Interesting 11.12.2001 Forbes Article on Aerus LLC


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Thread Number: 27816 / Tag: 80s/90s Vacuum Cleaners
Interesting 11.12.2001 Forbes Article on Aerus LLC

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Post# 310789 1/3/2015 at 15:28 (3,393 days old) by ronni (USA)
Checkrate/Likes 11/12/2001 @ 12:00AM www.forbes.com/forbes/2001/1112/1... Clean Sweep So long, Electrolux. There’s so little left of this venerable company that its new owner might just as well be starting from scratch. An old wheeze has a fellow walking down the street and running into what looks like a familiar face. “Jack, how you’ve changed!” he says. “You used to be dark-haired. Now you’re gray. You used to wear glasses. Now you have contacts!” Says the other guy, “I’m not Jack. I’m Harry.” Says the first, “So! You’ve changed your name, too.” You could say that about Electrolux . It was once a leader in home appliances. Now it’s a pipsqueak. It used to be exclusively in vacuum cleaners. Now it’s in aromatherapy. And now it has a new name, too: Aerus . What’s left of the old Electrolux, the company that revolutionized middle-class housekeeping with its rugged horizontal-tank vacuum? Not much, except a door-to-door sales force and its vacuum cleaner line. From this base Chief Executive Joseph Urso Joseph Urso hopes to build an appliance company that mixes vacuums with some quirky sidelines. There was a time when the Electrolux brand and the direct sales force were a mighty combination. As late as the 1950s a salesman who rang the doorbell would stand a good chance of finding a homemaker who could be shown a well-built, if overpriced, vacuum. If the prospect gagged on the price, she would be offered a generous trade-in on her old machine–which went promptly into a trash pile. The company thrived–especially its Swedish parent, which was founded in 1919 and set up a U.S. affiliate five years later. (The Swedish parent cut its ownership in the U.S. operation in 1928.) The Swedish outfit, now known as AB Electrolux Group, wisely diversified away from vacuums and traveling salesmen. Last year it pulled in sales of $13 billion on everything from refrigerators to chain saws. The U.S. stepchild, in contrast, was mired in the past and came close to suffering the same fate as the milkman and the Fuller Brush salesman. It belatedly made its products available to department stores in 1986, but the move backfired. It spooked the company’s door-to-door vendors, and within two years some 30,000 bolted. The company’s revenue shriveled by 45%, to $185 million in 1989. In 1998 Dallas buyout firm Engles Urso Follmer Capital Corp. bought the American Electrolux, including its factories in Bristol, Va. and Piney Flats, Tenn., from Sara Lee (its then-biggest shareholder) and three banks for only $55 million. Urso, now 47, gave up his investment banking job to run Electrolux from its new Dallas headquarters. Most of the purchase price was borrowed money. To liquidate the debt, Urso last year sold his most valuable asset–the right to use the name Electrolux. The Swedish operation paid $50 million to use the brand in North America beginning in 2004. That gave Urso four years to wean his company from its original name. During the transition the private company will be called Aerus Electrolux. So far, so good. Aerus earned $3 million pretax last year on $236 million in revenue (excluding the name sale). Eighty percent of that came from vacuum cleaners. But now Urso is shifting emphasis from cleanliness to karma, introducing full-spectrum lighting (using natural wavelengths), antiallergy bedding, bottled water, aromatherapy oils and air purifiers. By 2003 half the products will be outsourced in Europe, 30% in the Far East and 20% in the U.S. The product line is New Age, but the selling method is mostly old-school. Urso is keeping the 20,000-person direct sales force, most of them (like Amway or Avon vendors) part-timers. Urso has boosted their average commission from 22% in 1998 to 27%, which means they average $2,500 apiece in gross profit. He is also keeping 644 company-owned stores, three-quarters of which are profitable, and selling on the Internet. To spread the word about the company’s new incarnation, Urso will spend $5 million over the next 12 months on network TV ads and in magazines like Good Housekeeping. He will showcase his wares on QVC and continue the Electrolux tradition of demonstrating products at state fairs and in malls. Here’s something else that Urso is keeping: premium prices. That air purifier will run you $700. If you gag, the salesman will explain how the machine uses ionization, mechanical filtration and sterilization to kill toxic molds. But maybe you can talk him into giving you a trade-in on your last purifier. _______ Joseph P. Urso

Post# 310801 , Reply# 1 1/3/2015 at 19:03 (3,393 days old) by eurekaprince (Montreal, Canada)
Checkrate/Likes 2 This article has a serious error in its description of the parent company's involvement in the USA. It says: "The company thrived–especially its Swedish parent, which was founded in 1919 and set up a U.S. affiliate five years later. (The Swedish parent cut its ownership in the U.S. operation in 1928.)" This is not accurate at all. The Swedish Elektrolux company set up its own factory in the USA (in Greenwich, Connecticut) in 1931. It slowly reduced it's shareholder stake in the American operation over the next few decades, but still had 39% ownership up until 1968 when it sold it's share to Consolidated Foods and divested all interest in the US subsidiary. It's amazing how sloppy journalists have become these days. :-(

Post# 310849 , Reply# 2 1/4/2015 at 09:44 (3,392 days old) by eurekaprince (Montreal, Canada)
Checkrate/Likes Charles Lester has a great website which gives better information on the arrival of these Swedish vacuums in the USA. It's interesting to read that Werner Gren was inspired to create a lightweight cylinder vacuum after seeing an American Hoover upright in a store window in Vienna. Lester explains that Elektrolux had been shipping their European made vacs to the USA up until 1931. Just before that year, a large shipment of vacs went missing at sea and so the Swedes thought it safer to start making the vacs in the US. At first they contracted a sewing machine plant in Cleveland to make them, but at the end of 1933, Elektrolux opened it's own factory in Old Greenwich, Connecticut. See this link: CLICK HERE TO GO TO eurekaprince's LINK

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