General Electric will divide itself into three public companies focused on aviation, healthcare and energy.
The US company, founded in 1892, has refashioned itself in recent years from the sprawling conglomerate created by Jack Welch in the 1980s to a much smaller and focused entity.
It was heavily damaged by the financial crisis.
We are excited to announce that GE is forming three industry-leading, global public companies focused on the growth sectors of aviation, healthcare, and energy. https://t.co/DIFs2jU7O9 pic.twitter.com/O8DwrIOmF1
— General Electric (@generalelectric) November 9, 2021
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With its announcement on Tuesday that it will spin off its healthcare business in early 2023 and its energy segment including renewable energy, power and digital operations in early 2024, General Electric may have signalled the end of the conglomerate era.
“By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employee chairman and chief executive Lawrence Culp Jr said in a prepared statement.
Mr Culp will become non-executive chairman of the healthcare company.
Peter Arduini will serve as president and chief executive of GE Healthcare effective January 1 2022.
Scott Strazik will become chief executive of the combined renewable energy, power, and digital business.
Mr Culp will lead the aviation business along with John Slattery, who will remain its chief executive.
It will maintain a 19.9% stake in the healthcare unit.
Aviation is the most profitable part of GE’s business.
The company produces jet engines, aerospace systems, replacement parts and maintenance services for commercial, executive and military aircraft including fighters, bombers, tankers and helicopters.
The company has spent years undoing its massive transformation under Jack Welch, an era of unbridled growth that gave birth to sprawling conglomerate in the 1980s and 1990s.
From lightbulbs to appliances or healthcare to financial services, General Electric had a hand in it.
During the late-1990s boom, GE’s soaring stock price made it the most valuable company in the world.
GE’s revenue grew nearly fivefold during Mr Welch’s tenure, and the firm’s market capitalisation increased 30-fold.
However, the financial crises of 2007-2008 revealed the how exposed GE was to risk, particularly through its financial division.
In 2015, GE announced a radical transformation of the company, vowing to shed billions in assets to better focus on the company’s industrial core, namely power, aviation, renewable energy and healthcare. That led to some tumult in leadership.
Chief executive Jeff Immelt replaced by John Flannery in 2017, who was ousted just a year later with Mr Culp taking over and vowing a massive corporate transformation.
The company said on Tuesday that it expects operational costs of approximately two billion US dollars related to the split, which will require board approval.
The Boston company also announced on Tuesday that it expects to lower its debt by more than 75 billion US dollars by the end of the year.
Shares jumped more than 8% before the opening bell in New York.
