Will GE do better as three companies than as one?
The challenges of reorganizing were significant when Charles Coffin merged three businesses into General Electric (GE) in 1893. Now, more than 130 years later, Larry Culp, the current CEO, faces the opposite task. On April 2nd, GE split into two public companies: GE Aerospace, a jet engine manufacturer, and GE Vernova, a power-generation equipment maker. In January 2023, a third company, GE Healthcare, a medical-devices firm, was spun off.
Investors are not lamenting the end of the old GE. The company’s market value was nearly $200bn on the eve of the split, and over $230bn when including GE Healthcare. This is a significant increase from the $65bn valuation in November 2018, shortly after Mr. Culp took over as CEO. Both GE and GE Healthcare have outperformed the DJIA in the past year, and their shares have fared better than most American spin-offs. Mr. Culp believes that the group could not continue as an ”all-singing, all-dancing GE”. Instead, the corporate progeny will become less general and more electric, especially amid the energy transition.
For much of its history, GE was synonymous with size. Under Jack Welch, the CEO from 1981 to 2001, it became the world’s most valuable company. However, subsequent losses at GE Capital and troubles in its core industrial businesses led to its decline. Jeff Immelt, Welch’s successor, sold off various assets but also made an ill-timed $11bn takeover of a power-and-grid business from Alstom. Now, the question remains: will GE do better as three companies than as one?
Source from www.economist.com