GE exits slow-growth plastics business
If there was one company that I used to admire in the world of advanced materials, it was GE Plastics. In an industry plagued with commoditization, pressure from suppliers in Taiwan, China, Korea, Japan, and the Middle East, GE Plastics was able to leverage everything that makes GE a great company, and beat their competitors.
So why is General Electric Co. (GE) exiting plastics?
While many of the resins that the company makes are called by exotic and impressive names like “advanced” and “engineered,” the reality is that they had simply turned into commodities. While competing products were coming out at much lower costs, the end-users in the automotive sector were simply not willing to pay premiums for GE’s excellent design and tech support.
Why would SABIC buy it?
The higher prices of petroleum/feedstock/energy have hurt the margins even more and here the Saudis have a huge cost advantage.
What do we learn from this?
No matter how sexy a business you might have, if it doesn’t produce the desired ROI, it is time to exit. Plus, there is only so much you can do to be competitive. You may reach a point when no amount of cost-cutting or providing a “solution” matters to the customer.
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