Ge's Appliance Park: Rewire, Or Pull The Plug?Zachary Schiller
General Electric's mammoth appliance-making complex near Louisville has long been a showplace for everything from the newest in dishwasher and refrigerator technology to the hottest techniques in automated manufacturing. But Appliance Park, as the five sprawling factories are known, now faces a crucial decision that could mean a new lease on life--or signal its eventual doom.
As early as Feb. 1, John F. Welch Jr., chairman of GE, based in Fairfield, Conn., will decide whether to authorize an overhaul of the park's antiquated washing machine production. If Welch decides against the investment, which could run up to $70 million, the company is set to slash 1,500 jobs and let an outsider make its washers.
Appliance Park's problem is clear enough. General Electric Co.'s appliance unit is No. 1 in refrigerators, dishwashers, and electric ranges. But the 40-year-old Appliance Park, home to 10,000 of GE's 22,000-plus U. S. appliance workers and the supplier of 30% of the company's $5 billion a year in appliance revenues, is losing a "sizable" amount of money, says J. Richard Stonesifer, chief of GE Appliances. He won't quantify further. The worst performer? The washer making operation. GE holds just 16% of the $1.8 billion U. S. market for such appliances and hasn't done a major overhaul of its machines in more than a decade.
MASS RALLIES. Now, with 1994 energy standards for washers prodding GE, it's decision time. "To invest in a place that's losing money makes no business sense," says Stonesifer. But "if we don't make this investment, long-range it puts the viability of the park in question."
That's the message he and GE Senior Vice-President Frank P. Doyle delivered to the work force during dramatic mass meetings on Jan. 15. They were joined by local union leaders and William H. Bywater, president of the International Union of Electronics Workers (IUE), who urged employees to cooperate with GE to improve productivity. "Any habits we have that are counterproductive we should correct," Bywater says he told the crowd. The meetings may already be having an effect. "Everybody is kind of pushing together now," says Rebecca Wells, an assembly-line worker.
Soon, Appliance Park workers may have to push harder. Stonesifer has been meeting with union officials to hammer out an agreement on work-rule changes. One topic, however, is not on the table: wage or benefit cuts. Stonesifer says that's in keeping with GE's strategy of stressing team systems and worker empowerment.
Unionists give another explanation: They say GE learned a lesson from its motors operation, where wage cuts in 1988 clobbered productivity. "They went from losing a little money to sending out dollar bills with their motors," says Dewey D. Minton Sr., the IUE's chief negotiator at GE.
History may not be on the side of Appliance Park. Since 1990, GE has closed three U. S. appliance factories. And high-cost Appliance Park, where employment is less than half its 1973 peak, hasn't won a big investment since a 1987 refrigerator retooling. That eventually yielded a $290 million aftertax loss after a massive recall.
Still, it's unlikely that GE will withdraw from the washer market altogether. Although GE makes only one-third as many washers as Whirlpool Corp., which holds 50% of the U. S. market, the company probably turns out close to 1 million washers a year, worth roughly $285 million in sales.
MIDDLING RESULTS. If GE declines to invest in Appliance Park, it will likely turn to a partner for producing washers. Logical candidates include No. 2 Maytag Corp. and Frigidaire Co., the market's No. 4 producer. Neither company would comment, and GE wouldn't discuss which companies it is considering.
Whatever Welch decides, there's more at stake than outdated washers. Stonesifer says that washers aren't the only Appliance Park line losing money. That has helped drive down margins for the entire appliance unit (chart). In 1992, GE says, its operating earnings fell "moderately," down from the $435 million it earned in 1991, on a slight sales gain, up from $5.45 billion.
The slide came despite the first improvement in appliance-industry shipments in five years. Stonesifer, who took over appliances one year ago, blames heavy new-product-development costs. And GE says that net income from appliances has been increasing steadily.
If the union has any say in the matter, Welch will write a check for Appliance Park. "We're going to cooperate to do whatever we can to see that plant stays there," says the IUE's Bywater. If the word from Connecticut is no, however, one of the nation's premier manufacturing sites could become a relic.