As part of a move to improve profitability and raise cash for mergers, acquisitions and buybacks, Jeffrey Immelt, chairman of General Electric Co. (GE), Boston, MA, told investors and analysts in a presentation this week that the company will add its Industrial Solutions business to the operations slated for divestiture.
GE had mentioned the plan to divest its GE Water business in late October when it announced its deal to acquire oilfield services giant Baker Hughes. Immelt added Industrial Solutions to the list this week and said the combined divestitures would potentially add $4 billion in cash to the company’s existing $30 billion “unallocated capital” fund for investing in further growth. GE hopes to close a deal to sell Industrial Solutions in late 2017.
“Industrial Solutions for us is a $3 billion business,” Immelt said. “We think there’s going to be a lot of interest from people who don’t have a North American platform and [we’ll] see where opportunities come. And between those two it’s going to be $4 billion cash, $2.5 billion of restructuring that we can now apply to incremental cost-out goals. We think this just makes a lot of sense of good cash-generation through the cycles.”
GE is looking to cut $100 million a year by “rationalizing” its facilities, Immelt said. Recent acquisitions such as the Alstom SA power equipment business and Baker Hughes mean GE now has 150 million square feet of factory space world-wide, leaving room to find reductions in costs.
GE Industrial Solutions includes the company’s electrical distribution, switchgear and critical power product lines, which are among the products that formed the original foundation of the company. The company competes in these markets against some of the electrical industry’s biggest players, including Schneider, Eaton, Emerson, Siemens and ABB, as well as niche players in these markets. There had been rumors in past that GE Industrial Solutions was up for sale, but with GE corporate’s enhanced focus on the industrial market and its investment in advanced manufacturing lines for the Industrial Solutions business, acquisition talk had died down in recent years.
GE recently invested in Advanced Manufacturing Labs in Plainville, CT (2014) and Mebane, N.C. (2015). The AML uses robotics and automated manufacturing systems to design and build production lines for the new GuardEon molded case circuit breaker (MCCB) platform launched in 2015.
“The new lab is another example of GE’s investment in the future of our electrical distribution business to better serve our customers,” said Bob Gilligan, who was CEO of GE’s Industrial Solutions business when the Plainville facility, opened in 2014. “We are making unprecedented investments in our business to deliver the global MCCB platform faster than ever before, while introducing innovative design-for-manufacturing development methods and launching a modern, advanced manufacturing plant.”
