GE stuck with appliances, but still transcends them
Americans did their first loads of laundry in General Electric (GE) washing machines in 1910. And GE wants, so very much, for Americans to do their last loads of laundry in GE machines in 2000-as-soon-as possible.
“It doesn’t want to be selling washers and dryers,” said Erik Gordon, professor at the University of Michigan’s Ross School of Business. “GE wants to become a global leader in just a few heavy industrial businesses.” Among them: aviation, heavy transportation, power generation and water treatment.
In its 123 years, GE has had its fingers in a lot of different pies, and appliances are not a very lucrative pie anymore. “When you have a business that used to have double-digit margins and earned pretty good returns, and then the Chinese figure out how to put together cheap metal motors and such, and all of a sudden your margins are more like single digits — it’s just not a very attractive business,” said Brian Langenberg, principal at Langenberg & Company, a market and industrial analysis firm.
As part of its grand strategy to reinvent itself, GE earlier this year sold off its finance division worth $20-plus billion and bought French power grid giant Alstom for $10 billion. In November, it won a $2.6 billion contract to build 1,000 locomotives in India.
By comparison, the failed $3.3 billion deal to sell off its appliances division is “more of an annoyance than an issue,” Langenberg said.
And while the agreement with Sweden’s Electrolux is off, “there should be plenty of buyers who are still interested,” said Barbara Novarini, an equity analyst with Morningstar. “Just because we have a roadblock today in the abandoned deal doesn’t mean won’t get done in the near future.”
Novarini said she wouldn’t be surprised to see an Asian manufacturer such as Samsung or LG take up GE’s appliance division. Until then, Brian Langenberg said, “GE’s stuck with it.”
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