Struggling General Electric splits into three with aviation, healthcare and energy sectors

The once-all powerful US conglomerate General Electric will be broken up into three smaller companies in a bid to streamline the struggling 120-year-old manufacturer, its CEO announced.

Founded by Thomas Edison in 1892 in Schenectady, New York, the company at its peak in 2000 was America’s most valuable company, with 333,000 employees, 150 factories in the U.S., and another 176 factories in 34 other countries.

GE made everything from toasters to jet engines, it ran film studios and sold insurance and credit cards, oil and gas, plastics and MRI machines.

Yet on Tuesday, Larry Culp, 58, who took over in October 2018, announced that the quintessential US company was being broken up and only three divisions would remain: aviation, energy and healthcare. 

GE’s stock price rose 2.65 percent on Tuesday’s announcement to $111.29 – around the same price when Culp took over. 

Larry Culp, 58, the CEO of General Electric, announced on Tuesday that the company was being split into three divisions

GE in 2000 was America’s most valuable company. The share price on Tuesday closed at $111, around the same it has been trading at since Culp took over

‘This is the best way to fully realize the potential of these businesses,’ Culp told The Wall Street Journal.

GE has already sold off most of its financial services; its locomotive and home appliances business; and its oil-and-gas business operations.

Culp said that the board began talks about the plan in the spring, believing that the struggling firm had stabilized enough to cope with the shock of being split up. 

‘We looked at this and other options,’ he said. ‘It was clear this is the right path for GE.’

GE also announced Tuesday it expects it will have paid down $75 billion in debt from its 2018 peak by the end of the year. Culp said the debt repayment has helped make the split possible. 

The first sector to leave will be the GE Healthcare division, which makes MRIs and hospital equipment, and will depart in early 2023.

GE will retain a 19.9 percent stake, Culp said, which it will sell over time.

The following year, the energy unit will split off – combining its power and renewable energy units. The renewables unit makes turbines for power plants and wind farms.

What remains will be the third sector – making and servicing jet engines – the unit that Culp will ultimately run. 

The aviation unit has been hard hit by the pandemic, and is a key supplier to Boeing.

Critics see the move as a sorry end to a once-mighty company.

Workers are seen on the assembly floor of the refrigerator division of GE at its Erie plant

Workers look through windows and monitor results in the control room of a rocket motor test pit at General Electric in around 1945

Diesel-electric locomotive cars are manufactured at the General Electric Erie Works plant in an undated photograph

A GE machine in a hospital, a CT scanner, is pictured in Hong Kong in November 2015

GE turbines are pictured in Israel, at a wind farm in the Golan Heights in May 2020

Culp has argued that it is essential. He has overseen significant cost-cutting at the company, which had 300,000 employees worldwide in 2014, but now has little over half that, with 161,000 on the payroll. 

Culp also said the move was supported by customers and investors, claiming there was a ‘clear calling there for us to move in that direction.’ 

But, he said, a decision is yet to be made on which of the three will keep the company’s GE logo, which Culp said was recently valued at $20 billion. 

‘Everybody wants to make sure they hang onto their part of the brand,’ Culp told Bloomberg Television’s show, Balance of Power With David Westin.

‘It means a tremendous amount in each one of these markets. 

‘We don’t have a definitive brand plan today. We’ll work through that as we’ll work through other questions in the months to come, but rest assured, every business will share the GE heritage.’