Now What for GE Plastics?

Posted by: Diane Brady on May 17, 2007

Good-bye to the house that Jack Welch built—or at least the business where he launched his career.

General Electric is reportedly close to getting rid of its troubled plastics unit for $11 billion, with Saudi Basic Industries Corp. (SABIC) the most likely to succeed. The sale itself is unlikely to shock the market into buying up GE stock. CEO Jeff Immelt has said he wants out of slow-growth businesses for some time, putting the unit on the block earlier this year. And investors are still skittish about the size and complexity of GE. Even amid strong earnings, there’s always something these days(NBC, plastics, the housing market) that gets them down.

What fascinates me at the moment is the management challenge of unwinding this business from GE. About 11,000 people work there. All these people talking about ecomagination and Six Sigma and so-called growth traits. All the ambitious execs shooting for a chance to get to a high-level pow wow at Crotonville or, better yet, a seat at the annual gathering of the GE's executive elite in Boca Raton. What now?

How many hotshots will GE absorb back into the mother ship? What happens to a culture that grew up in GE and could soon be under the umbrella of Saudi Arabia's largest company? Will there be any U.S. government objection? After all, the business doesn't just churn out resins for caps and cars. It makes state-of-the-art material that has applications in security, too. And how will life change in the Berkshires city of Pittsfield, Mass.?

In many respects, employees feel they enter a social pact when joining a company like GE. They are often as attracted to the aura of working for GE as to the individual job. They aspire to move up the ranks; to perhaps move around the company. Then their unit is sold to the highest bidder. That's life. But how the transition is managed determines whether buyers get all the brain power along with the product base.

Reader Comments

Alec

May 18, 2007 3:00 PM

I believe this is going to be a major trend over the next few decades. Too many companies like GE have tried to sell everything from light bulbs to mortgages to nuclear weapons and reality TV. These monolithic organizations may look impressive in terms of net worth, but all this complexity just provides more chances for something to go wrong, not to mention extra layers of highly-paid management. As far as Saudis endangering our security, their track record clearly shows they're more interested in making money than damaging American security interests.

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