GE, home appliance pioneer, gives up on consumers

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NEW YORK (AP) - General Electric, a household name for more than a century in part for making households easier to run, is leaving the home.

The company is selling the division that invented the toaster in 1905 and now sells refrigerators, stoves and laundry machines. GE instead wants to focus on building industrial machines such as aircraft engines, locomotives, gas-fired turbines and medical imaging equipment - which are much bigger and more complex than washers, and more profitable.

"They are no longer going to be a consumer company," says Andrew Inkpen, a professor at the Thunderbird School of Global Management who studies GE.

GE, based in Fairfield, Connecticut, Monday announced the sale of its appliance division to the Swedish appliance maker Electrolux for $3.3 billion. Electrolux will still sell appliances under the GE brand in attempt to leverage the company's long history.

GE has sold devices to people for its entire 122-year history, starting with the light bulb, which was invented by company founder Thomas Edison. But in the first half of this year, GE's appliances and lighting division accounted for just 8 percent of the company's industrial revenues and 2 percent of its profit.

GE hopes that selling big, complex products such as power generators and oil and gas equipment to other businesses will boost profit and once again endear it to investors.

GE is the only remaining member of the first Dow Jones Industrial Average, calculated in 1896. As recently as 2004 it had the world's largest market value. But since then, GE has frustrated shareholders. Its shares are 22 percent below where they were a decade ago. The S&P 500 is up 79 percent over the same period.

GE got into businesses such as media or insurance because they promised new sources of profit, not because of any competitive advantage the company possessed. Investors found the structure unwieldy, and put their money elsewhere.

Heavy exposure to commercial and residential mortgages through its finance division threatened GE's existence during the financial crisis. It needed funds from a government liquidity program and a $3 billion investment from Warren Buffet to shore up its finances.

Now GE wants to be only in businesses that can benefit from the company's global scale, experience with complex projects, and technical ability.

GE Chief Financial Officer Jeff Bornstein said in an interview Monday that the company is becoming "Less of a conglomerate and more of a global infrastructure company. That's where we deliver our most value."

In July the company spun off its consumer credit card business into a new company, Synchrony Financial. In recent years it has sold NBC Universal and its insurance operations and it is gradually shrinking its sprawling financial company, called GE Capital.

In June GE agreed to buy the energy and power generation operations of the French engineering company Alstom for $17 billion. And over the last several years it has spent $14 billion acquiring oil and gas-related companies.

The company's strategy becomes clearer when one visits its global research and development campus near Albany, New York, where 2,000 people work on next-generation products and basic research.

One team has been working for 28 years on a type of ceramic that is only now being perfected. The material, which can withstand tremendous heat but won't shatter like most ceramics, will allow aircraft engines to run hotter and save fuel. It will also be used to help gas-fired power generators produce electricity more efficiently.

A novel electric power transformer being developed will help shrink the size and cost of underwater oil and gas pumping equipment - and also make offshore wind power less expensive.

That kind of technical research ability wouldn't make a sitcom any funnier and it wouldn't give GE an edge when offering a credit card. It might make a better washing machine, but not enough to boost prices much in a fast-moving retail market.

GE's appliance business also doesn't have the global scale of GE's other businesses or of its competitors. And it no longer aligns with GE's bigger strategy.

"It's become harder and harder to tell the story about how the GE appliance business is aligned with the General Electric Co.," said Chip Blankenship, CEO of GE Appliances Monday.

Christopher Glynn, an analyst at Oppenheimer & Co., said the company now has the potential to show the strong results it was once famous for.

"It's still GE, it's still huge," says Glynn, an analyst at Oppenheimer & Co. "But this is a viable reset."

The move may confuse those watching reruns of the NBC sitcom "30 Rock," though. Alec Baldwin's character on the show, which takes place in the GE Building at New York City's Rockefeller Center, is a GE executive in charge of microwave ovens.

Now GE doesn't own NBC or sell microwave ovens, and NBC's buyer, Comcast, is working to replace the giant neon "GE" that crowns 30 Rock.

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