There was a time, at the turn of the century, when General Electric (GE) was the world’s largest capitalization, worth nearly 600 billion dollars (nearly 557 billion euros). Today it weighs four times less – 153 billion dollars – and is now beyond the fiftieth place in the United States in terms of stock market valuation.
In a few years, the conglomerate, founded in 1892 by the technological genius Thomas Edison (1847-1931) and built by Jack Welch (1935-2020), a managerial brute made a hero in the 1980s, became a single-product company, refocused on aircraft engines under the name GE Aerospace. In 2023, it listed its health division, General Electric HealthCare, specializing in medical imaging. And, this April 2, the transformation is completed with the introduction on Wall Street of its division dedicated to renewable energies, GE Vernova. These two companies are worth respectively 41 and 37 billion dollars on the stock market.
Four decades ago, GE was the exception that proves the rule: that of a diversified conglomerate with high performance on the stock market. Usually, such behemoths suffer a discount, with investors valuing unrelated businesses at different multiples and not trusting their management to run them smoothly. Unless the activities are complementary, and unless the boss is a genius.
From boilers to media
The man who presided over the destiny of the American group from 1981 to 2001 was considered as such at the time: Jack Welch constituted a conglomerate with major financial strength: GE Finance. He cut costs, sold a lot and bought everything, notably media, with NBC in 1986. Under his reign, the valuation of the group increased from 12 to a maximum of 594 billion dollars. GE is then considered a real management school, and its managers believe that they can touch everything, from nuclear boilers to the media to finance because they think they are the best.
Jack Welsh’s less successful successors continued on the same path, buying, for example, in 2002, the wind activities of Enron after its bankruptcy. Then came the financial crash of 2008, which revealed that the king was naked: without its financial income, GE made no money, with industrial activities generating very little cash. The giant must call billionaire Warren Buffett to its aid. It is the beginning of a great slide, which culminates in 2018 with the supreme humiliation: after more than a century of presence, GE, which only weighs 115 billion dollars, is kicked out of the Dow index Jones of the thirty main American capitalizations.
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