Saudi Firm Buys GE Plastics
May 22, 2007

General Electric announced Monday it plans to sell its plastics division, a large supplier to the automotive industry, for $11.6 billion to Saudi Basic Industries Corp., the largest public company in Saudi Arabia.

Heightened competition and increasing price pressures prompted GE to put the plastics division, in its portfolio since 1930, up for sale. Sabic was an obvious buyer with its vast supplies of low-cost Saudi Arabia petroleum at its disposal for making plastics.

GE Plastics, with operations in Detroit, has made news in recent months for its lightweight materials that could change the way car body parts are made in the future.

Getting the Weight Out

Getting weight out is critical as automakers move toward more fuel-efficient and alternative-powered vehicles. To that end, GE Plastics has been testing new ways to mold thermoplastics for large surfaces, such as hoods.

Thermoplastics typically can’t meet structural requirements for large, horizontal panels like hoods so that automakers must use either heavy steel or other types of plastic. But GE Plastics plans to bring to market a thermoplastic, manufactured in a new way, for commercial use. So far it has been demonstrated only on concept cars.

The Chevrolet Volt, General Motors’ plug-in hybrid unveiled at January’s Detroit auto show, uses GE Plastics’ thermoplastics on nearly every exterior part, except for the glass, and many interior parts. By teaming with GE Plastic, GM said it cut 60 pounds from the low-slung hybrid.

Hyundai's QarmaQ concept, unveiled at the Geneva auto show in March, was a joint project with GE Plastics. It uses plastics in place of glass and steel in many areas, including the windshield, the top, the front end and the steering wheel.

The new material took 132 pounds out of the car, which helps lower fuel consumption significantly. The car can be recycled the equivalent of 900 plastic pop bottles.

GE Plastics: A Rich and Storied Heritage

GE Plastics was established in 1930. A decade later, it was the nation’s largest plastics producer. In another decade, it developed a high-strength plastic, branded as Lexan, that remains a big seller today for bulletproof glass, water bottles and Apple iPods. Astronauts Neil Armstrong and Buzz Aldrin wore Lexan visors for their moonwalk. GE’s famous chairman, Jack Welch, rose through the GE ranks via the plastics division.

GE Plastics has 11,000 employees in 20 countries. It has automotive operations in the Detroit suburbs that employ 1,000 people. Those employees will be divided up between the lighting division that stays with GE and the plastics division that goes with Sabic.

GE: Pressure Too Intense

GE’s sale of the plastics division to the Saudi company, including its price, had been anticipated. The deal will be sealed in the third quarter.

GE put the division in play due to increased competition and price increases of raw materials that squeezed profit margins. In 2006, the plastics division, which also supplies electronics and appliances, reported $6.6 billion in revenue, even with the previous year. Profits fell 22 percent to $674 million.

The Saudi Advantage

Sabic, the new Saudi owner, likely can make a go of GE Plastics. It has access to low-cost materials through Saudi Arabia’s vast petroleum supplies.

Saudi money for investment also is in abundant supply. Sabic beat out U.S. private equity firms and a Dutch plastics company in the bidding.

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