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CNNMoney reports that General Electric Co. (NYSE: GE) is selling its appliance business. Goldman Sachs Group (NYSE: GS) is running the auction for this maker of refrigerators, microwaves and dishwashers and expects to receive between $5 billion and $8 billion for this $7 billion division of GE's $17.7 billion (2007 revenues) Industrial business unit.
I have been advocating that GE shed its ancillary businesses and this is one that makes sense to sell. I have taught several cases on the appliance industry and one of them highlights the many problems that GE's Appliance business suffered from in the 1990s thanks to the growing bargaining power of mass merchandisers, significant competition from Chinese manufacturers, and some internally inflicted wounds.
If GE Appliances was valued at the same Price/Sales ratio as Whirlpool (NYSE: WHR) -- 0.3 -- it would fetch $3.5 billion. The appliance industry average price/sales ratio is 0.7 -- which would yield GE $4.9 billion. So it looks like GE believes its appliance business is worth well more than the average appliance industry competitor. I applaud the idea of selling GE Appliances but the real gem of GE is its infrastructure business which is capitalizing on the growth of developing countries like China and India.
Even if it sells GE Appliances, there many other businesses within GE's portfolio that are masking the stellar performance of GE Infrastructure.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
Reader Comments (Page 1 of 1)
1. Another pioneer in American manufacturing falling victim to foreign trade. Like the U.S auto industry, the government did nothing to entice companies to remain competetive. Had tariffs been implemented on imports, as countries do to our products, maybe we'd still be in the drivers seat.
Posted at 7:58PM on May 14th 2008 by john
2. Amen Peter
+ the appliance business will only get tougher with housing market down, consumer debt high and nobody with any room on their home equity lines.
Posted at 8:51PM on May 14th 2008 by Sheldon L
3. On one level it's sad that what was synonymous with GE-appliances-will be no more. But something has to be done with this underperforming company. I'd be happy if they dumped NBC and some other units, and concentrated on certain core industrial industries. Then maybe the company would attract interest again.
What a miserable performance since Immelt came in-and I don't just mean this last quarter. What baffles me is why he is not held accountable the way every other CEO would be today? It will be 7 years. The guy gets a free pass from financial journalists-I guess it's fear of CNBC retribution.
Posted at 12:55AM on May 15th 2008 by Marshall
4. Why sell this at the bottom of the worst housing decline in modern history ?? Because they have to. It reduces a little bit of the leverage and that's good. It also removes a predictable low risk business and makes the current leverage in this business even less acceptable. Raybo
Posted at 4:00PM on May 15th 2008 by Raybo
5. About a year ago I needed a new Dishwasher and was stupid enough to buy a GE. It's pretty and shiny but it just doesn't wash dishes. I had a GE before and they worked well but there has been a design change on the newer models and it really does a lousy job. Based on this experience I will probably never buy another GE appliance and will tell evedrybody who asks me why.
Posted at 5:24PM on May 15th 2008 by speedlad
6. Excellent appliance manufacture,
This is John from GF Glass located in Zhangjiagang China.We supply tempered glass used in many areas,such as home appliance,building,glass furniture,solar glass,shower room glass etc.We are one of the best companies that produce appliance glass.
Our company policy is to establish long-term corporation with the companies who is interested in appliance glass.We hope to start a fruitfull collaboration process with your esteemed company very soon.So if possible ,you can visit our factory and our office,and then talk about the cooperation face by face .
If you are looking for a reliable factory to meet all your needs,pls contact us freely .Any inquiries are welcome .Let us build long-term business relationships hand in hand based on mutual benefits.
Thanks & Best Regards,
John.
Posted at 12:30AM on May 16th 2008 by John-fan
7. We are one of the best companies that produce appliance glass in China. Our company
is named Guangfeng Glass, located in Zhangjiagang, nearby Shanghai City. Our
factory occupies an area of 16000M2 with a total construction area of 10000M2.
We have four tempered glass product lines and accesssional equipments.
Posted at 9:52PM on Jun 9th 2008 by John-fan
8. We are pleased to introduce our company,GF GLASS to you.
Company description:
Guangfeng glass is a professional tempered glass manufacturer founded in Zhangjiagang City of China,which nears to Shanghai. It is exporting globally ever since to companies located in North American, European, Asian and Australian countries.
From 2001, Guangfeng has been constantly adding new equipments to satisfy demanding OEM needs. It has been updated with over 100 various machines, including Italian made CNC cutting tables, continue tempering furnaces, high efficient glass washing machines, and high tolerance CNC drilling machines, CNC four sides edging machines.
For these years, Guangfeng have been providing fabulous services for global industries which rely on it for their tight production schedule. Its performance has established a good reputation with providing high quality glass with completive price, persisting consistent on-time delivery. What's more is that it have earned such an honest reputation and built a firm trust among its clients.
Product description:
our products has passed China Compulsory Certification,ISO 9001-2000 Certification,and CCC Certification.our products mainly include appliance glass,Solar glass(3.2mm and 4mm low iron pattern tempered glass and low iron clear float glass),ITO conductor glass,silk-screen printing glass,etc.
If you are looking for a reliable factory to meet all your needs,pls contact us freely .Any inquiries are welcome .Let us build long-term business relationships hand in hand based on mutual benefits.
Thanks & Best Regards,
John F.Rice
Sales Manager
Zhangjiagang Guangfeng Glass Co.,ltd
East of Remin Road, Yangshe town, Zhangjiagang City,Jiangsu province.
Tel:86-512-58699081
Fax:86-512-58698081
E-mail: clx0711@gfengglass.cn
MSN: GFGlass@live.cn
Posted at 10:17PM on Jun 9th 2008 by John-fan