpool, said Bart N. Schneider of the Value Line Investment Survey, a securities research firm.

After initially rejecting Electrolux’s advances, White agreed Monday to be acquired for $742.6 million. Electrolux’s initial bid came to $711 million.

White sells refrigerators, freezers and other appliances under the Frigidaire, White-Westinghouse, Kelvinator and Gibson brands.

The merger is seen benefiting both companies. White, for example, would have Electrolux’s resources to help complete a $500-million modernization program. White sees that program as crucial to lowering its costs and raising its efficiency.

By giving up its public ownership, White also could further invest in major long-term changes without holding back for fear of disappointing Wall Street with quarterly profit declines.

As for Electrolux, its stated goal is to lift its profit margins by using White to increase its economies of scale.

White’s products also would complement the gas and electric ranges sold by Tappan Co., an existing U.S. subsidiary of Electrolux. Such a full line of kitchen equipment could bolster Electrolux’s marketing position in the new-building and remodeling industries.

And finally, there is speculation that White could begin importing lower-cost components from Electrolux’s non-U.S. units to bring down the cost of its appliances.