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China's Haier buys GE Appliances for $5.6 billion

GE workers work along the assembly line of the washing machine models at Appliance Park. Photo: Matt Stone 

The sale of GE's Appliance Park and its 12,000-person U.S. Appliances business to Haier was finalized Monday in a deal that maintains the General Electric brand headquarters in Louisville as a property of the Chinese appliances giant.

The $5.6 billion deal severs Louisville's half-century-long ties to General Electric and flips ownership of one of the community's flagship employers to a major consumer electronics maker.

Roughly 6,000 people work at Appliance Park, about 3,800 unionized and 2,200 salaried employees. The good news for Louisville has been assurances that Haier (pronounced "hire") pledges to maintain the current management and workforce on Buechel Bank Road.

"GE Appliances will continue to be headquartered in Louisville ... and operated independently under the day to day direction of the current management team," a Haier news release said.

General Electric Chairman and CEO Jeff Immelt said the company's exit from its appliances and credit businesses is key to transformation as a "simpler, more competitive company."

"The sale of GE Appliances is another step in the company's portfolio transformation and its mission to become the world's leading digital industry company," Immelt added in a release.

For GE workers, health-care coverage and company benefits at nine manufacturing plants in five states transferred to Haier Monday. New company signs have already appeared in and around Appliance Park, keeping the GE insignia as a Haier brand logo.

Chip Blankenship, president of CEO of GE Appliances, will retain that position and also become a new senior vice president of the Haier Group.  He held a news conference late Monday afternoon at Monogram Hall at Appliance Park, where he read a statement and fielded numerous media questions.

He said the takeover by the Chinese entity was "very important for our employees and business.  Haier loves appliances and shares our goals.   I'm bullish on what the future holds with Haier as our parent."

He said Haier has the resources that GE Appliances needs to offer more products in more markets and that Haier can make the company more competitive on the global stage.

He said the management at Appliance Park is up to the challenge to be the best maker of the appliances in the world. The takeover, he said, will not change the company's passion for its customers, for solving problems, and for supporting its employees.

In connection with the acquisition, Blankenship said Qingdao Haier, the Haier entity that becomes the new parent company of GE Appliances, is making a $100,000 donation to a local program designed to help people prepare for careers in manufacturing and is intended to help close what he called a workforce skills gap.

Blankenship pledged that GE's long record of community involvement will continue. "The same people are here," he said, adding that "we feel strongly about giving back to the community."

GE has a good track record for providing donations, among others, to Metro United Way, local schools, and workforce-improvement initiatives.

Several top Haier officials were in Louisville Monday morning. Among the activities was the ceremonial planting of eight trees in a newly named Prosperity Gove at Appliance Park. Mayor Greg Fischer attended, as did some GE employees. The ceremony was termed a symbol of prosperity expected to spring from the new affiliation between Haier and GE.

Blankenship said that the takeover, by itself, will not determine the future rise or fall of employment at Appliance Park. Rather, employment levels will be driven primarily by market forces, he indicated.

He predicted an ongoing investment in upgrades at Appliance Park and said Haier officials had bought into a three-year strategic plan that local plant management had shown them.   He said it forecasts a growth in earnings. But Blankenship declined to specify how much investment might be made in the park over the three years. He did say, however, that he expected the investment to be at a healthy level.

Haier has agreed to recognize the IUE union at Appliance Park that represents most of the non-salaried employees. The acquisition mandates the negotiation of a new labor contract with the union, Blankenship said.

Dana Crittenden, the IUE local president, said of the takeover, "It's a landmark, a great day."

The finalizing of the deal ends employee concern and uncertainty about their future, he said. "We can put that behind us," he said, adding that he was confident that a fair contract will be negotiated.

Blankenship urged the public to continue to expect the same level of commitment by GE to its products, including investment in product development. He said the public probably will be seeing some new, nontraditional appliances.

Since 2010 GE Appliances has added about 3,000 manufacturing jobs and invested about $1 billion in its Louisville operations.

Haier's $5.6 million deal is $200 million more than previously forecast. The additional sum is intended largely to provide increased working capital, a news release said.

"Haier and GE Appliances have always sought to adapt to changing times and customer preferences," Haier Chairman and CEO Zhang Ruimin said in a statement. "We share the same vision of the future. ...  GE Appliances has great employees and a strong global customer base and I am confident that, together, we will be able to embrace the digital era and offer customers the best possible choice and service now and in the future."

"Haier loves appliances as much as we do and shares our goal to be the most competitive, innovative and customer-focused company in the world," Blankenship said. "Together we will find new and better ways to help people improve their lives at home."

The news release said the sale will generate an after-tax gain of about 26 cents a share. Goldman Sachs provided financial advice to GE, and Sidley Austin LLP was GE's legal adviser.

Workers were informed earlier Monday about the closing of the deal.  A letter signed by Blankenship was distributed to employees.

"For a business that's already been around for more than 100 years, we have an amazing opportunity for renewal.." Blankenship said.

Acquiring GE's appliance business, Haier Chairman Liang Haishan said, is "a key part of Haier's strategy... We have great respect for and trust in GE Appliances' talented management team and we look forward to working closely together to create a truly global leader in the design and manufacture of innovative, high-quality home appliances."

Established as a refrigerator factor in the Chinese coastal city of Qingdao in 1984, Haier is the largest appliance brand in the world, accounting for 10 percent of global appliance sales.  The Chinese company's acquisition of GE's U.S. appliance business speeds up Haier's worldwide expansion.

A federal review of the GE sale to Haier was completed in early March. Connecticut-based GE had been trying to sell the division for some time. It struck out after regulators filed an antitrust suit in late 2015 to block a proposed $3.3 billion acquisition by Sweden's Electrolux. GE backed out in December and announced Haier as the new suitor in January.

University of Louisville president James Ramsey met Monday morning with executives from the Chinese manufacturing company at FirstBuild, a campus innovation center.

"We are appreciative of this great partnership," Ramsey said on Twitter.

GE Appliances division's nine plants in five states earned $5.9 billion in revenue in 2014.  Executives also said that Haier will be licensed to use the GE brands for its appliance for 40 years, inclusive of extensions. Haier reported 2014 revenue of $32.6 billion and operates 21 industrial parks worldwide.

Haier formed a U.S. subsidiary 16 years ago and opened a factory in Camden, S.C.   GE Appliances makes refrigerators, freezers, cooking products, dishwashers, dryers, air conditioners, water-filtration systems, and water heaters.
 


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