General Electric just became a little less general. Well, maybe more than a little. By selling off its consumer appliance business to Electrolux, the corporate giant is leaving behind its most widely recognized products and the source of its brand awareness for perhaps nine out of 10 people in this country. GE has kept its lighting division–a tiny part of their far-flung empire, and the only one that will continue to market products to consumers.
But now, its focus will be largely on the business customer, which, with one transaction, can generate more profit than the sale of a thousand washing machines. Gas-powered turbines, aircraft engines and 5,000-horsepower locomotives are where business is booming for GE. The company has rarely been tentative about shedding businesses that aren’t performing well, and buying or growing businesses that are. This summer, they agreed to buy the energy and power generation operations of the French engineering company Alstom for $17 billion. Which makes the $3.3 billion Electrolux paid for their appliance division little more than a down payment.
From a branding standpoint, though, two factors are intriguing. First, although they sold the appliance division to another company, the new owners will continue to sell products under the GE brand name. While there must be enough pages in their legal agreement to fill a refrigerator shipping carton, turning over the most recognizable part of your brand to another company seems more than a little risky.
The Sweden-based Electrolux markets appliances under their own name, and they own the Frigidaire brand and also the brands AEG and Zanussi, which are not sold in the United States. Buying GE at less than half the $8 billion price it was being offered for in 2008 is likely a bargain, and a strategic move to grow market share, spread R&D costs and compete globally. But, suppose they decide to position the GE brand as their entry-level line of appliances, at low prices and perhaps lower quality? Or maybe they end up with a series of recalls that weaken the GE appliance brand. And, of course, it could continue to be a steady success as it has been, more or less, for nearly a century, starting with a new-fangled invention dubbed the “toaster.”
Which brings me to the second factor: What kind of a crossover effect might remain between the broader brand image of GE appliances and the remaining GE conglomerate, which is concentrating its effort on industry and the business-to-business marketplace? For decades, GE has been a perfect example of a “house of brands.” That is, a company that sells a wide range of products and services under one umbrella brand name. Thus, we saw GE Appliances, GE Aviation, GE Transportation, and even GE Capital operating under a singular brand identity. Theoretically, at least, each individual brand provided value to the group.
But, it would appear that GE is actually betting on a different concept: that there is a significant distance or even a disconnect between their consumer brand, that they have handed over intact to Electrolux, and their B2B brand portfolio that they will continue to develop. After all, would an aircraft manufacturer looking to purchase a $1 million jet engine really take notice that GE dryers are on sale at Lowe’s for the unheard-of-low-price of $299? Or, that a recall for faulty wiring on a GE refrigerator would have a negative effect on a customer’s perception of a GE locomotive? Probably not.
Many partial brand transactions call for a specified transition period, such as the five-year limit set when IBM sold their personal computer business to Lenovo in 2005. (Lenovo actually phased out the IBM brand in less time than that.) Which makes GE’s apparent decision to leave the most recognizable and well-known product line of their brand in the hands of another company for an indefinite period all the more unusual. Perhaps they are counting on a general recognition by their industrial clientele that they are the “real GE,” or maybe they just don’t think anyone will really care. Despite that, deep inside GE’s corporate headquarters, somebody must have written on a whiteboard, “In Electrolux we trust,” because that is, indeed, what they are doing with their precious brand name.