GE Appliances, the subsidiary of the US General Electric
Corporation, is all set to break off its Indian joint venture partnership with Godrej
& Boyce Mfg Co. It said in a statement jointly issued with Godrej & Boyce that it
is in preliminary discussions to divest its equity investment in the 40:60 joint venture,
Godrej-GE Appliances, attributing the decision to its global brand strategy "that
focuses on markets where the GE consumer brand franchise for appliances is strong".
The joint statement said GE intends to divest its stake in
the Rs 813-crore white goods manufacturing company, although it has not spelt out the
beneficiaries. Market sources feel the stake will be available to the Godrejs at a
comparatively low price as GE is virtually exiting the appliances business in India.
Scott Bayman, president of GE India, has, meanwhile,
categorically stated that GE''s other investments in India will not be affected by this
decision. "This does not in any way diminish GE''s commitment to India, where GE''s key
businesses have invested considerably in establishing a strong presence in India. We
continue to move forward on a wide variety of initiatives in India," he said.
GE has not been particularly successful with its joint
ventures in India. At least two of them, GE Apar and Countrywide Consumer Financial
Services (a GE Capital joint venture with the Housing Development Finance Corporation) had
very brief lives. This experience may have compelled the global conglomerate to rethink in
terms of setting up 100 per cent subsidiaries in India given the relaxed foreign direct
investment norms and the current regulations governing setting up of wholly-owned
subsidiaries by multinational companies.
Mr Bayman says GE has benefited immensely from its
association with the Godrej group. "The strength of the Godrej brand and the
integrity of the Godrej group are well recognised. Since its inception, Godrej-GE
Appliances has experienced growth and increased value," he said.
Jamshyd Godrej, managing director of Godrej & Boyce
Mfg Co, feels the GE decision to quit the joint venture will not cause any impact on the
company''s commitment to customers and dealers. "We will continue to access both
technology and products from around the world as well as leverage our world class
facilities and capabilities to offer products and services best suited to the aspirational
needs of our customers," he said.
Godrej-GE Appliances had a dual brand strategy, relying on
both Godrej and GE brands. Notably, there were no products that carried a Godrej-GE label.
While the Godrej brand had strengths in the refrigerator, washing machine, air-conditioner
and cooking range segments, GE added to the strength through imported ranges of
refrigerators, washing machines and dehumidifiers.
Godrej-GE Appliances has an estimated 30 per cent share of
the Indian refrigerator market. The company has an annual capacity for 1.3 million units.
It expects to launch refrigerators free of chlorofluorocarbons, or CFCs, in 1999-2000.
The company is also planning to implement the second phase
of the Ecofrig project, in collaboration with the ministry of environment and forests, and
the governments of Switzerland (through INFRAS) and Germany (through Deutsche Gesellschaft
fur Technische Zusammenarbeit). In the first phase of the project, the company has
installed a foaming facility and has selected cyclopentane for foam. In the second phase
of the project, it will finalise the non-CFC refrigerant gas.
The company intended to fund the plant
conversion through loans from the World Bank through the Industrial Development Bank of
India, and through internal accruals. The conversion is expected to be completed by
November 1999. The plant will have an annual capacity of 9 lakh units. The company will
phase out CFC products from its various facilities by 2003.
In washing machines, the company has a 12 per cent market
share, and is in the fourth position behind Videocon, BPL and Whirlpool. Its strength has
been in customer care and after-sales service.