Umair Gaines
General Electric, once America's iconic company, has been struggling under its own weight for years. The company has been making changes to simplify its business, such as selling non-core assets and reducing debt. In 2024, General Electric completed its breakup into three independent, investment-grade industry-leading companies: GE Vernova, GE Aerospace, and GE Healthcare. GE's aviation unit, its most profitable, will keep the General Electric name and ticker symbol. With the completion of this split, is General Electric going out of business?
| Characteristics | Values |
|---|---|
| Date of breakup | April 2, 2024 |
| Number of companies | Three |
| Names of companies | GE Aerospace, GE HealthCare (GEHC), and GE Vernova |
| Focus areas | Aviation, healthcare, and energy |
| Stock price | $100.00 per share |
| NYSE ticker symbols | GEV (GE Vernova) and GE (GE Aerospace) |
| Debt reduction | More than $75 billion |
| Market cap growth | $100 billion |
| Free cash flow | Quadrupled since 2018 |
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What You'll Learn
GE's financial woes
General Electric (GE) has been struggling under its own weight after growing to become a sprawling conglomerate. The company's financial woes can be traced back to the 2008 financial crisis, which nearly bankrupted its most profitable business, GE Capital. In addition, the company's expansion was spurred by the success of GE Capital, and when it was regulated, it could no longer be profitable as it became much more expensive than its competitors.
GE's aviation unit, its most profitable business, was also affected by the coronavirus pandemic as global air travel came to a halt. The company's shares lost 80% of their value from the start of 2008 to the first few months of 2009 and have only recently begun to recover.
In 2018, GE's CEO, Lawrence Culp, Jr., took over and began to simplify the business by selling non-core assets and exiting GE Capital to reduce the company's debt. Under Culp's leadership, GE has slashed more than $100 billion in debt and quadrupled its free cash flow. The company's market cap has grown by about $100 billion to $192 billion.
On February 29, 2024, GE's Board of Directors approved the spin-off of GE Vernova and GE Aerospace, marking the end of the 132-year-old conglomerate. GE Aerospace, a world-leading provider of jet engines and systems for commercial and military aircraft, retained the GE symbol. The energy unit, GE Vernova, made its debut under the ticker symbol GEV and rose about 5% on its first day of trading.
The breakup of GE into three independent, investment-grade industry leaders is a historic step in the multi-year transformation of the company.
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The role of CEO Lawrence Culp Jr
Henry Lawrence "Larry" Culp, Jr., born in March 1963, is an American business executive. He is the chairman and CEO of General Electric, as well as the CEO of GE Aerospace. He is the first outsider to run GE in the company's 126-year history.
Culp has played a crucial role in turning around General Electric, which was struggling with weak profits and a significant amount of debt when he took over in 2018. He has focused on paying off debt by selling assets and improving cash flows by streamlining operations and reducing overhead costs, leading to a successful recovery. Since 2018, GE has slashed over $100 billion in debt and quadrupled its free cash flow. Its market cap has increased by about $100 billion to $192 billion.
On April 2, 2024, Culp oversaw the completion of GE's breakup into three independent, investment-grade industry leaders: GE Vernova, GE Aerospace, and the previously spun-off healthcare business. This marked the end of the 132-year-old conglomerate that was once the most valuable U.S. corporation.
Culp has championed a lean business philosophy, emphasizing customer value and driving improvements in safety, quality, delivery, and cost. He has also created nearly 30 profit and loss statements to increase operational visibility. His efforts have been recognized by investors and analysts, who consistently rank him as one of the top CEOs in annual institutional investor surveys.
In addition to his role at GE, Culp has held various positions at other companies. He previously worked at Pall Corporation and Danaher Corporation, where he rose to the position of CEO from 2001 to 2014. He also served as a senior lecturer at Harvard Business School, focusing on leadership, strategy, and general management in MBA and executive education programs.
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GE's aviation business
General Electric (GE) has a long history in the aviation business, dating back to the 1900s. In 1903, they hired Sanford Alexander Moss, who initiated the development of turbosuperchargers at GE. Over the next ten years, this led to a series of record-breaking flights. By the years immediately preceding World War II, turbosuperchargers had become standard equipment on almost all military aircraft.
The development of the J47 engine, which was in high demand for military aircraft, led to the opening of a second manufacturing facility in Evendale, Ohio. The J47 was followed by the J73 and the much more powerful J79, which was GE's second major success. The J79 and the F-104 Mach 2 fighter aircraft earned GE and Lockheed the 1958 Collier Trophy for outstanding technical achievement in aviation.
