When the giant International Summer Consumer Electronics Show opens its four-day run Sunday at McCormick Place, several major manufacturers will be missing from the list of floor exhibitors. But none is likely to be more conspicuously absent than General Electric Co.
”When you buy a floor exhibit, it can cost you up to six figures,” said Jacques Robinson, GE vice president and general manager of its consumer-electronics business operations. ”It just isn`t worth it to us. Just to silence the rumors?”
The rumors are that GE will stop manufacturing television and audio products or quit the consumer-electronics business entirely, perhaps as early as the end of this year but almost certainly within the next year or two.
Consumer electronics is believed to provide $1 billion to $1.2 billion in annual revenues for GE. But it has fallen outside the charmed circle of businesses at that Fairfield, Conn.-based conglomerate, where annual sales reached $27.95 billion in 1984 and where the marching orders are to ”fix, sell or close” marginal performers.
The rumors follow Robinson wherever he goes, including a showing of GE`s new video, audio and other home-entertainment products in New York City last Thursday. In an telephone interview, Robinson said GE is committed to fixing, not to selling or closing, the consumer-electronics business, and he criticized competitors that he said are spreading rumors about GE.
But Robinson conceded that GE`s consumer-electronics business could emerge from the repair shop as a much smaller manufacturer or as just a distributor of products made by others and sold under the GE label.
He said that other domestic TV manufacturers are suffering from the same problems besetting GE. ”It`s an industry with a profit problem, and we have a part of it,” he said.
Domestic television manufacturers are being hurt by Far East imports, severe pricing competition and excess manufacturing capacity, Robinson said.
”A lot of companies are making money on distributing (Japanese-manufactured) videocassette recorders and covering their losses in TV manufacturing,” he said.
But the corporate attitude at GE these days doesn`t suggest tolerance for businesses with profit problems.
Under the hard-driving leadership of Chairman John Welch Jr., GE has been emphasizing a core circle of 15 businesses. In an uncertain orbit about the core are businesses, including consumer electronics, that are in jeopardy of being jettisoned.
Rumors of a GE exit from consumer electronics have been circulating since at least 1977, when GE and Hitachi Ltd. of Japan announced plans for a TV manufacturing joint venture. Those plans collapsed under U.S. government antitrust objections.
The rumors have gained new currency with recent moves by GE to acquire small-screen color TVs from abroad. Speculation was intensified by a recent New York Times profile of GE in which Welch was quoted as saying that the consumer-electronics business is among several lines GE is considering selling.
Last year, GE sold its small household-appliances business to Black & Decker Manufacturing Co. for about $300 million. GE was believed to have had a 25 percent share of that market and annual sales of about $500 million.
According to several industry executives and analysts, GE has between a 6 and 10 percent share of the $5.8 billion U.S. color TV market. That would lump GE in the second-tier of producers, well behind the top-tier firms, RCA Corp. and Zenith Electronics Corp.
GE also is thought to be in the second-tier of VCR distributors. It is believed to be a bigger player in the marker for radios and other audio products.
David Altman, an analyst at Goldman, Sachs & Co., said that GE`s consumer-electronics business may have made a small profit a year ago, but that it could lose about $30 million in 1985.
”Looking at the existing portfolio of businesses GE is currently operating in, consumer electronics would stand out as one of the likely candidates for divestiture in the next few years,” Altman said.
Another analyst, who requested anonymity, was more blunt. ”GE could be out of the TV business by year-end. It might stay in audio a little longer,” the analyst said.
Robinson declined to disclose market share or results of the consumer-electronics business. He did say the business was profitable last year and denied it could lose as much as $30 million in 1985.
GE ”isn`t actively pursuing” selling the business or finding a joint-venture partner, Robinson said.
Some rivals claim that GE`s relatively high labor costs might be an obstacle to a sale. GE is expected to try to reduce those costs in coming contract talks with union employees at its Syracuse, N.Y., picture-tube plant. ”We have been working to fix the business, and we are making slow, steady progress” in reducing costs and increasing profit margins, Robinson said.
In a move to cut costs, GE announced last November it would discontinue by July production of color TV sets with screen sizes of 13-inches and below. GE will rely on Far Eastern manufacturers for those intensely price-competitive lines. They will produce the sets to GE specification, and GE will distribute them in the United States under its label.
GE said that the production cutback would reduce its work force by 570 at its U.S. plants and by 660 at its plants in Singapore and Ireland. A few weeks ago, GE laid off 1,000 workers in Singapore, citing a ”pause” in worldwide demand for TV and audio products.
A few weeks ago, GE agreed to sell idled picture-tube manufacturing equipment at its Syracuse plant to a Hong Kong trading company.
GE continues to manufacture 19-inch and 25-inch color TVs. It purchases its 40-inch set from the Far East.
One TV industry executive, who asked not to be identified, suggested that GE may be tempted to buy 19-inch TVs. If so, GE could find itself without enough volume to justify running its picture-tube plant in Syracuse or its final assembly plant in Portsmouth, Va.
”Once you start down that `sourcing` path, you fairly rapidly evolve into a distribution company,” the executive said. ”I don`t see GE dropping out as a retail brand, but it might disappear as a TV manufacturer, possibly within the next 12 months.”
Asked if GE could become just a distributor, Robinson said, ”That`s an option. I would put it in the category of still being in the business.”
He said among several other options open to GE is to become just a picture-tube manufacturer.
Rumors about GE departing the business have been a ”nuisance,” Robinson said, but have not hurt GE`s daily operations or its relations with distributors and dealers.
GE, like other big manufacturers, meets several times a year with distributors and dealers. Such manufacturers have less need to exhibit at this week`s Summer Consumer Electronics Show.
GE will have a hotel hospitality suite here to meet customers, and Robinson plans to attend the show. Asked what he would like to say to those spreading the rumors about GE, Robinson said:
”I`d say, `It`s a waste of time, the rumors aren`t true.` A rumor campaign is not the way to win. You win by having better products, better prices and better information for consumers. We`re going to win on the business basics and not on the rumors.”
