GE finally decides to sell / spin off its appliance division as it faces pressures from the declining appliance market and unstable corporate performance. When I was a part of this business from 2002 to 2006, I often heard this rumor but it never came true. There was little or no reason for me to be afraid as my employer was not GE and I would have found another job at my employer"s other divisions if this business was shut down. We often used to hear sentimental reasons for not selling off the appliance division. Because Edison invented electric bulb (now part of appliance division), GE was supposedly putting up with the bleeding division.

Analysts estimate sales in the appliance business, which posted revenue of $7 billion last year, are likely to decline between 10 percent and 12 percent this year. That stems from weak consumer spending and a drop in home improvement sales and residential construction (Source).

I was just wondering about the aftermath of this move. There are so many people dependent on that business and if it is sold to say, Whirlpool (which already bought Maytag in 2006 and terminated most of the employees) which is already running an exactly similar business, there will be so many people who will lose jobs (GE Appliance employs approximately 13000 people worldwide - Source) . A spinoff may be a better option for the appliance division as it will atleast keep the people intact but that seems very unlikely given the plight of the market. Who will buy an ailing appliance division?

GE appliance has a huge network of suppliers as any business with an annual revenue of $ 7 billion will obviously have. Now, with a company like Whirlpool buying GE Appliances, I bet they will kill more than half of the suppliers, if not all, because they must have loads of MBAs a dn supply chain evangelists thinking about strategic procurement and harnessing economies of scale out there! So much for these concepts!

Let"s turn out focus to the outsourcing partners of GE Appliance (I was at one of them for 4 years). I don"t know what would convince the new buyer of the company to continue with these partners. My guess is that all of the contracts will be terminated due to some clause mentioned in the 200 page contract which would probably read like this ... " In the event of company being sold out blah blah blah".... All said and done, nearly 500-1000 people will again look for jobs and realign their energies elsewhere.

Why am I counting all the effects of this move? Is it such a shocking news after all? Didn"t I enjoy reading the book "Straight from the gut" by Jack Welch which was full of such stories? Isn"t Jeff Immelt reacting to the recent share market disaster which GE displayed for the first time in recent history (Source)? All said and done, there is nothing wrong in what GE leadership is doing and it was destined to happen one day. My only concern is that this is the first time I am putting faces to a restructuring / sell off decision and I can see the effect much more clearly. I just hope that the entire episode is handled in a humane manner with mimimum losses to people I care for and I know personally.

This reminds me of the article written by Milton Friedman titled as The Social Responsibility of Business is to Increase its Profits! Milton Friedman claims, "there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

Looks like everyone believes in his logic these days! Certainly, the executives at GE certainly do!

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3.23 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."