The victory in the US confirmed Ericsson’s presence in the country, but future success could not be expected to come automatically. The company had to mark out its determination to become a long-term participant in the US. One of its major customers, for instance, McCaw Cellular, clearly indicated that it would like to be able to describe ERA as an American company.
Ericsson decided to contact General Electric, which had for a long time been manufacturing terrestrial mobile radio and the handsets that went with them, although this was not a major operation for the company. The president of General Electric at the time was the legendary Jack Welch.
Johansson recalls: “Welch’s philosophy was that his company should be number one or two in each market. General Electric had for a long time been manufacturing mobile terrestrial radio and the accompanying handsets, but this was not of major commercial importance for the company. On the other hand it was interesting for us to see if we could take over this aspect of GE’s operations and develop it.”
Negotiations with General Electric, led by Johansson, took just under a year.
Lars Ramqvist describes how in practice the partnership with General Electric was decided on April 18, 1989. He was in Madrid, where Welch called him.
JOINT US COMPANY
“We reached agreement on the conditions for our joint US telecom systems company. One important issue for Ericsson was a majority holding in the company. GE had hesitated for as long as possible but during the telephone call, Welch said: ‘Lars, since Ericsson is a one-product company, I’ll give you the majority share. This is the first time and this is an exception since the GE policy is to always be in a majority position’. Ericsson acquired 60 percent and GE was to leave the company after ten years.”
The outcome was, in other words, a joint venture, Ericsson-GE Mobile Communications, and General Electric’s manufacturing plant at Lynchburg in Virginia was taken over by the new company.
An important shift of focus came with the decision that the management of ERA’s research and development activities for mobile telephony was to be transferred to the US. Lynchburg was the location, but Nils Rydbeck was eager to ensure that development should be linked to a university setting. “The expertise required had increased enormously in only 10–15 years. When I started at SRA in 1976, we were recruiting engineers with high-school qualifications but now we were frequently looking for staff with PhDs,” he says.
Johansson, who had led the negotiations and been the driving force in the GE efforts, would not have been surprised if he had been asked to be CEO of the American company, but he was not even offered a place on its board. The two places for Ericsson were occupied by Lars Ramqvist and CFO C.W. Ros.
Welch had earlier asked Ramqvist to get rid of all the lawyers as he felt they were only delaying the deal. “In retrospect I would say that they probably did a good job. The contract was a thick one, with hundreds of pages, but we never had to refer to it. What we had to take into account was that GE wanted to see new people running it,” recalls Ramqvist, who now learned people “at the very top” welcomed Ericsson as “an American company”.
Author: Svenolof Karlsson & Anders Lugn