GE appliances get a Chinese owner in U.S. state of mind
GE refrigerators, as iconically American as the Coca-Cola's cooling inside, will soon need to include an asterisk with their brand-USA claim.
New Chinese owner Haier has every incentive to keep that asterisk as small possible.
The GE appliance unit's U.S. presence — both the local manufacturing and the storied branding — is the appeal of the $5.4 billion deal, say analysts.
The unit and the 40-year license to use the GE brand, are akin to "rocket fuel for Haier. It's a fantastic shot in the arm," said Alan Wolf, senior editor for TWICE Magazine., which covers news in the consumer electronics and technology industries.
"The U.S. is the hottest and the wealthiest market and a prize for any product manufacturer. That is why Samsung and LG have pulled out all the stops to grow their market share in this country."
China�s Haier buying GE appliance unit for $5.4B
GE's pedigree goes back to the lightbulb and Thomas Edison.
Formed in 1892 with the merger of Edison General Electric and The Thomson-Houston Co., GE began marketing a full roster of heating and cooking products by 1907, giving it more than a century of brand equity in the U.S.
"GE has been in this game since way before my mom was born," said Richard Doherty, research director at The Envisioneering Group. "They and Westinghouse really ushered in the century with the idea of the electric kitchen and the electric laundry room."
Haier hopes to parlay that lineage into a more esteemed and larger global and U.S. presence, executives indicated in a statement announcing the agreement, which they expect to close mid-year.
Today, the $5.9 billion-in-sales GE appliance unit has about 12,000 employees, most of them (97%) located in the U.S. at its Louisville Appliance Park headquarters in Louisville, Kentucky, and sites including Bloomington, Ind., LaFayette, Ga., and Decatur, Ala.
Haier, based in Qingdao, China, has pledged to retain the GE appliances management team and its employees in the U.S.
That pledge prompted a big outpouring of relief from workers and Louisville leaders, who embraced the Chinese company's decision to make the city its new U.S. headquarters, easing concerns of 6,000 workers worried about the alternatives. GE had been shopping around its appliance unit since 2008 and last month called off a potential sale to Sweden's Electrolux.
RETURN TO US
Four years ago, GE began returning production of appliances to the U.S., such that more than 80% of GE’s appliances were made in the US in 2015, says Euromonitor analyst Feng Zhang.
This move allowed GE to more loudly tout the largely American-made status of its refrigerators, washers and driers.
Haier's acquisition gives it a "century-old brand asset and could, potentially, change the global major appliances market landscape," Zhang said in a report Friday.
Haier, whose own roots trace back to the 1930s, isn't completely unknown in the U.S. It formed a U.S. subsidiary 16 years ago and opened a factory in Camden, S.C.
But as a brand, it barely registers in the U.S., a contrast with its international presence.
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So Haier can continue to mine the U.S. market with its American-made credentials and use that same clout to increase sales in the faster-growing Middle East, Africa and Asia Pacific markets, Zhang said.
WHIRLPOOL, BUT ALSO LG
The U.S. appliance market is now a mix of U.S. companies and non-U.S. owners.
South Korean electronics giants LG and Samsung continue to account for a growing share of U.S. appliance sales, edging in on their dominant U.S. competitors.
GE-branded appliances run neck and neck with Whirlpool among U.S. sales, with each controlling about 15% of the major appliance market, according to market research from Twice.
GE appliances, especially refrigerators, have been performing better amid the return to U.S. manufacturing, says Consumer Reports Senior Home Editors Dan DiClerico. "We have seen a marked improvement in the performance," he said. "Looking specifically at refrigerators, Haier hasn’t done quite as well. So you hope GE will rub off on Haier, rather than the other way around."
A look back at GE Appliances' iconic brand
And as for Americans' connection to the GE brand, that may be less of a selling point as the years go by. "You are looking at a whole new generation of consumers," Wolf of Twice said. "The millennials, I don’t know how much traction that holds for them, particularly in light of the fact we have LG and Samsung coming in great guns. Right now (those companies have) a much higher profile."
Contributing: Grace Schneider of the Louisville Courier-Journal.Follow Mike Snider on Twitter: @MikeSnider