GE looks to shed local operation
Spinoff part of larger plan; 265 jobs in limbo here
General Electric Co. announced Thursday it is hoping to spin off its Consumer & Industrial business group, which includes the company’s Fort Wayne operations, instead of just its appliance business.
The consumer and industrial businesses have 50,000 of GE’s 300,000 employees, sales of $13.3 billion and a profit of slightly more than $1 billion last year. GE Lighting invented the world’s first incandescent light bulb in 1879.
In mid-May, GE said it planned to spin off or sell its iconic appliance business. At the time of the appliance announcement, the company said it would separate the appliance business from the industrial and lighting businesses in the Consumer & Industrial group.
GE, an industrial, financial services and media conglomerate, said it continues to explore all options for the consumer and industrial operations but believes it makes the most sense to shareholders to spin off the entire unit, keeping its leadership teams and employees intact.
Because the three business units were integrated in numerous ways, sharing an information technology team for example, it makes sense to spin them off or sell them together, GE spokeswoman Kim Freeman said.
In Fort Wayne, the local plant at 1635 Broadway produces small motors for products such as golf carts and is the headquarters for the company’s Motors division, within GE’s Industrial group. Freeman said there were about 300 people working at the local plant in mid-May; the figure now stands at 265.
Wayne Nash, of the International Union of Electronic Workers-Communications Workers of America Local 901, said GE had more than 12,000 employees in Fort Wayne when he began working for the company in 1966. During its heyday before he started, Nash said he heard the company employed as many as 15,000 in Fort Wayne. According to GE’s Web site, the company has operated in Fort Wayne for more than 100 years, since at least 1902.
Nash said GE’s local employees were called into a meeting at 9:15 a.m. Thursday. James Campbell, president and chief executive officer of GE’s Consumer and Industrial group, told employees through a video conference the plans for the group. Nash said Campbell talked about working to make the spinoff happen.
Campbell did not take questions, saying he didn’t have the answers for most questions, Nash said. Many current employees have reached retirement age and have questions about their pensions and benefits if the businesses no longer belong to GE.
“It’s really nerve-racking for the people that are here,” Nash said.
From a financial standpoint, the announcement was not a surprise and stems from GE’s poor earnings in the first quarter, said Deane Dray of Goldman Sachs Group Inc. A spinoff avoids taxes associated with selling the appliance business, he said.
“We also believe GE could still pursue a sale of the stand-alone appliances, with today’s announcement potentially creating a sense of urgency among potential bidders for this legacy consumer asset,” Dray wrote in his report. Dray said he does not consider the spinoff plan to be a catalyst for GE’s stock. Weak credit and consumer markets and the effects of potential divestitures will likely keep earnings “flattish” through 2009, he wrote.
GE shares closed up 45 cents, or 1.7 percent, at $27.64.
The stock had its worst day in decades in April after the company reported a smaller-than-expected first-quarter profit and lowered its outlook for the full year. GE is scheduled to report its earnings again today.
The disappointing first-quarter results increased pressure on GE Chairman and Chief Executive Jeff Immelt to sell assets and reorganize the company. Immelt pledged to increase planned cost-cutting by 50 percent, from $2 billion to $3 billion.
Immelt has made clear that GE’s NBC network is not for sale, despite some analysts’ calls for such a move.
kpeterson@jg.net