One of the conglomerates synonymous with American capitalism will be no more
In a recent Bloomberg Businessweek cover story, there’s a moment when General Electric $GE (GE) CEO Larry Culp is taking a tour through a factory. He and a host of executives on the tour with him are checking out a giant furnace known as a “monument.” As part of a request to build more efficiency into the company’s manufacturing processes, Culp explained that the furnace would be broken up into smaller pieces that would increase productivity.
“We like to tear down monuments,” he says.
And on Tuesday, he tore down yet another monument to American capitalism — GE itself. The conglomerate just split itself into three pieces three years after it first announced plans to do so. There will now be a jet engine company that will be called GE Aerospace and an energy company called GE Vernova (GEV) in addition to a healthcare equipment company called GE HealthCare (GEHC) that was already spun off last year. The other two began trading on their own Tuesday.
“This year’s letter is our last for GE in its current form,” Culp wrote in the note accompanying the corporation’s 2023 annual report, adding that “we are not marking the end. This is the beginning.”
The healthcare stock, which trades under the ticker “GEHC,” is up 47% since its debut, compared to 34% for the S&P in the same span. GE Aerospace (winner of the “GE” stock ticker) shares fell about 2% in Tuesday trading; GE Vernova (GEV) shares were down about 1%.
Before it broke up, GE had spent its 132 years building itself into the biggest, shiniest example of American corporate culture. (The company was actually older than America as we know it; it was founded before Utah, Oklahoma, New Mexico, Arizona, Hawaii, and Alaska joined the Union.) It started as the commercial outlet for Thomas Edison’s light bulbs, but in time added segments like washing machines, television programming, and money itself. Its GE Capital arm was so big at one point that the U.S. government named it one of a handful of so-called “too big to fail” financial companies.
But keeping together such a sprawling business empire eventually wore thin on investors. After superstar CEO Jack Welch retired (handsomely) in 2001 after 20 years in charge, the company’s nearly $600 billion market cap began a long slide to a fifth of that value. It’s spent years shedding assets like consumer lending and pharmaceuticals and NBCUniversal; now it’s lean enough to snap itself like a twig.
When Culp told shareholders back in 2021 that “by creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees,” the company’s stock shot up 15%.
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