Appliance Maker Won't Have to Repay Incentives for Closed Factory

Tennessee officials say Electrolux isn't required to repay $100 million in state incentives because their 2010 agreement didn't include clawback provisions.

This Tuesday, Jan. 15, 2013, file photo shows Electrolux's plant in Memphis, Tenn.
This Tuesday, Jan. 15, 2013, file photo shows Electrolux's plant in Memphis, Tenn.
AP Photo/Adrian Sainz, File

Tennessee officials say Swedish appliance maker Electrolux isn't legally required to repay $100 million in state incentives for its soon-to-be-shuttered Memphis factory.

That's because the state's 2010 agreement with Electrolux didn't include clawback provisions to recoup money if job thresholds aren't met. Accountability agreements with clawback requirements were added to state economic incentive agreements starting in 2013, economic development department spokesman Scott Harrison said.

Electrolux committed to create 1,240 jobs in Memphis and last reported 1,100-plus employees in 2017, Harrison said. The company currently employs about 530.

Last week, Electrolux announced plans to stop production in Memphis within two years, while investing $250 million to consolidate U.S. cooking manufacturing into its Springfield, Tennessee, facility.

Electrolux's Memphis project received a $97 million grant paid in full and $2.6 million of a $3.1 million training grant, with the rest of that money to remain unpaid, Harrison said. Some of the money paid by the state helped with construction and infrastructure improvements, which could help attract a new tenant, Harrison added.

"We are disappointed to hear that Electrolux will close its Memphis facility in 2020," Harrison said. "TNECD will continue to do everything we can to attract high-quality jobs to Memphis and West Tennessee."

There are no state economic grant incentives for the Springfield project, Harrison said.

Electrolux spokeswoman Eloise Hale said it's too early to say whether the company plans to repay any of the state money. But she said Electrolux officials "intend to meet our obligations."

Republican Gov. Bill Lee called the Electrolux circumstance disappointing, and added that it underscores the importance of clawback provisions for economic incentives.

"The process now for incentives is that if a company does not deliver on what is promised, then there is an ability to retrieve those funds, and I want to make sure that we do that going forward," the Republican governor told reporters Tuesday.

The deal for Memphis to land Electrolux was announced in December 2010, just before Democratic former Gov. Phil Bredesen left office. In 2011, during former GOP Gov. Bill Haslam's early days, Electrolux officials threatened to terminate the project agreement if the state Legislature did not approve funding or make money available quickly enough.

At the time of the deal, workers' unions and some politicians also criticized the tax breaks as too high, especially when the city was managing a tight budget.

The state grants are part of more than $150 million in incentives given to the company for the plant, which opened in 2014 and makes ovens.

Incentives included a 15-year property tax abatement program from Memphis and Shelby County. Memphis Mayor Jim Strickland and Shelby County Mayor Lee Harris met with Electrolux on Friday and the company agreed to pay the "full taxable amount," Strickland said. The amount was not disclosed.

Strickland has said that Electrolux's departure will "in no way" affect the city's determination to recruit new companies and jobs to the city.

State Sen. Brian Kelsey, a lawmaker representing parts of Memphis and Shelby County, has said he sent a letter to Gov. Bill Lee expressing his concerns about the plant closing. Kelsey said he thinks the state should join Memphis and the county in recovering public incentives provided to Electrolux.

"This loss for Memphis should prompt careful review of the use of taxpayer dollars for similar incentives in the future," Kelsey said in a statement Friday.

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