General Electric has agreed to sell its Louisville-based appliance business to China-based Qingdao Haier Co. for $5.4 billion.
Company and union officials and Louisville Mayor Greg Fischer said the deal would benefit the city, the local appliance campus and the employees, and opens opportunities for Louisville-made products to be exported.
The unit’s headquarters will remain in Louisville, and the agreement calls for GE Appliances “to continue to market the current portfolio of GE brands for a period of 40 years.”
However, officials said the four-year contract to which GE and the local workers agreed last year will be renegotiated once Haier takes possession of the business, which is subject to shareholder and regulatory approvals.
GE Appliances employs about 12,000, including about 6,000 at its 900-acre Louisville campus, which manufactures household products including dishwashers, refrigerators and hot water heaters. Through the end of the year, GE will have invested about $1 billion and hired 3,000 employees in its Louisville facilities since 2011.
GE has been trying to sell the appliance business because it wants to focus on being an infrastructure and technology company.
GE recently terminated an agreement to sell the unit to Sweden-based AB Electrolux. Federal regulators had sued to stop the $3.3 billion acquisition because they feared a loss of competition and higher prices in the appliance industry. Electrolux had to pay GE $175 million because the deal failed.
GE Appliances spokeswoman Kim Freeman said Haier’s limited presence in the U.S. is good for the Louisville-based operations, because it reduces the new owner’s ability to change headquarters or move production elsewhere.
“They’re buying us for our people, our products and our services,” she said.
In addition, Haier has said they would like to distribute GE-branded, American-made products to China.
“It gives us an opportunity for a new channel of growth,” Freeman said, adding that Haier has pursued a strategy to manufacture close to the end customer. “They want to make where they sell.”
With rising production costs in Asia, it also does not make as much sense anymore to pursue low-wage production as it once did, Freeman said.
Dana Crittenden, president of the IUE-CWA Local 83761, said today’s announcement brings union members closure after years of uncertainty and will allow them to continue to build upon the Appliance Park legacy.
“I think it’s great news,” he said.
According to Crittenden, the acquisition by Haier would be better for the local campus than an acquisition by a company such as Electrolux, which has significant presence in the U.S. and would have kept its North American headquarters in Charlotte, N.C.
As for renegotiating the labor contract, Crittenden said he did not think it would be an issue. For the next year or so, the contract will remain in place, and afterward, Haier said, it will negotiate with local workers “in good faith,” Crittenden said.
Mayor Fischer, too, was upbeat about the news.
“This has very significant, and I think very good implications for our city,” he said at a press conference Friday morning. “Haier not only brings global scale and growth opportunity to GE Appliances, but – very importantly – we also keep the HQs and existing great leadership and full complement of employees here in Louisville. Let me repeat: We get to keep the headquarters and the employees.”
Haier is “a large global company, but they are a large global company with a local focus, which drives one of their missions which they call ‘zero distance to the consumer.’ That’s an approach to product development as well, which bodes well for our continued strong product development here in Louisville and Appliance Park, and also at First Build,” Fischer said.
Haier Director David Liu said in a press release that GE’s appliances unit “has significant strategic value for Haier.”
“The business’ integration into Haier, combined with Haier and GE’s lasting, comprehensive partnership, lays a solid foundation for Haier’s long-term growth.
Qingdao Haier is 41 percent owned by Haier Group, with which GE also has agreed to enter a Global Strategic Partnership to “jointly pursue growth projects in focus areas where both companies can increase business competitiveness such as Industrial Internet, healthcare, and advanced manufacturing.”
GE shares were down about 1.25 percent in early morning trading. The S&P 500 was down about 2 percent.
Haier Group, which calls itself “the world’s leading home appliance provider,” recorded global revenues of $32.6 billion and profits of $2.4 billion in 2014.
Officials expect the transaction to be completed in mid-2016.
Reporter Joe Sonka contributed to this report.