GE GE Aerospace

   (FROM THE WALL STREET JOURNAL 11/20/15) 
   By Brent Kendall 

WASHINGTON -- Electrolux AB's chief executive battled in court Thursday with a Justice Department lawyer over whether his company's planned acquisition of General Electric Co.'s appliance business would lead to higher consumer prices.

The 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.

Department lawyer Steven Kramer attempted to demonstrate that Mr. McLoughlin's company over several years has said consolidated markets give it more control over prices. Mr. Kramer also pointed to a 2005 board-meeting presentation in which the company said market fragmentation "leads to price erosion."

The document said there were potential antitrust risks in the U.S. cooking-appliances market if Electrolux bought the GE business.

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 Co. and LG Electronics Inc. of South Korea, 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.He pointed to 2013 data that he said showed Electrolux "achieved record margins."

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, 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 U.S. appliance-market pie.

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(END) Dow Jones Newswires

November 20, 2015 02:47 ET (07:47 GMT)

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