Don’t expect major changes any time soon following Haier Group’s expected $5.4 billion acquisition of GE Appliances later this year.
According to an internal communication obtained by TWICE, the Chinese appliance giant intends to operate GE and its recently relaunched Haier America unit as separate entities, at least for the time being.
The manufacturer, considered No. 1 worldwide in white-goods volume, noted that both operations have sound and distinct management teams, business models, operating strategies, and brands, with minimal overlap of product categories.
Indeed, GE’s strength in cooking and the contract channel raised the hackles of federal watchdogs looking to derail a previous $3.3 billion buyout deal with Electrolux. The Louisville, Ky.-based business, also known for its prowess in laundry, bottom-mount refrigeration and engineering, has only recently begun to bear the fruits of a $1 billion infusion by its corporate parent, which helped spruce it up for sale after previous auctions — including a 2008 bid by Haier — fizzled.
Conversely, Haier America is a largely unfamiliar $500 million U.S. brand that has struggled to break out of its commodity AC role. It was only recently reborn under Whirlpool veteran Adrian Micu who, with Haier Group’s blessing, assembled a new management team, invested tens of millions of dollars in added production capacity and R&D, and developed a lifestyle marketing strategy designed to give retailers a home appliance alternative.
For the immediate future Haier Group will allow GE to function independently out of its Louisville headquarters under the direction of a local board, with input from its current management team. Together the group will guide the company’s strategy and day-to-day operations, Haier said.
Eventually however, it plans to gradually integrate its U.S. businesses to “provide greater global scale in operations and supply chain,” and to allow both organizations to benefit from pooled product development resources, the internal document indicated.
Industry observers, who have watched previous mega deals fall through, including Haier’s $1.3 billion bid for Maytag in 2005, appear cautiously optimistic and largely laudatory. “Haier’s purchase will result in very little short-term impact to the appliance marketplace, and will poise the new company with the scale to provide more choices for our members and consumers,” said John White, chief marketing officer and appliances executive VP for the BrandSource buying group.
Jeff Knock, chief commercial officer of the Nationwide Marketing Group, the country’s largest buying organization for independent appliance dealers, similarly believes the deal is “beneficial to everyone involved.”
While nothing is guaranteed, Knock noted, “It appears this transition is headed toward closure,” although it’s “far too early to tell the implications of this change at an industry level right now.”
Haier Group, which also owns New Zealand’s premium Fisher & Paykel brand, was founded in 1984 in Qingdao, China with a joint-venture assist from German majap maker Liebherr, from which Haier would eventually adopt its name.
The deal is expected to close midyear.