What price the General Electric name? Pretty high, I would suspect, and extremely tempting for an Asian manufacturer of washing machines and air conditioners that wants to build a global business.

GE confirmed this morning that it is “reviewing strategic options” for its consumer appliances division. I guess that, in this context, “reviewing strategic options” must mean “selling, but perhaps holding on to a little stake”.

Its reasoning is interesting because it tells you all you need to know about how Asian manufacturers now dominate the consumer appliance market. Here is part of Jeff Immelt’s statement:

It remains primarily a U.S. business, meaning its fortunes are tied to the rise and fall of a single market. We want to make this good business great again by finding the right strategic solution – a solution that will give Appliances the global reach and investment required to compete more effectively.

This is one of those statements that makes a great deal of sense looked at from one perspective, and no sense whatever looked at another way.

It is true that GE has no brand name internationally for washing machines and the like. Jet engines, yes, but air conditioners, no. It is also true that GE is better off concentrating its efforts on global businesses such as infrastructure.

The question is, however, why GE is not prepared to invest enough in the business to turn it into a global powerhouse when it clearly expects someone else to buy it for that reason. We need probably look no further than Haier, the Chinese appliances company that tried unsuccessfully to buy Maytag in 2005.

The answer is, presumably, that GE thinks that a US business cannot make enough headway globally and an Asian company will do better. That certainly fits with the tide of history, which I wrote about in a column two years ago.

Personally, I think that is a rational decision similar to the way that IBM offloaded its consumer-facing PC division to Lenovo to concentrate on higher value business software and services. Mr Immelt has long been sceptical about whether GE could maintain a competitive advantage in consumer appliances.

But it is hardly reassuring in an election year when the gradual erosion of the US manufacturing base is a controversial topic. The Kentucky primary is next week and GE Appliances is run from Louisville, Kentucky. For how much longer, I wonder?

May 16th, 2008 in Manufacturing | Permalink