The Plan

Corporate icon GE breaks into three, underscoring the decline of OG conglomerates

GE becomes G3… General Electric  is the 129-year-old electricity giant founded by Thomas Edison, who invented the commercial light bulb. Over the years GE expanded to produce everything from microwaves to financial products, becoming the world’s most valuable company by 2000. But GE’s biz has declined since then. Now it’s worth less than a quarter of what it was 20 years ago. The plan:Yesterday GE said it would split into three smaller public companies to allow more focused growth. Shares jumped 5% on the news.

• Aviation: GE’s aviation biz, which makes jet engines for Boeing and brought in $22B in sales last year, will keep the GE name.
• Healthcare: GE Healthcare, which makes MRI and other medical machines, and earned $17B last year, will spin off as a new biz 2023.
• Energy: GE’s power, renewables, and digital divisions — which contributed $33B in revenue last year — will spin off in 2024.

The light bulbs went out… but GE isn’t done yet. It pioneered the conglomerate model: It developed disciplined management practices in one industry — manufacturing — and applied them to others: insurance, finance, TV. But as industries grew more complex, they required more specialized leadership, and the old-school conglomerate model fell apart. So GE faced pressure from investors to “deconglomeratize:”

• Selloff: In the past six years, GE sold off its finance, appliance, lighting, and train businesses, which has put it on track to pay off $75B in debt by year’s end.
• Fresh start: GE’s new companies will have industry-specific boards and execs, which could attract investors eager to invest in big wind turbines but not MRI machines.

Contributor: Robinhood