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STOCKHOLM—Electrolux AB's failed ambition to acquire General Electric Co.'s appliance business came at a price: The Swedish firm said Wednesday it would pay the $175 million break-up fee demanded by the U.S. company.

The charge, compounded with the botched promise of creating a white-goods giant capable of rivaling with Chinese leaders and Whirlpool Corp. of the U.S., might also cost Keith McLoughlin his job as Electrolux chief executive, analysts said.

"Electrolux has put a lot of time, money and prestige into this deal," said Mattias Eriksson, chief strategist at Nordea. "As the company goes back to the drawing board it might be a natural time to switch chief executive."

Mr. McLoughlin didn't respond to requests seeking comment. According to a company spokesman, he has said he was "fully committed to continue in (his) role."

GE's decision at the start of the week to abandon a $3.3 billion agreement to sell its appliance business to Electrolux has tossed the Swedish company 15 months backward, when it was trying to solve a delicate equation: How to counter the onslaught of Chinese and South Korean appliance manufacturers on its traditional Western markets while conquering positions in Asia.

A big expansion in the U.S., where Electrolux has a 20% market share, could prove difficult after the U.S. Justice Department challenged the proposed transaction with GE in court, sending a message that it wants more competition, not consolidation.

When the deal collapsed on Monday, a lawyer for the Justice Department said it would have been "bad for the millions of consumers who buy cooking appliances every year. Electrolux and General Electric could not overcome that reality at trial."

Mr. McLoughlin said Monday he was confident Electrolux could expand in emerging markets.

But the CEO has presided over several failed attempts to increase Electrolux's sales in China. In 2013 he ended a strategy to compete head-on with local rivals for cheap home appliances, instead launching an effort to move the Electrolux brand upmarket in the country. But the new approach hasn't fared better than the previous one, the company says.

Electrolux generates 18% of its 112 billion Swedish krona ($13.9 billion) in annual sales from Latin America and 8% from the Asia and Pacific region. That remains far off its long stated goal of generating half of its sales from emerging markets.

The U.S. flop is a setback for Mr. McLoughlin, a graduate of the U.S. Military Academy at West Point, who had announced the proposed deal—the largest ever for Electrolux—with much fanfare in September 2014.

"This is an historic moment and important strategic move for the Electrolux Group, which takes our company to a new level in terms of global reach and market coverage," he said at the time.

Throughout the review process, however, Mr. McLoughlin appears to have underestimated the antitrust obstacle posed by the Justice Department, saying repeatedly he was confident Electrolux could secure the purchase with minor concessions.

Mr. McLoughlin's appearance in the Washington court handling the case on Nov. 19 caused confusion. Days after the CEO testified that a combination of Electrolux and GE's appliance businesses wouldn't hinder competition, providing details on product-offering developments by competitors to support his claim, lawyers for the Swedish company said Mr. McLoughlin had made incorrect statements which he wanted to retract.

Mr. McLoughlin has survived several controversies in Sweden. Upon taking the CEO job in January 2011, he was criticized in Swedish media for collecting the country's biggest executive paycheck. More recently, the Swedish press questioned his choice of moving into a luxurious hotel after terminating the lease on his Stockholm house.

Despite the failed deal with GE, Mr. McLoughlin continues to enjoy support from Electrolux's biggest shareholder, Investor AB, the investment vehicle of the prominent Swedish Wallenberg family.

Investor, however, said it was expecting a new roadmap from the CEO.

"Now we have to look forward and find other ways to develop the company," said Stefan Stern, a spokesman at Investor.

An Electrolux union delegate in Sweden, Viveca Brinkenfeldt-Lever, said employees had been disappointed to see GE pulling the plug on the proposed deal without waiting for the outcome of the antitrust trial initiated by the Department of Justice.

On Mr. McLoughlin, she said: "He has our full support."

Write to Christina Zander at christina.zander@wsj.com

(END) Dow Jones Newswires

December 09, 2015 15:05 ET (20:05 GMT)

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