GE’s Plastics Unit on the Market
By Larry Rulison, Times Union, Albany, N.Y.
Jan. 20–SELKIRK — After months of denials and silence, General Electric Co. confirmed Friday that it is selling its struggling plastics unit, which employs 530 people at a factory in Selkirk.
GE made the announcement early Friday morning when it released its quarterly and year-end financial results.
The company, which sold off its plant in Waterford last month, reported $20.8 billion in earnings for 2006 on sales of $163.4 billion, both increases over 2005.
Locally, the sale of GE Plastics is the biggest news. The plant, located in the town of Bethlehem, has been in operation for 40 years and pays nearly $650,000 in annual town and school taxes.
At its headquarters in Pittsfield, Mass., GE Plastics employs 420 people, and it has operations around the United States and the world with thousands of workers.
Bethlehem Town Supervisor Theresa Egan was called about the news by GE officials Thursday, and was assured there would be no layoffs.
“I was very happy to talk to them,” she said. “They seemed very upbeat about it.”
If GE Plastics is sold, it will further shrink company employment in the Capital Region, where its historical roots lie.
In December, the GE Silicones factory in Waterford, which employs 1,000 people, was sold as part of a $3.8 billion deal with the private equity firm Apollo Management L.P. That factory continues to operate under the same management team with a new name, Momentive Performance Materials Inc.
GE also employs 1,900 people at the Global Research Center in Niskayuna and 3,200 at GE Energy in Schenectady, two locations where GE corporate has been making significant investments as it seeks high-growth businesses, especially energy, medical and security technology.
During a conference call with analysts Friday, GE CEO Jeff Immelt continued to bemoan the plastics unit, which had $674 million in profit last year, down 22 percent from 2005. One of the problems is the high cost of benzene, a material used in making plastics.
“I think it’s a world-class franchise,” Immelt said. “We just couldn’t add enough value to be successful.”
GE Plastics spokesman Chris Tessier said a buyer is expected by the second quarter, with a closing by the end of the year. Analysts believe private equity firms or chemical companies such as Dow Chemical Co. or BASF AG could be potential bidders.
George Leveille, director of economic development and planning for Bethlehem, said the GE sale shows just how important it is for the town to diversify its tax base.
“We will certainly keep our eye on things, and hopefully a buyer will emerge who will continue to invest in the facility,” he said. “To be sure, the plant is an important part of our tax base and we need to do everything in our power to retain it.”
On Friday, GE also said it is restating financial results for 2001 through 2005 and the first three quarters of 2006 to adjust accounting for interest rate swaps in part of its financial services commercial paper program.
Shares (NYSE: GE) fell $1.05, or 2.76 percent, to close Friday at $36.95.
The Associated Press contributed to this report.
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