Dec. 21, 2004
GE-Honeywell merger affects more than avionics.

While it is commonly accepted that the combination of General Electric Co.'s jet engine business with Honeywell International Inc.'s avionics business was the driving force behind the company's proposed merger, other GE business units also will benefit from the marriage. GE Appliances and GE Plastics both are expected to get a boost from the $42 billion merger. GE Appliances stands to gain from the integration of Honeywell's lead in residential controls. Honeywell announced extensive plans in late 1999 to extend its reach deeper into its customers' personal lives by giving them greater convenience and -- through an innovative, Internet-based business -- the coordination of home heating, air conditioning, and ventilation controls and general household controls with appliances. Honeywell's original plan was to enable heating or air conditioning, lights, and music to turn on or off (or kept at maintenance levels when no one is home) so that your home would be warm and comforting when you arrive. With the addition of GE's appliances, it is easy to see how Honeywell's original plans could be optimized to arrange the operations of clothes washers and dryers and dishwashers to have them run at the most economical times of day or kitchen appliances coordinated to have home-cooked meals prepared for your arrival. By integrating GE Appliances, Honeywell's plans will gain efficiencies derived from having all of the components -- controls, appliances, and wiring -- produced, delivered, and installed by one unit of GE. Honeywell's plans for an Internet-based business in which it would monitor homes to provide maintenance and services when needed also would benefit from a marriage with GE. Honeywell planned an Internet-based system that would, for example, monitor tanks used to store home-heating oil. The monitor would notify the local oil company when the heating oil needed to be replenished and the oil company would send out a truck to top-off the tank. GE's depth of experience in Internet communications and its existing systems for coordinating sales and service make the coordination of Honeywell's Internet plans a no-brainer. In plastics, Honeywell's line of nylon resins completes GE Plastics broad line of engineering thermoplastic materials. Nylon was the one engineering plastic that GE Plastics did not provide. Through the former AlliedSignal Plastics, Honeywell is one of the world's leading producers of nylon. Engineering plastics are the man-made substances that have replaced glass in bullet-proof enclosures and steel in automobile parts. They are the high-strength, light-weight materials that car bumpers, compact discs, cell phones, and spacecraft are made from. Nylon is one of the most common engineering thermoplastics, and one of the fastest growing. For example: Nylon is being used more frequently in the auto industry to replace metal in car engines because it can withstand high heat and corrosive environments while improving vehicle performance. Nylon engine manifolds help boost gas mileage for a variety of reasons while keeping engine noise to minimal levels, and they are cheaper to produce than cast-iron or steel-engine manifolds. Honeywell is the second largest producer of nylon in North America, but its business was limited because nylon was the company's sole engineering plastic material. Combining it with GE's other products solves that problem. GE maintains a strategy of being No. 1 or No. 2 in the markets for each of its sector, and the addition of Honeywell's nylon will put GE Plastics' in a category of its own. No other company in the world will offer customers the wide range of engineering materials that it will.

Bruce Vernyi writes for BridgeNews.

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