GE confirms plans to exit appliance business
Written on May 18, 2008
General Electric Co (GE.N: Quote, Profile, Research) confirmed on Friday it may sell or spin off its century-old appliances unit, saying the business was too focused on the United States.
The appliance arm, which employs about 13,000 people worldwide, is the area of GE hardest hit by the two-year U.S. housing slump, as the company sold a lot of its dishwashers and refrigerators to home builders.
The Louisville-based business, which last year generated $7.2 billion in revenue, could appeal to an Asian manufacturer looking for a well-known American brand, analysts and investors said. They estimated the appliances business could sell for $4 billion to $8 billion and cited South Korea’s LG Electronics (066570.KS: Quote, Profile, Research) and China’s Haier as among possible suitors.
“With the weak dollar, this could look more attractive to an overseas company trying to get a big foothold in the U.S. market,” said Matt Collins, capital goods analyst at Edward Jones in St. Louis.
LG officials declined to comment, while those at Haier did not respond to calls.
Over the past five years, the Fairfield, Connecticut-based conglomerate has sold off businesses that generated about $52 billion in revenue, including its plastics unit, as it seeks to move away from slower-growing and more volatile market segments in favor of long-cycle businesses with global exposure, like jet engines and commercial finance.
“This review is consistent with the strategy we have been executing to transform our portfolio for long-term growth,” said Jeff Immelt, chief executive of the second-largest U.S online payday advance. company by market capitalization, in a statement. He added that the $7.2 billion appliance unit, which is based in Louisville, “remains primarily a U.S. business, meaning its fortunes are tied to the rise and fall of a single market.”
GE is also scaling back its personal finance business, GE Money, looking to sell its Lake Japanese consumer lending unit and U.S. private-label credit card business. Troubles at its financial arms, which the company blamed on the credit crunch, played a major role in GE’s unexpected drop in first-quarter profit, though it also cited the GE Industrial arm, which includes appliances, as a weak spot.
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