General Electric will sell off its venerable American home-appliance manufacturing division to China’s Qingdao Haier Co. Ltd., for a reported $5.4 billion.
GE has been looking to unload its appliance-making business and recently rejected a $3.3 billion bid from Sweden-based Electrolux after months of opposition from U.S. antitrust regulators.
Haier has announced that the GE brand will remain active and also that the division will remain based in Louisville, Kentucky, for the time being. Most of the management team is likely to stay on, at least during the change over is complete, sources say.
“We’ve been on a multiyear journey since 2012 to introduce new products, improve quality,” chief executive officer of GE Appliances Chip Blankenship said recently. “Our earnings are substantially improved.”
The sale of what was once a core division of the 100-year-old American powerhouse to China is another sign of the changing state of business in the U.S.
The move for China is also one aimed at helping the government-run country transition from its current policies of internal re-investment to a more international-based model in order to stave off a coming collapse.
The new Chinese owner is “committed to growing the business globally,” according to GE Chairman and CEO Jeff Immelt. He went on calling the agreement “a good deal which will benefit our investors, customers and employees.”
The Chinese company was started by Zhang Ruimin, a man who is now one of China’s richest businessmen. Ruimin made his mark by focusing on product quality in a nation that had until then not been much interested in manufacturing integrity.
In the 1980s, Ruimin ran a Chinese refrigerator company, but when he discovered that a large number of the appliances his company had made were substandard, he brought in dozens of sledge-hammers and ordered employees to destroy every bad appliance and then build new ones to replace them. One of those hammers now supposedly sits in China’s national museum.
Ruimin’s focus on quality eventually made him a leading CEO, just as China began to expand from its strict communist model to a mixed economy. By 1999, he was expanding into the U.S. by buying a small fridge-maker. In 2000, he opened a new factory in South Carolina.
This deal is marks the second time that Haier group tied to buy GE’s appliances division. The Chinese firm seriously considered buying in 2010 but ultimately begged off over the then-$4 billion price tag.
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