When you say misfortune. Da years, to be exact since 2017, Midea tries to go shopping of large American or European companies of the Majap without success. In fact, every time – diabolical coincidence – some competitor arrives and steals away the coveted prey. Just recently Firstonlinem revealed that Midea is going for it again and this time not with General Electric, Whirlpool, SMEG and other companies, as had happened, but with the Swedish giant Electrolux. Meanwhile, news regarding the movements of Midea top management in Italy could confirm what Firstonline has revealed…..
Electrolux in Midea's sights: the background
Already in 2017, Paul Fang Hongbo, billionaire president and CEO of Midea, had leaked the intention to acquire Whirlpool (whole, not just EMEA) or, in the absence of an agreement with the big American, the Swedish Electrolux. Which, however, he had made it clear that it was not for sale. And Firstonline had reported the Chinese CEO's statement to Bloomberg, also in response to the rumors that had been circulating for a while. "But is it true that you made this offer?" had been the question. "Why not? – replied Fang – we would certainly be interested in taking a look at the largest American manufacturer of household appliances, as well as the Swedish Electrolux AB, if suitable opportunities present themselves”. And why be surprised? The Chinese technology giants had emerged a few years ago from the decades-long isolation in which they had operated, with a huge and constant availability of cash but also with considerable aggressiveness. Fang had in fact added a decidedly tough comment: "Globalization cannot be stopped by any individual or any country". Then the Coronavirus arrived to block globalization, but this Fang could not have known it.
The household appliances market: who is the world number 1
It is not true that Midea, as many blogs and newspapers write, è the world number 1 for household appliances: because this primacy belongs to Haier – always Chinese – whose turnover (over 34 billion dollars) is made almost entirely by the household appliances sector. A record in volumes and, since Whirlpool has clearly downsized with the sales of its "jewels", also in value. While most of the Midea sales ($53,2 billion in 2021) comes from the medical sector, air treatment, alternative energy, robotics and industrial machinery. The rest are rice cookers, small appliances, air conditioners and refrigerators. Only a few years ago Midea decided to grow in household appliances too, after acquiring several companies in completely different technological sectors. Recently, he launched, in America, al KBIS, Kitchen and Bath Industry Show a line of bultin appliances which, according to the declarations of the Chinese management, would be only the beginning of a policy of conquering the collection market which in the USA is all based on the Premium range.
Midea: growth driven by M&A
In 2016 Midea had entered into a contract with the Italian Clivet (refrigeration-air conditioning) an agreement to acquire 80% of the capital and related real estate assets. And in 2022 it completed the operation by buying the remaining 20 percent, becoming a leader in the European alternative energy market. In 2016, he shelled out more than $500 million to secure the Japanese Toshiba (household appliances), a brand that has been decomposed and frozen for some time, then in Italy it acquired the license to use the brand Ocean, the name of the Nocivelli Brothers company, very famous in the golden decades of the Italian white industry, which became Brand Electroménagers and then went bankrupt due to a French maneuver still to be clarified. The license actually remained at the stake…
Midea: a long relationship with Electrolux
Also in 2016, it had acquired control of the German robotics giant, the Kuka for 4,5 billion euros. And concluded a strategic agreement with the giant Israeli Servotronix specialized in industrial controls and automations, a sector where Midea intends to grow rapidly, AND – an ignored but very important fact – in 2016 it had bought from Electrolux the company Eurekafloor cleaning specialist. A relationship between the two multinationals that dates back many years since Midea has been manufacturing household appliances for some time as OEM for Electrolux and even in 2018 the two big names had closed an agreement according to which the Swedish multinational entrusted Midea with the distribution of high-end appliances in AEG brand. Midea has been looking for joint ventures, acquisitions, alliances for years. Without forgetting the IoT sector: in 2014 he signed an agreement with the Huawei to create a very strong joint venture that is invading appliances and buildings with connected systems and devices that tell the Chinese clouds everything about what is happening in homes, offices and factories. Midea Building Technologies also recently launched in Shanghai Smart Building Alliance among the Chinese giants and this definitely makes an impression because in a very short time the whole Chinese supply chain involved (including chips!!!) is destined to conquer primacy after primacy. According to an Italian-American blog, the US government expressed its concern with a headline in broken Italian: "Will the Italians allow Midea's Chinese to suck up Electrolux?". Yet the US government, in 2016, when Electrolux, Midea and Haier were contending for the General Electric, still a symbol of made in the USA, stopped the Electrolux (which had already given a substantial advance) preferring the Chinese Haier, which, however, was not a dangerous competitor for Whirlpool. And as a second solution, the go-ahead was ready for Midea. It is precisely from this failed acquisition that the crisis, which has become structural, begins for the Electrolux USA branch and, consequently, for the entire group.
The arrival of the manager expert in acquisitions: a crucial junction
Midea today is above all a financial power that intends to invest in M&A and stopping it will be difficult. By early 2021 he had taken over Jeremy Choy for the strategic role of Chief Financial Officer, CFO, with the task of quickly managing important acquisitions. In fact, Choy was, at less than 40 years old, the head of nothing less than Asian technology mergers and acquisitions at the giants HSBC, Goldman Sachs and JPMorgan. The role of CFO is not to simply manage large accounts but to make them as dynamic as possible to make investments abroad in terms of growth by external dimensions. So much so that, having failed to go shopping according to the rules of his engagement, Choy was, so to speak, dismissed less than a year later. Now è Senior Vice President, Chief Strategy and Corporate Development Officer of UL (the official education organization of the United States). And immediately Midea named another.
Midea closes in on Italy and visits the Electrolux factories
Midea must absolutely secure well-known brands since its strong point – as indeed it has always been for the Chinese giants – is the ODM/OEM activity, that is subcontractors, now it is no longer. After Covid, the growing costs of the entire logistics chain and changes in the markets, are progressively undermining the mass production of large household appliances of the gigantic Chinese factories. Today we need to produce as close as possible to the markets, with historical, locally known, reliable brands, churning out customizable products, no longer mass batches and with a flexibility that no mega-automation can ever guarantee. And you need to have managers who know their markets. The factories, technicians and "local" managers therefore become strategic.
Also because global logistics hasn't gone right, in fact, it's the other way around. An important piece of news on Friday 17 March: the logistic crisis, so extensive and persistent that negatively impacted the balance sheets of Whirlpool and Electrolux, is not only continuing but worsening. Since Friday indeed the busiest seaport in the United States, Los Angeles, has come to a complete standstill because the goods are no longer unloaded. Inflation and economic turmoil have hurt demand, and US importers liquidate and destroy unsold goods. Before the end of 2023 the situation is not destined – the newspapers write alarmed – to improve. It is in this scenario, less and less global and more and more “local” that the latest moves of the big Chinese hi-tech companies (appliances will increasingly be an IoT) such as Midea, fit into place. Two weeks ago – and this is the most important news – the entire top management of the multinational was in Italy, in a series of careful visits to the Italian Electrolux factories, although the company officially denies it. No courtesy visit, of course.
