GE Plastics & Sabic: What It MeansGE Plastics & Sabic: What It Means

GE’s high-profile, yet highly cyclical plastics business will be bought by Saudi Basic Industries (SABIC) for a price close to $11 billion, according to Bloomberg.com and the Wall Street Journal. I have a few thoughts on this based on my 30+ years experience writing about plastics and other materials:

1) I think it’s a great move for design engineers who may have been concerned about loss of innovation from GE Plastics. Two reasons: a- Sabic is a cash machine. I visited its first plastics plants in the al Jubail region in 1988 when they were just opening. Each was built with no holds barred. Everything was first class down to the decorations in the lobby. Investment in plastics R&D will be off the charts. I liked Jeff Immelt when he ran the plastics business around 1990, but the Wall Street beast isn’t well suited for the plastics business, b) I expect Sabic will build some production facilities for its engineering plastics business on the Persian Gulf. Sabic will provide gas at virtually the cost of production, as it did for its al Jubail plants. Look for more price competitiveness on those engineering plastics that operate more like commodities, such as ABS and some polycarbonate.

2) I won’t be surprised to see a heavy turnover of management at GE Plastics. I’m sure execs will be offered significant retention bonuses to stay a year. But that will be it. These are GE people. They became managers at GE because they loved the culture that Jack Welch created. Working for Saudis is a different deal, particularly for women who may not be enthused about how women are treated in Saudi Arabia. GE Plastics people have been in denial about a potential sale since it was first reported. In fact, they even dismissed reports in the Wall Street Journal and Bloomberg as “rumors”. The Saudis are not the type to come in and empty the executive suites. Just the opposite. They have proven themselves to be effective and solid managers at Sabic. Just the same, I sense dramatic change.

3) What’s really important about GE Plastics is its culture of innovation and leadership. GE Plastics has not been afraid to take big chances to pursue exciting opportunities in plastics. The Chevy Volt comes to mind. They missed a few bets, like the giant plastics show house in Pittsfield, MA. But we need that kind of risk-taking and leadership. I think Sabic will keep the innovation flags flying.