General Electric (GE), it’s over. The American company announced Tuesday, November 9, that it would split into three separate listed entities, one specializing in aircraft engines, the second in energy and the third in health. Thus is played the epilogue of an American legend: GE, it is the firm founded by Thomas Edison in 1892 which prospered on the fairy electricity.
It is the ultra-powerful conglomerate developed at the end of the XXe century by its legendary boss Jack Welch: in 2000, General Electric had become the largest market capitalization on the planet, valued at 594 billion dollars (512 billion euros). Welch belied the stock market adage that told companies not to turn into a sluggish conglomerate, but to refocus on a single profession.
It worked because this boss was a brute, who slashed the activities not growing enough and always moved forward, developing a powerful financial arm with GE Capital. This strategy did not survive him long, after his departure in 2001. Under its chairman Jeffrey Immelt, who will remain until 2017, the firm took the full brunt of the 2008 financial crisis and shed its financial activities. It hesitated and embarked on costly acquisitions, in particular that of Alstom in France, in 2015, for 12 billion euros, when the gas market was at its highest.
Drastic deleveraging
In June 2018, the firm, by dint of being dismantled, weighed only $ 115 billion on the stock market: it was excluded from the Dow Jones index, of which it had been a part when it was created in 1896. Four months more late, new turmoil, the boss of GE John Flannery is sacked after only fourteen months in power, while the stock market has halved in one year, while a provision of 20 billion dollars has been spent on his unfortunate acquisitions including Alstom. He is replaced by an outside personality, Larry Culp.
The latter is pursuing a debt reduction strategy but hopes to avoid dismantling by organizing the refocusing of the group on its high-growth businesses (healthcare, aircraft engines, turbines), without losing its health. He drastically reduced the group’s debt, for example selling the aircraft leasing activities for $ 30 billion. This was not enough, the stock market valuation of the group continuing to be disappointing (around $ 120 billion, with an action down 20% in ten years and which has stagnated since the arrival of Mr. Culp).
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