GE Aviation's engine, the GEnx, is used to power Boeing's new 787. The engine was also the exclusive power plant on the Boeing 747-8. GE Aviation has manufacturing facilities in several locations across the United States, including Lynn, Massachusetts, Evendale, Ohio, Durham, North Carolina, and others.
In April 2024, GE Aviation, now known as GE Aerospace, became the only remaining business line of the former General Electric conglomerate, after it had completed the divestiture of GE HealthCare and GE Vernova. GE Aerospace is a world-leading provider of jet engines, components, and systems for commercial and military aircraft, with a global service network. It has an installed base of over 44,000 commercial and 26,000 military aircraft engines.
GE Aerospace shares were up about 2% in mid-afternoon trading on April 2, 2024, when the company completed its split into three independent companies, marking the end of the 132-year-old conglomerate.
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$8.39 $26.95
GE's healthcare business
General Electric (GE) has recently undergone a significant restructuring process, spinning off its healthcare business as part of a three-way split. GE Healthcare has a long history, dating back to the Victor Electric Company, founded in 1893. Over the years, GE Healthcare has evolved and expanded through various acquisitions and investments, becoming a leading global medical technology and digital solutions innovator.
GE Healthcare provides intelligent devices, advanced analytics, and artificial intelligence solutions to the healthcare industry. With its Edison intelligence platform, GE Healthcare enables clinicians to make faster and more informed decisions, ultimately improving patient outcomes. The company has a strong focus on precision health and digitizing healthcare, aiming to drive productivity and enhance the patient experience.
GE Healthcare's products and services cover a wide range of medical specialties, including cardiology, pulmonology, gastroenterology, and maternal infant care. They have also supported events such as the Brighton marathon in the UK, providing equipment to monitor and treat patients. Additionally, GE Healthcare has been actively involved in research and development, building a research reactor for neutron and unit cell research in Germany, which is currently the only one of its kind in operation.
GE Healthcare was incorporated in 1994, and it has continued to grow and adapt to meet the evolving needs of the healthcare industry. The recent spin-off from GE marks a new chapter for the company, allowing it to operate as an independent entity and continue its legacy of innovation and patient-centric care.
While there has been a recent focus on GE's restructuring and spin-offs, there is no indication that GE or its healthcare business is going out of business. On the contrary, the spin-off of GE Healthcare is intended to position the company for future success and growth in the healthcare industry.
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GE's energy business
On April 2, 2024, General Electric (GE) completed its breakup into three independent, publicly traded companies: GE Vernova, GE Aerospace, and GE Healthcare. GE Vernova, which began trading on the New York Stock Exchange (NYSE) under the ticker symbol "GEV", is a purpose-built global energy company that includes Power, Wind, and Electrification businesses.
GE Vernova's technology base includes approximately 57,000 wind turbines and 7,000 gas turbines, which help generate approximately 25% of the world's electricity. The company aims to accelerate the transition to more reliable, affordable, and sustainable energy while helping its customers power economies and deliver electricity that improves the quality of life.
GE Vernova is committed to reducing the carbon intensity of the world's power systems and achieving carbon neutrality in its facilities and operations. With a diverse portfolio of leading technologies and a global presence in about 100 countries, the company is well-positioned to lead the energy transition and shape a more sustainable future.
The spin-off of GE Vernova and GE Aerospace was part of CEO Larry Culp's efforts to transform and save the conglomerate, which had been struggling with weak profits, debt, and the impact of the coronavirus pandemic on its jet engine business. Culp's focus on debt reduction, streamlining operations, and improving cash flows contributed to a significant financial recovery, paving the way for the successful launch of the three independent companies.
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Frequently asked questions
No, but the company has undergone a restructuring process. On April 2, 2024, General Electric completed its breakup into three independent, investment-grade, industry-leading companies: GE Vernova, GE Aerospace, and GE Healthcare.
General Electric's decision to restructure was driven by a need to simplify the business, reduce debt, and improve operational focus and accountability. The company had accumulated a substantial amount of debt, and its lucrative jet engine business was impacted by the coronavirus pandemic.
GE Vernova is a global energy company focused on the energy transition, including electrification and decarbonization efforts. GE Aerospace is a world-leading provider of jet engines, components, and systems for commercial and military aircraft. GE Healthcare, which was spun off in 2023, focuses on health technology.
The decision to split General Electric into three companies was well-received by Wall Street analysts and investors. The stock price reacted positively, and the breakup is expected to create shareholder value by reducing the conglomerate discount on GE shares.
