Potentially devastating omission uncovered in original Electrolux contract

MEMPHIS, Tenn. — FOX13 uncovered a potentially devastating omission from the original contract that sent millions in tax savings to the Swedish appliance company Electrolux.

A spokesperson with the state’s Department of Economic and Community Development said the 2010 contract with Electrolux didn’t include a “clawback provision.”

ORIGINAL STORY: Electrolux to close Memphis facility, impacting local economy

This kind of provision allows the granting entity – in this case the city, county and state – to get their money back if the company doesn’t live up to their end of the deal.

FOX13 reviewed Electrolux’s 15-year PILOT (payment in lieu of taxes) to open a manufacturing plant to Memphis. The company’s 2011 PILOT was worth $38 million and abated 90 percent of city property taxes and 75 percent of county property taxes.

Electrolux promised to create 1,240 jobs and invest $195 million in capital investment into the facility.

An Electrolux spokesperson said the company invested $321 million into Memphis facility, but the number of jobs fluctuated.

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In 2015, there were 1,240 employees, but by the end of last year, there were 530 employees at the plant.

This is a major decrease from the year before when there were 1,137 employees at the Memphis plant.

“It’s part of a process that if you don’t do it, you may never get the business that you want,” said Research professor Jeff Wallace from the University of Memphis.

Wallace said often the reward is worth the risk.

“While they were here, they provided jobs, wages and experience to hundreds of Memphians so it’s hard to see tax revenue going to something like that. But at the same time, it generated tax revenue and jobs to people who needed it,” said Wallace.

But in a statement to FOX13, Congressman Steve Cohen believes Electrolux failed to live up to its job creation promise:

"I'm very disappointed that the employees of Electrolux learned today that Memphis' economic development investment in one company's future apparently won't pay off. The company's abandonment of Memphis will mean potential financial hardship for its employees and suppliers and should result in more careful review of promises made by corporations about local job creation in the future."

Even though there wasn’t a clawback provision in this deal, an Electrolux spokesperson said the company intends to meet the obligation of the agreement.

Memphis businesses with PILOTs are required to submit an annual performance report and Thursday was the deadline for 2018 report.

As of 5 p.m., Electrolux hadn’t submitted its report, which means the company faces a $50 fine each day until the report is filed.

FOX13 also spoke with Electrolux employees about the plant’s closure as they left work this afternoon. Some said the news caught them off guard.

“You know what, it was sad, but you know we’re good workers, so God is going to open up another door for us so just put it in his hand,” said Evelyn Mercier, an Electrolux employee.

But others said they knew something was up after Electrolux leadership met with both city and county officials last month.

The International Brotherhood of Electrical Workers (IBEW) labor union, which represents some of these Electrolux employees, said most of them work on the assembly line or in maintenance

The union said it is unclear how difficult it will be for these employees to find jobs next year.