Friday, March 25, 2005

Topic: GE Plastics -- Local management.

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Blogger jonathan said...

Possible sale of GE Plastics


The Berkshire Eagle

Wednesday, January 10, 2007

Reports that General Electric is looking to sell its plastics business are unsettling for Pittsfield, which hosts its corporate headquarters, and the Berkshires as well. It will hurt if it happens, but the city and county have survived worse, and with its more-diverse economic base, the region is better able to adjust to change than in the past.

That GE Plastics, which employs 450 people at its corporate headquarters, is even on the market attests to the overwhelming determination of GE to please its shareholders. Annual revenue at the division was up 9 percent in 2005 over the prior year's earnings to $6.6 billion, but just being profitable isn't enough anymore for corporations in general, and General Electric in particular.

While GE's overall profit rose 10 percent in the third quarter of 2006 over a year earlier, the plastics unit's profits dropped 23 percent. Increased competition, higher costs of raw material and the downturn in the automobile industry have combined to whittle down the profit margin. With GE Chairman Jeffrey R. Immelt promising shareholders that profit would grow at two to three times the nation's overall rate of economic growth, a plastics division that makes a yearly profit that doesn't achieve the level of other divisions will be perceived as disappointing.

GE certainly has an obligation to shareholders, many of whom live here in the Berkshires, but when a money-making operation goes about because it doesn't make enough money to meet projections that may be unrealistic then something is awry. This, of course, is not a situation unique to General Electric.

GE Plastics is well-respected in the industry as well as profitable in the long run, and should appeal to the private equity funds GE is thought to be shopping it to. In an Eagle story last March, plastics industry analyst and consultant Mel Schlechter described GE Plastics as "an empire," praising it for its innovation, capable work force and marketing skills. A buyer with no desire to fix what isn't broken may stand pat, and corporate headquarters could remain in the city.

Should Pittsfield lose the corporate headquarters, 450 good jobs would be lost, which affects everything from the tax base to schools to local businesses. Outside employees and vendors stay in local hotels and eat at local restaurants. Some of the 450 employees, however, may seek jobs at other local plastics companies, many of which came here because of GE Plastics, and now that they are established, will presumably stay.

A sale could play out in a number of ways. A city that saw 5,000 jobs go with the departure of GE's transformer manufacturing operation in the mid-1980s, however, has learned the hard way how to roll with the punches.

Wednesday, January 10, 2007 9:31:00 AM  

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