GE confirms plans to exit appliance business

NEW HAVEN, Conn. _ General Electric Co. plans to sell or spin off the business that for a century has put appliances in American homes, a decision that could presage further asset sales, analysts said.

The industrial conglomerate, one of the world's largest companies, said in a statement Friday that the move is part of an ongoing plan to exit "slower growth and more volatile businesses."

Last year, Fairfield-based GE shed its underperforming plastics business by selling it to a Saudi Arabian company for $11.6 billion.

"We think this is further recognition the company needs to exit the slow and no-growth businesses," said Robert Schenosky, an industrial analyst with Jefferies & Co. in New York who has favored asset sales. "It's a recognition that there is not anything that is untouchable at this point."

Schenosky said it's hard to predict what else GE might sell.

"Certainly other candidates could include the lighting business and even potentially NBC Universal," Schenosky said.

GE could be a dramatically different company in the coming years, Schenosky said. He also said the company needs to look at the type of acquisitions it makes, saying deals in health care and entertainment made the company larger but did not boost earnings power in a meaningful way.

Matt Collins, an analyst at Edward Jones in St. Louis, said he would not be surprised to see GE sell its lighting and electrical distribution businesses.

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"I think we'll continue to see them make strategic moves to get the stock working over the long term," Collins said. "This will probably be another noisy year for them."

GE shares fell 24 cents to $32.13 in trading Friday, near their 52-week low. Shares have traded between $31.50 and $42.15.

The stock had its worst day in decades last month after the company reported a smaller-than-expected first-quarter profit and lowered its outlook for the full year.

Chairman and Chief Executive Jeff Immelt has rejected calls to sell NBC, though he has been under pressure to restructure the industrial and financial conglomerate, particularly since last month's surprising first-quarter earnings report that profit fell 6 percent.

GE's 101-year-old appliance business, headquartered in Louisville, Ky., has been hurt by the housing slump and economic slowdown in the U.S. The appliance division had revenue of $7 billion last year and employs about 13,000 people worldwide.

"GE Appliances has a very strong brand ... and for more than 100 years has been one of the icons associated with GE in the United States," Immelt said. "However, its remains primarily a U.S. business, meaning its fortunes are tied to the rise and fall of a single market."

The company is planning a strategic review that could result in an outright sale of GE Appliances, a strategic partnership or a spin-off to shareholders.

"This review is consistent with the strategy we have been executing to transform our portfolio for long-term growth," Immelt said. "Since 2003 we have exited slower growth and more volatile businesses, generating $52 billion in gross proceeds from dispositions. These proceeds have been reinvested into a transformed portfolio of faster growth, higher margin businesses, stock buybacks and other restructuring activities."

Analysts estimate sales in the appliance business are likely to decline between 10 percent and 12 percent this year. That stems from weak consumer spending and a drop in home improvement sales and residential construction.

Some have suggested a sale price in the low- to mid-$6 billion range.

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On the Web: http://www.ge.com

Comments

[avraamjack]

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The endless drive to increase earnings per share has hurt many companies and their employees.
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"Supercapitalism" by Robert Reich touched on this.
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[UnbiasView]

Has GE decided to stop selling products to Iran yet?

[Hopalongpoppyseed]

Why make anything useful when you can be a war profiteer? Let the toasters be made offshore and who cares if they burn down peoples houses? Put General Electric Defense Contrast in your search engine.

[Podewumun]

They'll no doubt be restarting their nuclear device triggering sector, in which they used to lead the industry.

[locutus420]

Just because there is a whiff of recession, they're going to close down the only part of GE that actually makes useful things? Where would the company be if they had thought this way throughout the 20th century? What, did GE put too much in Mortgage Securities, and now, since the idiots at the top couldn't see the writing on the wall, they have to abide by corporate charters and appease the shareholders by selling off the core of it's business? Oooh, now we're profitable, see? If the US is entering a recession, and India and China are having record growth, couldn't we sell GE appliances internationally? If we keep selling off the businesses that actually MAKE things, it's going to be harder and harder to pull ourselves out of the coming recession. This kind of short-term thinking is what got us here in the first place, and it will be our undoing.

[farnald]

GE makes a lot more things than kitchen appliances. It is number one in aircraft engines. More than half the time you fly the plane you are on is powered by GE. It also makes power systems and locomotives. I am not happy to see the appliance division go, but it is only a small part of what GE makes here in the USA.

[gcallaghan]

They'll blame it on the growing markets in India and China where home appliances used to be something people only dreamed about. Even with the sinking dollar and the empty ships leaving our Pacific ports, GE can't undersell in those markets, And made-in-America is not exactly a big selling point in the third world. We'll see more and more Chinese appliances in our stores.