…to Electrolux, for $3.3 billion.
Today’s WSJ story on the sale began with the words “General Electric, which commercialized the electric toaster and self-cleaning oven”…sounds sort of trivial Actually, household appliances have been an important factor in the liberation of human energies and in social change.
Owen Young, who was GE’s chairman from 1922-1939, grew up as a farm boy. To his biographer Ida Tarbell, he described what life had been like on each Monday–wash day:
He drew from his memory a vivid picture of its miseries: the milk coming into the house from the barn; the skimming to be done; the pans and buckets to be washed; the churn waiting attention; the wash boiler on the stove while the wash tub and its back-breaking device, the washboard, stood by; the kitchen full of steam; hungry men at the door anxious to get at the day’s work and one pale, tired, and discouraged woman in the midst of this confusion.
Owen Young showed how GE could sell labor saving appliances to peasants and proles. This was possible because peasants were allowed to own land and the crops and animals that grew on it. They were allowed to sell these crops and animals and keep the money gained from these sales. The proles owned their own businesses.
Wise liberals invented income taxes and fees that took this money from the peasants and proles, inheritance taxes that forced them off their farms and businesses. Farms and small businesses became regulated by the EPA, BLM, and many other agencies.
Vast latifundia owned by corporations now employ the peasants and proles. Oligarchs control the corporations.
The GE sale shows that selling to peasants and proles is no longer worth the effort. GE now sells to oligarchs.
So, GE has decided to abandon their core business. They’ve decided that being a bank (GE Capitol Credit) and a media company (NBC) suits their ‘image’ more than manufacturing does, but they’ll keep the jet engine business mostly for defense dollars.
I’d expect the company to fracture and separate over the next decade; there’s no longer a common thread.
Having bought a variety of appliances over the last 30 years or so I’d say that having GE (low end) under the auspices of Electolux (basically, crap) does not bode well for the brand.
“they’ve decided that being a bank (GE Capitol Credit) and a media company (NBC) suits their ‘image’ more than manufacturing does”…I don’t think that’s correct at all. The company’s dependence on financial services is being reduced with the spinoff of the consumer credit business, and NBC Universal has been sold completely (to Comcast.)
True, but the point is that they have shifted their customer base from individual consumers to oligarchs. Global infrastructure is their new focus. Good luck with that in the emerging global market. I see an inversion coming, not only for tax reasons but to escape the FCPA.
Financial revenues are around 30% of total revenues and NBC is about 1% in 2013. Their main business is still manufacturing. I think of GE, as an investor myself, as a mini S&P 500 with oars in many areas. I suspect the appliance business was negligible anyway. Our (US) comparative advantage doesn’t lie in this area and it’s therefore cheaper to import appliances.
http://www.ge.com/ar2013/pdf/GE_AR13.pdf
Appliances have been commoditized, and that’s why the margins are so slim. They may not see improvement anytime soon if demographic trends hold.
See the bottom two charts:
http://17dof.com/2014/08/26/more-stuff-and-demographics/
On the other hand, with the “smart home” movement, there may be value added to appliances beyond their core uses. A few years ago, no one thought thermostats would be a growth business. Then Nest came along and changed the whole ball game.
“shifted their customer base from individual consumers to oligarchs”…business-to-business sales is automatically selling to oligarchs?
In the early days of electrification, it made sense to market both things that created electrical demand (light bulbs, electric appliances) and things the fulfilled the demand (turbines, generators, power distribution equipment.) Now there are plenty of sources for the demand-creation side.
A couple of things that will be interesting to watch in the aftermath of this acquisition:
1) Electrolux has the right to use the GE brand, in exchange for a royalty…but does this make sense long-term? I would think one of the main potential synergies of this deal would be the ability for Electrolux to leverage its advertising dollars over a broader product mix…and this would seem to work better with a single brand name.
2)What will be the future of Appliance Park in Louisville, KY, where 6000 people currently work? (The peak was something like 23,000, many years ago.) Immelt has lately been talking a lot about the disappointments of offshoring and talking up domestic manufacturing (including some new product lines to be made in Louisville)…it will be interesting to see how Electrolux views this.
GE sure got out of the light bulb business by convincing Upton and other clueless Republicans to ban incandescent bulbs in favor of Chinese made CFLs and now LEDs. Both are orders of magnitude more expensive and, unless you are a AGW enthusiast, useless. I have been stocking up on incandescents. I hope I have a lifetime supply (I am almost 77).
The market for slaves is saturated in the US.
One GE engineer (Steinmetz?) in the 1920s calculated that providing electricity to a home was the equivalent of owning 147 slaves.
Today, most laborious tasks in the home have been electrified so margins are thin for appliances. In my home we no longer have room for any more!
As to “smart home” gizmos like NEST, you have to be pretty naïve to put control of the home on the internet where it can be hacked or taken over by government.
See an early attempt to control your home temperature: http://www.americanthinker.com/2008/01/who_will_control_your_thermost.html
Mother has two GE refrigerators in her home. One has been in continuous use since the kitchen was remodeled in 1963. The old one, acquired in 1946 as soon as refrigerators were available after WWII, is the spare in another part of the house, in continuous use since 1946. At one time GE knew how to make durable, quality appliances.
Recent years have seen steep declines in reliability and quality, some contractor groups no longer specify GE branded appliances. The appliance division was seen as a career-ending backwater for aspiring GE appliances. Customer service has been poorly rated by many as entropy of disinvestment ate away at the business. GE Appliance’s PR department had no interest in my mother’s story of long term customer satisfaction.
GE now knows how to compete in crony capitalist markets, finance, some large capital goods with few competitors, but has lost its taste for consumer market innovation, production efficiency, and the disciplines of highly visible, value-oriented manufacturing.
Correction, “The appliance division was seen as a career-ending backwater for aspiring GE executives”. Not to imply that those types are themselves appliances
The brand will be in better hands with a new owner already in the USA.
New owners will invest rather than bleed the brand.
Rest of World is still a growth market for energy efficient appliances.
As a whirlpool/KitchenAid owner, never seriously considered any GE appliance as the master of cost take-out and product cheapening.
Oops, I’m not really anonymous.
I don’t think many people fully appreciate the transformative role that technology has played on society. GE and its equivalents, in my opinion, had a pivotal role in the formation of Feminism by liberating women from many of the mundane tasks of day to day life. Idle hands are the Devil’s workshop.
Poor Sam Insull gets no respect but he had a lot to do with the great wave of small electric appliances in the 1920s and Commonwealth Edison was a source of innovation. Unfortunately, Sam lost control of his holding company and it collapsed in the Depression. The Roosevelt administration hated him and Harold Ickes was determined to make an example of him. He was tried but acquitted and died a poor man. The 1920s had a lot of similarity to the 1990s in my opinion.
http://en.wikipedia.org/wiki/Samuel_Insull