Haier Struggles to Overcome the China Slowdown

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Yuan Pressure

Haier too is trying to reach new consumers through linkups like the one signed in 2006 that allows it to sell its kitchen appliances at B&Q. And it's pushing its domestic reach by developing its own sales channels with around 5,000 Haier-dedicated outlets on the mainland today. That supplements its traditional reliance on local retailers like Gome and Suning. "They realized they have to beef up their own channels to keep up their own bargaining power with retailers," says strategy professor Teng.

To beat the high costs of shipping and pressure from the rising yuan at home, Haier has shifted production overseas to some of its regional facilities, including the Thailand refrigerator factory it bought in April last year in Prachinburi province, 170 kilometers east of Bangkok. That, too, fits into its strategy of boosting overseas sales from about one-quarter of total revenues now to more than half over the next few years. Despite disappointing sales in the U.S., Haier hasn't given up on the U.S. market and is planning more product launches there. "We transferred some of our production to Southeast Asia and are exporting products from there as well as selling locally," says Zhang.

Now, Haier is also actively considering overseas brand acquisitions as a way to boost its presence in foreign markets quickly. One possibility has been the purchase of General Electric's (GE) white goods unit, a prospect raised by GE CEO Jeffrey Immelt in late May when he listed the company as a potential suitor. "We surely are very interested in GE," says Haier's Zhang.

But being interested doesn't equal a successful takeover, of course. Just three years ago, Haier joined forces with private equity firm Blackstone and Bain Capital in a $1.28 billion bid for appliance maker Maytag (BusinessWeek.com, 7/4/05), but ultimately lost out to a higher bid from Whirlpool. "He is probably encouraged by Lenovo's reasonably satisfactory acquisition (BusinessWeek.com, 1/3/08) of IBM's (IBM) PC unit," says Teng. "But it is a long shot for Haier. It will be difficult to make it happen, and even if it did, it would be difficult to integrate the GE business."

Roberts is BusinessWeek's Asia News Editor and China bureau chief.