For an evolving GE, consumer products are not a priority

In a recent General Electric television ad, flying garbage gets sucked into a funnel, turbines glide through the desert, and street lamp bulbs sprout wings and take flight across the urban and natural landscapes of South Africa. These fantastical technologies, the ad suggests, are all examples of “what would happen” if GE’s technological innovation reaches its potential.

Completely absent from the new commercial was the American consumer.

The ad reflects a shifting business model for a touchstone U.S. company, which has  been part of the daily lives of  average Americans since its 1892 founding in Schenectady, N.Y. Today, consumers are interacting with GE less and less as the conglomerate seeks to boost profits and define itself as a global problemsolver by emphasizing its lucrative industrial divisions.

“We are the largest and most profitable infrastructure company in the world,” GE chief executive Jeffrey Immelt said of the Fairfield, Conn.-based company’s identity in its 2013 annual report.

The company reinforced that message this week when it confirmed that it is in talks to sell its $2 billion appliances business to one of several possible bidders, including the appliance maker Electrolux. Several news outlets reported that Quirky, a New York-based startup that uses crowdsourcing to quickly develop its household products, is also interested in GE’s appliance business.

If a sale of the unit is completed, the company’s iconic toasters, refrigerators and washing machines may retain the GE brand name — but will no longer  be made by the company.  “Most U.S. consumers are not going to be touched day-to-day in a way that they know” by GE-made products, said Brian K. Langenberg, principal of Langenberg & Company.

Just a few years ago, many U.S. consumers were watching GE-owned television programs, using GE-owned credit cards, and buying GE-owned household appliances. But GE completed a deal selling NBC Universal to Comcast last year, and began the process of  spinning off its consumer credit card unit Synchrony Financial last month.

If GE sells its appliances business, consumers could find themselves interacting directly with the company’s products rarely–when they buy a new light bulb or undergo an MRI, Langenberg said.

What’s left are things that are harder to touch.

“We often talk about how GE technology and people move, power, build and cure the world,” GE spokesperson Seth Martin said in an e-mail. “And that is really how we touch individuals today—through our aircraft engines, our power turbines, our healthcare equipment—providing the essential infrastructure and technology the world needs.”

Consumer-oriented products currently represent just a small fraction of the company’s business. GE’s appliance and lighting units, which sell products marketed to both consumers and industrial buyers, make up about 3 percent of the company’s profits and 6 percent of its revenue. The appliances division in particular has grown less profitable as foreign appliance makers command a growing share of the U.S. market.  </p><p>GE’s retail lending arm, now known as Synchrony Financial and the financial power behind the private-label credit cards for Gap and Amazon.com, raised $2.9 billion last month in the year’s largest initial public offering. But the division had become a distraction to the firm, which expects to complete the spin off next year.

Both divisions stand in contrast to GE’s giant aviation and oil and gas divisions, which delivered strong performances that boosted the company’s 13 percent growth in net income in the second quarter.

Langenberg said that these industrial businesses are thriving in part because they allow GE to secure large and long-term financial deals — something not possible with household appliances.

“Every time you hang a pair of engines on an aircraft, you get 25 years of selling parts,” Langenberg said. “With a dishwasher, you’re selling it once—if something breaks down, you’re not getting a big aftermarket revenue stream.”

GE’s stock was down about 1 percent in Friday trading, but about 8 percent so far this year.

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Jiaxi Lu · August 15, 2014