US expansion a cheap shot

Cheaper wages, a bigger market and higher unemployment are the reasons Electrolux management could justify closing the Orange plant but invest in 810 jobs in America, according to financial experts. 

Electrolux announced 810 additional jobs for its North American headquarters in Charlotte, North Carolina, on December 20, less than two months after it announced the closure of the Orange factory. 

The minimum wage in Australia is $16.88 per hour, compared with  $7.25 in  the US, and the unemployment rate is 1.5 per cent higher, which means a greater pool of people willing to work for cheaper, according to MoneyLink financial planner Russell Tym.

“Another factor that might be of influence is the new cheap energy available in America .... by 2020 they’re saying they won’t need to import oil anymore,” he said. 

“They’ll exploit huge reserves of shale oil.”

TWO MONTHS AFTER ORANGE SHOCK, ELECTROLUX ANNOUNCES AMERICAN EXPANSION

North American media reported the Swedish appliance maker would invest $85 million to construct a six-story building adjacent to its existing headquarters. 

The additional jobs in North Carolina are in research and development, marketing, design, engineering, supply chain, finance, IT and executive management, and will be added at the end of 2017. 

The Electrolux Orange factory closure is expected in 2016. 

Charles Sturt University finance lecturer Hasbo Skoko said America was a much bigger market than Australia, which would make it a more attractive option. 

“Even if it is the same wage, the same everything, it is a bigger market so it is cheaper to manufacture there. It is the same for Holden, the same for everything,” he said.

Electrolux was offered similar financial incentives to invest in the Mecklenburg County, where the expansion is set to take place.

It was offered tax breaks worth about $4 million over 10 years as part of the deal. 

The NSW government had offered Electrolux payroll tax relief and had funded an engineering and productivity plan for the plant’s future, in order to keep the Orange factory, which employs 544 people. 

The total package was worth about $4 million.

Orange City Council offered the company $1 million over 10 years to stay in Orange.

The former federal government gave the plant a $4.7 million clean technology investment grant, which was conditional on it continuing to operate beyond this year.

nicole.kuter@fairfaxmedia.com.au

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