Problem: In 1990, General Electric acquired Tungsram Ltd., a Hungarian light bulb manufacturer. Hungary's inflation rate was 28% in 1990 and 35% in 1991, while the forint (Hungary's currency) was devalued 5% and 15%, respectively, during those years. Corresponding inflation for the U.S. was 6.1% in 1990 and 3.1% in 1991.
Q1. What has happened to the competitiveness of GE's Hungarian operations during 1990 and 1991? Explain.
Q2. 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?