General Electric Co., deciding it was unable to be competitive in one of its best-known businesses, announced plans yesterday to sell its consumer electronics division to Thomson S.A., a large French electronics company.

The division, which last year sold $3 billion worth of televisions, radios, videocassette recorders and other products bearing the GE and RCA brand names, will be swapped to Thomson for between $500 million and $1 billion in cash and the French company's medical equipment division, which will give GE a European foothold in that business.

"I like the medical business strategy more," GE Chairman John F. Welch Jr. told a press conference in New York yesterday. GE is a leading player in the medical equipment business with a variety of electronic diagnostic products, including magnetic resonance and CAT scanners.

Under the terms of the agreement between the two companies, Thomson will be able to use the GE name on products for 10 years and the RCA name forever.

About 31,000 GE employes at 17 worldwide plants will work for Thomson. The medical equipment business being acquired by GE, Thomson-CGR, has about 6,600 employes worldwide.

The companies will retain a 19.9 percent ownership in each business "as a means to assure a smooth transition," they said in a joint statement. They also will set up a jointly owned research company to explore consumer electronics technology.

With the sale of its consumer electronics operations, GE -- once one of the nation's biggest brand names -- remains in only two general consumer businesses: light bulbs and major appliances, such as refrigerators, washing machines and air conditioners. It sold its small-appliance business to Black & Decker Manufacturing Co. of Towson in 1983.

The sale of GE's consumer electronics business is the latest in a series of major actions by Welch to remake the Fairfield, Conn.-based giant as a diversified, high-growth technology, services and major appliance company.

The proceeds from the sale add to GE's already bulging $2.5 billion war chest and are likely to increase Wall Street speculation that the company is planning a major acquisition. Just 18 months ago, GE stunned the business world with its $6.2 billion takeover of RCA.

GE stock rose 37 1/2 cents yesterday to close at $56.12 1/2 in New York Stock Exchange trading.

Analysts have been wondering since the RCA acquisition what GE planned to do about consumer electronics, which has been buffeted by competition from Japanese and European companies. "GE alone is not positioned to be a major player in an industry that demands worldwide presence," the company said in a statement yesterday.

Prior to taking over RCA, GE had been slowly disengaging itself from many parts of the consumer electronics business, but the acquisition of RCA, which has leading positions in many consumer electronics areas, put GE even deeper into the field. Welch had made it clear since the RCA takeover that the consumer electronics business was under scrutiny.

Earlier this year, GE seemed to signal a renewed interest in consumer electronics when it announced that it would resume the domestic production of GE-brand color TVs at an RCA plant in Indiana. Previously, GE had closed its TV production line and bought TVs from Matsushita, a Japanese manufacturer, to sell under the GE brand.

In his statement yesterday, Welch said, "Consumer electronics, although a large business in terms of sales, has not been central to GE's strategic plan. The people of GE consumer electronics have been making very good progress in their efforts to increase the business' profitability. They will now become part of a true worldwide electronics business -- one very much like Philips and the Japanese firms with whom they are competing. Being part of Thomson -- a company that is committed to consumer electronics -- should do much to enhance and maintain consumer electronics jobs in the United States."

Welch said the acquisition of Thomson's medical equipment operations "is a unique opportunity to enhance the participation of GE's medical equipment business in a growing and very competitive worldwide market. This acquisition adds a strong European presence to the business' current strength in the U.S. and Far East."

GE said it had determined that most of the growth in the medical equipment business in the next decade is going to come outside the United States, with the European market expanding at a rate twice that of the American market.

The acquisition of GE's consumer electronics business gives Thomson its first major foothold in the American market. The company, which is owned by the French government and which had about $9 billion in sales last year, is engaged in a variety of electronics businesses. It recently purchased two other consumer electronics companies -- West Germany's Telefunken and Great Britain's Ferguson. Thomson Chairman Alain Gomez said in a statement yesterday: "This transaction is the latest step in our strategy to become a world leader in consumer electronics."

Welch told a press conference in New York yesterday that negotiations for the transaction began in June when he approached Thomson about buying the French company's medical-equipment division, and the deal soon evolved into a trade. "We couldn't have bought CGR with cash," he said. "There have to be trades in this game to strengthen world players."

Staff Writer Steve Coll contributed to this report.