GE Will Buy Controlling Interest in Major Hungarian Firm : Eastern Europe: The $150-million deal is the largest Western investment so far in the East Bloc. It may spark similar moves by other companies.

General Electric Co. announced Wednesday that it will make the largest Western investment to date in the newly opening economies of Eastern Europe, spending $150 million for controlling interest in a major Hungarian light-bulb company.

In one stroke, the deal will more than triple the stake of U.S. businesses in Hungary.

After the purchase is closed later this year, GE plans to spend a modest amount of money to upgrade technology at Tungsram Co., one of Hungary’s larger industrial concerns, with annual sales of $300 million. Based in Budapest, the company makes residential, automotive and industrial bulbs at 12 factories.

“This gives us a look at Europe in total, both East and West, where we hope the lines will blur over time,” said GE Chairman John F. Welch.

GE will own 50% plus one share of the company, and have an option to buy 30% more in the future.

U.S. companies have tended to lag behind those of other countries, particularly West Germany, in enthusiasm for the region. The GE deal may spark investment by other U.S. companies, suggested Donald Hasfurther, director of East-West trade at the U.S. Chamber of Commerce.

“It will lend a certain credibility and stability to the scene over there,” he said.

The deal was announced one day after Solidarity leader Lech Walesa, visiting Washington, renewed a plea for more investment in his Eastern European country, Poland. Many analysts argue that this is necessary to raise living standards in the region and further bind it on the road to political and economic reform.

U.S. Commerce Secretary Robert A. Mosbacher praised the GE deal. “U.S. private investment in Hungary is the best way for the United States to provide the capital, managerial know-how and entrepreneurial dynamism that Hungary needs to make the transition to a Western-style market economy,” he said in a statement.

Of the Eastern European countries, Hungary has led the pack in throwing open its doors to Western investment. It has offered a number of large state-owned enterprises for sale and energetically courted buyers.

“Hungary is on the way to democracy and the development of a free-enterprise system,” Tungsram President Andras Gabor said in a statement released by GE on Wednesday.

“There is no going back now, only forward,” he said. “GE’s participation in Tungsram gives us the opportunity both to grow our lighting business and to embrace this process of change.”

Welch said talks with the Hungarian authorities and owners had begun only this summer.

“They’ve been candid, open, constructive,” he said. “This has been as straightforward a negotiation as any of the global negotiations we’ve ever had.”

Welch conceded that the Hungarian company, which sells to both Eastern and Western Europe, may be threatened as the East opens up to competition. But he expressed confidence that the venture will succeed, predicting it will become a low-cost, high-quality producer in an East-West market that will increasingly merge into one. “We know this business cold,” he said, calling GE’s technology in it “world class.”

He stressed that Hungary might be carrying a greater risk, because the deal might serve as a test case of whether the liberalization policies there will work.

The U.S. Commerce Department has identified almost 30 U.S. joint ventures in Hungary that account for about $70 million in investment, not including GE’s. (Total Western investment in Hungary was about $400 million before this deal.)

The GE deal “actually triples U.S. investment in Hungary,” said Russell Johnson, the Commerce Department’s desk officer for Hungary. Among the U.S. companies now in Hungary are the McDonald’s fast-food chain, advertising company Ogilvy & Mather and bicycle maker Schwinn.