General Electric separates | The Economist


PMAYBE THE most notable feature of General Electric (GE) over its 129-year history has been how well it reflects the dominant characteristics of large American corporations. Most of its history has been a chronicle of tumultuous expansion, then globalization, followed by painful restructuring away from the now unloved conglomerate model. On November 9, Lawrence Culp, its managing director, announced that GE would divide its remaining operations into three public companies.

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Each of these entities will be large, essential and very modern. We will make jet engines, which GE estimates already power two-thirds of all commercial flights. Its electricity business will supply the systems and turbines generating a third of the world’s electricity. The healthcare division will continue to be the backbone of modern hospitals. Yet he talks to GEremarkable role that it is a modest scope given its past sprawl. From the end of the 19th to the end of the 20th century, his products lit up the dark streets; provided the toasters, fans, refrigerators and televisions (as well as the stations passed to them), which transformed homes; delivered the locomotives that towed the trains; then built a huge business by funding all of that and more.

The ambition to be everything was enabled by the perception that she could handle anything. The 21st century has disturbed this perception. Jack Welch, an acquisitive CEO known to be a management genius, retired in 2001 after receiving a staggering $ 417 million severance pay. Ever better results during his tenure won over investors and pushed up the share price. But problems soon arose. The structure that Welch left behind was actually bailed out during the financial crisis. Losses at GE Capital, the sprawling financial unit he encouraged, has been blamed, although the industrial core of the company also turned out to have many problems.

The last few years have been spent spitting up one notable business after another. The timing of the breakup announcement was determined by the sale of a large aircraft finance unit. The transaction reduced debt enough to provide the three soon-to-be independent companies with an investment grade credit rating. Mr. Culp, boss of the firm since 2018, speaks of the “illusory benefits of synergy” to be exchanged for the definite benefits of concentration. “A more specific goal attracts and motivates people,” he says.

After touting his us management, it now appears that mismanagement is what made it for a GE. The competition to replace Welch was widely seen as pitting the world’s best leaders against each other, with the losers being hired to run other big companies. But his successors struggled. Welch’s handpicked replacement Jeffrey Immelt retired under a cloud in 2017. John Flannery, once considered a wizard behind the rise of the healthcare division, took over but was fired after a little over a year. Mr. Culp was brought in from outside, a step last taken in the 19th century.

For much of Welch’s tenure and its immediate aftermath GE was the most valued company in the world, peaking at nearly five times its current $ 121 billion. It is tempting to conclude that GEThe failure of ‘illustrates the demise of the conglomerate. This is refuted by the diversification of today’s most valued companies: tech companies that have diversified into driverless cars, cloud computing, etc. Rather, GES history reflects how imperfect even America’s most valuable companies can be, and if flaws do appear, they can be completely transformed.

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This article appeared in the Business section of the print edition under the headline “Not So General”

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