Split into three companies: General Electric smashes itself

Split into three companies
General Electric is smashing itself

General Electric becomes three companies: The industrial icon divides the areas of aviation, health and energy and is pushing ahead with restructuring. However, the announcement has met with mixed reactions.

The traditional US industrial giant General Electric (GE) is splitting into three separate companies. As the crisis-ridden Siemens competitor announced, the aviation, health and energy sectors are to be divided into three independent companies. All three companies should therefore be listed on the stock exchange. The highly indebted group is undertaking a new restructuring.

“Today is a defining moment for GE and we are ready,” said CEO Lawrence Culp. By splitting General Electric, each of the three companies could benefit from “greater focus, tailored capital allocation and strategic flexibility to drive long-term growth and offer customers, investors and employees more value”.

The trunk group focuses on aircraft propulsion systems

General Electric plans to start its own health division GE Healthcare, which offers medical devices and software, in early 2023. GE will hold a 19.9 percent stake in the new company. In a next step, the three previous areas of energy generation, renewable energies and digital are to be merged and outsourced at the beginning of 2024. GE supplies turbines for coal, nuclear and gas power plants and builds wind turbines.

The trunk group GE will then concentrate on the construction of aircraft engines. GE Aviation is the global leader in aircraft turbines. The announcement sparked euphoria on New York’s Wall Street. Even in pre-market electronic trading and after the start of trading, the GE share increased significantly.

Creditworthiness put to the test

Analysts were more critical. The rating agency S&P Global Ratings put the Group’s creditworthiness to the test. If the profitable GE health division were to be spun off, the group would be “less diversified,” said S&P, pointing out that the medical sector had proven to be crisis-proof in the corona pandemic. The aviation industry, on the other hand, was hit hard by the pandemic.

General Electric was founded in the late 19th century and has long been a flagship of US industry. However, the group was hit hard by the global financial crisis in 2008, among other things. As a result, there were several attempts to restructure the indebted group through sales, but also acquisitions.

The German GE rival Siemens has also relied on extensive restructuring in recent years. For example, Siemens spun off its energy division Siemens Energy last year and listed it on the stock exchange.

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