In 1990, General Electric acquired Tungsram Ltd., a Hungarian light bulb manufacturer. Hungary's inflation rate was 28 percent in 1990 and 35 percent in 1991, while the forint (Hungary's currency) was devalued 5 percent and 15 percent, respectively, during those years. Corresponding inflation for the U.S. was 6.1 percent in 1990 and 3.1 percent in 1991.
a. What has happened to the competitiveness of GE's Hungarian operations during 1990 and 1991? Explain.
b. In early 1992, GE announced that it would cut back its capital investment in Tungsram. What might have been the purpose of GE's publicly announced cutback?