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Boston Bombing Hinders Spanish Cooker Maker’s Cash Quest

April 22, 2013

Boston Bombing Seen Hindering Spanish Cooker Maker’s Cash Quest

People work on an assembly line at the Mondragon group's Fagor electrical appliances' plant in Arrasate, Mondragon. Photographer: Rafa Rivas/AFP/Getty Images

The Boston Marathon bombing that killed three people and injured more than 170 may also have unintended consequences for a Spanish company more than 3,000 miles away.

Fagor Group, which manufactured at least one of the pressure cookers used to house the bombs, is contending with the publicity just as it seeks financing, said a person with knowledge of the company’s situation. Fagor needs about 60 million euros ($78 million) immediately to pay down debt and is struggling because of Spain’s credit crisis, the person said, declining to be identified because the negotiations are private.

Based in the town of Mondragon in Spain’s Basque region, Fagor sells about 200,000 cookers a year in the U.S., with a market share of about 40 percent, according to Elena Goirizelaia, a spokeswoman for the company’s domestic appliances unit. Of those, some 50,000 had the same six-liter capacity as the ones used to make the bombs. The average Fagor cooker costs about $140.

Investigators on April 18 identified Fagor as the brand of at least one of the pressure cookers used to hold the explosives. Both bombs may have been made using pressure cookers packed with explosives and nails, pellets and other shrapnel to maim victims, they said.

Brand Reputation

The fact that the bombs were made with Fagor cookers shouldn’t affect the reputation of the brand “even though nobody really wants to get involved in anything negative like that,” according to Victor Conde, a professor of marketing at Nebrija University in Madrid.

The suspects -- Tamerlan Tsarnaev, 26, and Dzhokar Tsarnaev, 19 -- are brothers accused of an attack that transformed America’s most storied road-running race into a tableau of mayhem and confusion, planting two bombs that exploded about 10 seconds apart near the finish line of the Boston Marathon April 15.

Fagor America Inc., the company’s U.S. unit based in Lyndhurst, New Jersey, said in an e-mailed statement last week that it had been contacted by investigators and is cooperating.

“All personnel in Fagor America Inc. are deeply saddened by tragic events in Boston and share in the suffering of the victims and their families,” the unit said in the statement. The company “looks forward to learning about the results of the investigation once it is complete and made public by the investigators.”

Logical Coincidence

Given the company’s market share in the U.S., it’s a logical coincidence that the pressure cookers were made by Fagor, a company spokesman said.

A search on Wikipedia for Fagor already shows the company’s link to the Boston bombings. Under “History,” the internet encyclopedia references the role of Fagor cookers in the attack.

Fagor’s quest for funds has been complicated by the restrictions on lending by Spain’s regional savings banks and so the company is negotiating with local and central governments for the loan, the person familiar said. The regional government leader, Inigo Urkullu, is concerned about the company’s longer- term future even if it obtains the 60 million euros because of its importance to the local economy, the person said.

Sales Slump

In Spain, the market for domestic appliances has shrunk by more than 50 percent since the debt crisis started in 2008 and earnings are expected to drop this year, spokeswoman Goirizelaia said, as the country struggles with record unemployment.

Fagor is owned by Mondragon Corporation, a privately held Spanish cooperative company also based in the Basque country region that has interests in finance and industry as well as retail and education. Fagor’s domestic appliances division employs more than 12,000 people, or about 14 percent of the corporation’s total staff.

In total, Fagor makes more than 7 million electrical appliances a year, with plants in Spain, France, Italy, Poland, Morocco and China, according to its website. Fagor appliances had annual revenue of about 1.28 billion euros in 2011, which compares with 14.8 billion euros for the whole corporation.

Founded in 1956, Mondragon is mulling whether or not it will change its corporate structure in order to attract investors and is considering selling between 20 percent and 30 percent, the person familiar said.

To contact the reporter on this story Manuel Baigorri in Madrid at mbaigorri@bloomberg.net;

To contact the editor responsible for this story: Heather Harris in London hharris5@bloomberg.net


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