General Electric Co. and RCA Corp. officials said yesterday the planned $6.2 billion merger of the two companies "will improve America's competitiveness in world markets" through its marriage of high-technology and service businesses.
At a press conference at GE's Manhattan office building, top executives from both companies maintained that the impact on the nation's position in global markets should overshadow domestic antitrust concerns about the merger.
"In an era of growing international business competition," said GE Chairman John Welch Jr., "we believe we are creating an American-based corporation that will be an even greater and more fundamental global competitor. That just has to be good for America and the specific markets we serve."
Though Welch and RCA Chairman Thornton F. Bradshaw said they discussed the merger in advance with "ranking government officials" and met with no objections, the deal was attacked yesterday by Sen. Howard Metzenbaum (D-Ohio). A longtime foe of big mergers, Metzenbaum said, "On its face, the deal raises serious antitrust questions," and threatened to call hearings on the plan.
The merged companies would combine strengths in the defense business, consumer electronics and satellite and computer communications.
With over $30 billion in annual revenue, GE is not only a diversified company whose name is a household word in products ranging from light bulbs to washing machines, but also is the fifth-largest defense contractor and a leading financial services firm. Welch, who has been GE's chairman for the past five years, has said his strategy for the company is to compete only in businesses in which it can be first or second in market share.
"Five years ago, GE made the decision to concentrate in six key manufacturing areas -- businesses where we had commanding or leading market positions," he said. "At the same time, we began shifting our overall profit mix to one that emphasized technologies and services.
"Specifically, in 1980, our earnings were about evenly divided between manufacturing on the one hand and technologies and services on the other. Today, five years later, about 70 percent is from technologies and services. Following the RCA merger, we will generate about 80 percent of our earnings from those business areas. As you can see, the RCA merger accelerates our momentum in services and technology and complements GE's strengths in our other business areas as well."
RCA Corp., with more than $11 billion in annual sales, is a leader in television sales, satellites, radar systems and video cassette recorders, as well as the owner of the NBC television network. Restructuring its operations over the last several years, RCA has sold its Hertz Rent A Car operation and its CIT financing subsidiary.
GE's Welch and RCA President Robert Frederick emphasized that the companies' defense, consumer electronics and communications businesses are more complementary than overlapping. There are few RCA and GE products that directly compete with each other, the two executives said, but neither would elaborate on how the companies plan to consolidate their operations, saying such questions were "premature."
Welch and Frederick also said it was too early to discuss how the top managements of the companies will be combined, but RCA's Bradshaw said he plans to step down after the merger is completed. Bradshaw, 68, said he will remain a consultant to GE for three years.
Frederick and Welch are not strangers. Before he went to RCA in 1982, Frederick was a senior vice president at GE. Once a candidate to be chairman of GE, Frederick left after the job went to Welch. Frederick had been considered the likely successor to Bradshaw at RCA. He said he had "mixed emotions" about missing the opportunity to run his own company but "I don't see myself going into an enemy camp."
Sounding the major theme of the merger, Welch asserted that the GE-RCA combination would be better able to compete with the vertically integrated and cash-rich Japanese and European companies that are GE's global rivals.
"Start to think about a company facing Toshiba, Siemens and everyone else in the world, that has the No. 1 television network; that's No. 1 in the jet engine business; that's No. 1 in engineering plastics; that's the No. 1 finance company," said Welch. At a meeting of Wall Street researchers who follow the company, Welch said combining the firms would create "a powerhouse of a firm. There's nothing like that. The story is really that. We've got the all-time best company and I'm prepared to debate with any one of you about that one on one."
At that meeting, Welch noted that NBC -- currently the top-rated television network -- is "the crown jewel" of the RCA acquisition because of its potential for enormous cash flow, continuing profit growth and its virtual invulnerability to foreign competition.
While Welch told analysts that "there could be" an antitrust problem with the merger in consumer electronics, he emphatically stated, "We don't envision any government problems that would stop this in any way," and reiterated that the merger should be completed by October of next year.
GE and RCA both are major sellers of television sets, video recorders and related products, though much of what they sell is made for them abroad.