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The traditional American company General Electric, which after growing into a sprawling conglomerate struggled under its own weight, will split up into three listed companies with a focus on aerospace, healthcare and energy.
GE has spent the past few years breaking up the empire founded by Jack Welch in the 1980s. It has been badly damaged by the financial crisis, particularly the company’s finance division, which was wound up earlier this year.
The company has already outsourced many of the products most Americans are familiar with, including its home appliances and last year, as well as the lightbulbs it has made since the company was founded in the late 19th century.
When General Electric announced on Tuesday that it would spin off its healthcare business in early 2023 and its energy segments including renewables, power and digital operations in early 2024, it could have signaled the end of the conglomerate era.
The company hopes to achieve more centralized growth and profit by splitting into three companies with completely different goals and directions.
“By creating three industry-leading global public companies, each can benefit from greater concentration, tailored capital allocation and strategic flexibility to deliver long-term growth and value for customers, investors and employees,” said Chairman and CEO Lawrence Culp Jr. said in a prepared statement Tuesday.
Culp becomes the non-executive chairman of the healthcare company, with GE retaining a 19.9% stake in the unit. Peter Arduini will become President and CEO of GE Healthcare on January 1, 2022. Scott Strazik will become CEO of the combined renewable energy, power and digital business. Culp will co-lead the aviation business with John Slattery, who remains its CEO.
In 2015, years after the financial crisis revealed its vulnerability, GE announced a radical transformation with a plan to mine billions in assets to better serve the company’s industrial core – power, aviation, renewables, and healthcare focus.
Two years later, Jeff Immelt, who had headed the company for Jack Welch since 2001, was replaced by John Flannery. While it had spun off its equipment division the previous year, Flannery was replaced in just one year by Culp, who envisioned a completely different, smaller and more stable GE.
Culp reached a major milestone earlier this year in a $ 30 billion deal to merge GE’s aircraft leasing business with Ireland’s AerCap Holdings. Since the agreement drove GE Capital Aviation Services into a separate business, Culp essentially closed the books of GE Capital, the financial wing of General Electric that brought down almost the entire company during the 2008 financial crisis.
That marked a turnaround this year, at least for investors. The long-suffering General Electric Co. stock began to rebound. Shares are up 33% this year, outperforming the S&P 500.
GE stock was once one of the most sought-after on Wall Street, consistently outperforming competitors and the broader market. In the 1990s, he achieved a return of 1,120.6% under Welch. Revenues grew nearly five times and the company’s market capitalization increased 30 times during Welch’s tenure.
But the stock began to lag in the summer of 2001, in the dwindling days of Welch’s reign. Then the financial crisis struck and hit the company’s financial wing, GE Capital. The company’s stock lost 80% of its value from early 2008 through the first few months of 2009.
On Tuesday, GE shares rose 6% to a new year high.
The company announced Tuesday that it expects operating costs of approximately $ 2 billion related to the split, which will require board approval.
The Boston-based company also announced Tuesday that it would cut its debt by more than $ 75 billion by the end of the year.
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