GE to Auction or Spin-off Appliance Business

It appears that a someone from the higher-ups at GE leaked the story to the Wall Street Journal that they are looking to jettison their mature appliance business. During my one year of employment at the company, Jeff Immelt (Chairman and CEO of GE) and Jim Campbell (President and CEO of GE Consumer and Industrial – the parent of the appliance business) have stated that one does not invest millions of dollars in a business that they intend to sell. Certainly these are very difficult economic times – especially in appliances which are intimately tied to housing starts.

Perhaps they planned to ride the storm out. After all, this business has weathered many other challenges in the past. Also, of all of GE’s businesses, this one is probably most identifiable to the average US citizen.  However, something else happened which, I believe, propelled Mr. Immelt to take this significant step. Back in March he reaffirmed to GE employees (a large number of which also own sizable amounts of GE stock) the guidance that, even though much of the rest of the economy was suffering from the sub-prime mortgage crunch, GE was much too disciplined to make the same mistakes and would hit their goal of 10+% earnings growth. A few short weeks later, GE announced a 12% profit loss and lowered guidance for the rest of the year driving the stock price down 12% in one day.

Shortly thereafter Jack Welch, the previous and extremely well-known CEO of GE, said that Immelt had some “credibility issues.” These challenges have put a huge amount of pressure on him to make some significant changes in order to improve the stock price.  I guess Appliances seemed like the best candidate.

Read the Bloomberg story here.