GE- General Electric, on Tuesday, finalized its division into three separate companies, marking the conclusion of the conglomerate’s 132-year history. Once a leading U.S. corporation and a symbol of American business dominance worldwide, GE’s aerospace and energy divisions commenced trading independently on the New York Stock Exchange. This move comes over a year after GE spun off its healthcare business.
Debut of GE Vernova
GE Aerospace continues to carry the GE symbol, while the energy unit, GE Vernova, entered the market with the ticker symbol GEV.
GE Aerospace shares saw a roughly 2% increase in value by mid-afternoon, while Vernova experienced a rise of approximately 5%.
Reason for the split-up
The objective was to streamline GE into a more agile entity, concentrating on sustainable expansion and profitability within its key areas of expertise. These initiatives aimed at revitalizing the company yielded positive results. Notably, GE managed to significantly reduce its debt load, witnessed a recovery in its stock price, and set the stage for its most significant transformation yet: the division into three separate entities.
The division marks the conclusion of CEO Larry Culp’s endeavors to revitalize a company that appeared to be on the brink of collapse due to poor investments and the 2008 financial crisis, which severely impacted its most lucrative arm, GE Capital, nearly leading it to bankruptcy.
When Culp assumed the role of CEO in 2018, he inherited a company grappling with meager profits and an overwhelming debt burden. GE’s stock had plummeted nearly 80% from its highs in 2000, leading to its removal from the Dow Jones Industrial Average after over a century of inclusion. The company faced significant turbulence, resulting in the dismissal of two previous CEOs within a short span of time.
Culp’s challenge to salvage the struggling conglomerate intensified when its profitable jet engine business suffered from the effects of the COVID-19 pandemic, which brought global air travel to a standstill. Nevertheless, his strategy focused on debt reduction through asset sales and enhancing cash flows by optimizing operations and trimming overhead costs, ultimately fostering a turnaround.
What does the split mean for GE?
The completion of the spilt means that GE will now trade on the NYSE under GE and GEV separately. This is also a move towards revitalization and growth.
GE Aerospace, boasting around 44,000 commercial engines and roughly 26,000 military and defense engines worldwide, reported adjusted revenue of approximately $32 billion in the previous year. The company projects an operating profit of roughly $10 billion by the year 2028.
GE’s Split History
In November 2021, GE made headlines with its announcement to split into three distinct companies, each focusing on aviation, energy, and healthcare. This decision came after the company had already divested itself of its once-iconic appliances division. Furthermore, in 2020, GE ceased the sale of light bulbs, a product it had been manufacturing since its inception in the late 19th century.
During its prime, GE’s stock soared to become one of the most coveted on Wall Street, largely under the leadership of Jack Welch, regarded as one of America’s first CEO “superstars.” Dubbed “the house that Jack built,” GE consistently surpassed its competitors and the broader market, buoyed in part by the success of GE Capital, its financial arm.
Throughout the 1990s, the company delivered impressive returns on investments, boasting a staggering 1,120.6% increase. Under Welch’s stewardship, which began in 1981, company’s revenue surged nearly fivefold, while the company’s overall value soared by 30 times.
However, signs of trouble emerged in the summer of 2001, as Welch’s tenure neared its end, with the once-dominant GE stock beginning to lose its luster.
For 132 years, General Electric (GE) had epitomized the quintessential American corporate giant. Established even before several states joined the Union, GE initially served as the commercial conduit for Thomas Edison’s groundbreaking light bulbs. Over time, it diversified into various sectors, including home appliances, television broadcasting, and even financial services. At its zenith, GE Capital, its financial arm, grew to such proportions that it was deemed “too big to fail” by the U.S. government.
However, the strain of maintaining such a vast empire eventually wore on investors. Following the departure of celebrated CEO Jack Welch in 2001, with a generous retirement package in tow, the conglomerate’s once formidable market capitalization of nearly $600 billion embarked on a steady decline, dwindling to a mere fraction of its former value. In response, the company embarked on a years-long divestment spree, shedding assets such as consumer lending, pharmaceuticals, and even NBCUniversal. Now, after years of slimming down, GE has reached a point where it can undergo a breakup, shedding its layers like a brittle twig.
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