GE to Haier
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">I'm reminded of the Far Side comic where the goldfish stand outside their bowl, their castle ornament ablaze, lamenting, "Well, thank God we all made it out in time...'course, now we're equally screwed." </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">I also think of AMC, who ran a radio ad sometime in the mid-eighties, offering zero-percent interest financing on new purchases. After the ad, the DJ murmured something about "I think 'zero interest' is exactly the problem." </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">Much as it pains us (I still wish I could shop at Montgomery Ward--and hush, Ralph ;-) ) to watch it all unfold, I'm not sure there's a way to win these situations (and indeed, it depends on whose definition of "winning" it is to which you're subscribing). </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">In market segments that are saturated, even venerable brands succumb. Sometimes it's because you can't enhance your profitability in an already marginal situation. You can try to do a lot of things to enhance short-term profitability (renegotiate contracts, trim workforce, improve efficiency, convince everyone to replace everything they own, or engineer the stuff you produce to have a two-year lifespan--and so forth). </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">Eventually, the problem is there's already a world full of what you're selling, and other people in other places are making it for less, maybe with more features than what you can add for the same pricepoint. </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">There are a lot of peripheral issues here that may affect the long-term outcome, and I think that workforce costs are going to be huge contributors. I'll be keen to see if, like Hyundai, Haier might regard this as an opportunity for on-shore production, and play up the "Look, we build it here!" angle. Even if they do, though, I have my doubts as to whether the job force would be preserved--and assuredly not at the same pay/benefits level. I cite Interstate Brands' bankruptcy and reemergence as Hostess Brands, LLC, essentially as a way they could reboot, and get out of BCGTM contract terms (and pensions, and other commitments with which I'm sure they'd prefer to dispense). </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">From an engineering perspective, if we assume that Haier behaves more like Lenovo (who had been building laptops for IBM anyway, but then acquired the rights to the entire ThinkPad line when IBM discontinued PC production), then they'll use this opportunity to inherit a strong brand with good products in place, from which they can eventually develop the next generation. That may be soon; that may be later. Chances are, they'll keep a good thing going for a while--Lenovo managed to cling to that original ThinkPad design for a really long time, before finally redesigning it a couple of years ago. It was a good design from the start, so they stuck with it. Given the F&P example, this seems to align. </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">But the tooling and such is in Appliance Park, and Haier is somewhere else--whereas Lenovo had been doing it all along; they (literally) just had to switch the sticker. So, I rather expect that a rebadged Haier might be more likely. Still, if they continue to produce F&Ps in Thailand with the original designs, there's hope. </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">Seeing as Haier exists in a sphere with cheaper labor costs than GE, and as they are already the metaphorical D&M of their field, with rebadges aplenty for other sourcers, I think they have little need to keep Appliance Park around in the long-term, unless--like I said--they feel the need to make in-roads under the "Assembled in the U.S.A." angle. We'll see. (I hope I'm wrong.) </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">I don't think there was another way to keep the appliances division going for GE--no one else has the capital to take on a behemoth like that in the U.S., and the U.S. field of appliance manufacturers presently could only be tepidly termed an oligopoly at best. </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">In many ways, and many posts prior discussing it, it's apparent that this war was fought and decided long ago, anyway--the first waves arrived in the seventies when Westinghouse divested; in 1980 when GM called it a day; in the mid-eighties where Hobart hung-up the residential-products apron, and in 1986 when D&M--king of the badge-design--was teleported to the Electroluxian homeworld. </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">GE could have packed it in, too, but they seemed to be primarily a capital engine that carried on in the spirit of the great diversified corporations of the sixties. Money flowed to and fro, amongst the arms of the company that needed it at any given time. I almost think they were sufficiently capitalized to keep motoring along for quite some time, in a state of relative obliviousness. </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">Nevertheless, the capital engine tends to prune underperforming branches occasionally, and then the capital shuts off. Can you guess another GE division that went defunct once the hedgeclippers were produced? Montgomery Ward. </span>
<span style="font-family: trebuchet ms,geneva; font-size: 12pt;">The stage seems to have been set long ago for the ultimate outcome of (WCI) Electrolux, Whirlpool, and Maytag persisting, with Maytag ultimately playing the role of AMC to Whirlpool's Chrysler in the opera, such as it were.</span>