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GE Breakup Plan Ends Company’s Conglomerate Era

Bill Koenig
By Bill Koenig Senior Editor, SME Media

General Electric Co. this week unveiled plans to break itself up into three publicly traded companies. The move brings an end to the conglomerate era at GE.

GE as a conglomerate reached its apex during the reign of Jack Welch. The GE chief mixed industrial with financial services and media. Under Welch, who retired in 2001, the main guiding principle was for a GE holding to be No. 1 or No. 2 in its given business.

Welch, in turn, was hailed a superstar CEO. Executives at GE subsidiaries were often recruited for high posts at other companies.

Welch’s successors slimmed GE down a bit to concentrate on industrial businesses. For example, GE divested NBC and financial services. But GE’s portfolio still varied widely, from aerospace to healthcare, to energy.

Those days, under the plan disclosed this week, are numbered.

GE said it intends to combine GE Renewable Energy, GE Power and GE Digital into one business. That will be spun off in 2024. GE Healthcare is to be spun off in 2023. After those moves, GE will be focused on aviation.

The idea is the three separate businesses “will be better positioned to deliver long-term growth,” the company said in its announcement.

Of course, back in the Welch days, being a big conglomerate supposedly was the key to long-term growth. Things change. Welch’s successors certainly discovered that.

“The cross-industry vertical conglomerate model for public companies is now a thing of the past,” said Keith Campell, a senior partner at consulting firm West Monroe’s mergers and acquisitions practice. “GE suffered a series of issues.”

What makes this noteworthy is how GE had long been one of the largest and most powerful of U.S. companies. The company traces its lineage to Thomas Edison. More recently, Jack Welch’s tenure as chief, which began in 1981, made him a celebrity executive.

GE’s current CEO, Lawrence Culp, apparently has decided less is more.

Culp is a former CEO of industrial company Danaher Corp. He was credited with revamping Danaher into more of a science and technology concern. Culp was on GE’s board when he was tapped for the CEO post in 2018.

After three years on the job, Culp has come forward with this week’s breakup plan. It’s about as far away from Jack Welch as you can get.

“There is a reason why large corporations continually review their portfolio to determine if the current management team is maximizing enterprise value for shareholders,” said West Monroe’s Campbell. “In this case, the CEO and board determined than an energy, healthcare and aviation business were not creating synergies.”

In any event, manufacturing has a lot riding on how Culp’s plan plays out. GE remains a major player in aviation and that business has spurred developments in 3D printing. It remains to be seen how the spun-off businesses will respond to be separated from GE.

GE’s next chapter will be much different than its earlier ones.

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