Trystan Casey
General Electric (GE), once a global symbol of American business power, has seen its stock fluctuate significantly over the years. In 2017, the company announced job cuts and a restructuring plan, causing its stock to fall by 45%. GE's stock had also been on a downward trajectory since 2000, falling nearly 80% from its highs that year. In 2024, GE completed a three-way split, dividing into three independent companies: GE HealthCare, GE Aerospace, and GE Vernova. This move was aimed at turning the company around and allowing each entity to focus on its core strengths in the healthcare, aerospace, and energy industries. The breakup seemed to be successful, with GE Aerospace shares up about 2% and Vernova rising about 5% in mid-afternoon trading on its debut.
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What You'll Learn
GE's three-way split into GE HealthCare, GE Aerospace, and GE Vernova
General Electric (GE) has been on a decline since its peak in 2000, when Jack Welch retired. The company has struggled with weak profits, a mountain of debt, and a decline in its lucrative jet engine business due to the coronavirus pandemic.
In 2024, GE completed its transition to split into three separate publicly traded companies: GE HealthCare, GE Aerospace, and GE Vernova. This marked the end of the 132-year-old conglomerate, which was once the most valuable U.S. corporation and a global symbol of American business power. GE HealthCare was the first to be spun off in 2023, followed by GE Aerospace and GE Vernova in 2024.
GE HealthCare trades under the "GEHC" ticker and has gained about 57% in value since it started trading. GE Aerospace, which retained the "GE" ticker, focuses on aviation technology and is the largest division of the former conglomerate in terms of revenue. Analysts estimate its market value at more than $100 billion, benefiting from a surge in demand for aftermarket services due to delays by Boeing and Airbus. GE Vernova, the energy unit, trades under the "GEV" ticker and debuted with a 5% rise.
The three-way split is part of CEO Larry Culp's efforts to turn around the company, which was struggling due to bad investments and the 2008 financial crisis. Culp focused on paying off debt, improving cash flows, and streamlining operations to usher in a recovery. The split allows each company to focus on its core strengths and growth opportunities in the healthcare, aerospace, and energy sectors.
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GE's decline from its peak in 2000
General Electric (GE), once a corporate giant, has been on a decline since its peak in 2000. In 2024, the company split into three independent companies, specialising in aerospace, energy, and healthcare. This marked the end of the 132-year-old conglomerate, which was once the most valuable US corporation.
So, what led to GE's decline from its peak in 2000? Firstly, GE's success in 2000 was largely attributed to its CEO at the time, Jack Welch, who led the company for 20 years and was considered the greatest CEO in American history. Welch transformed GE into a diversified stock market winner, with a market capitalization of over $410 billion in 2000. However, critics argued that Welch instilled a focus on short-term performance and aggressive financial targets, which may have contributed to GE's subsequent struggles.
Following Welch's retirement in 2000, his successor, Jeff Immelt, faced significant challenges. The 9/11 attacks occurred during his early days in office, followed by the Great Recession in 2008 which severely impacted GE's financial services division, GE Capital. Despite warnings, Immelt failed to address the issues within GE Capital, and the company's overreliance on this division to stabilize quarterly performance became a major risk factor.
Additionally, GE's decline was accelerated by the 2008 financial crisis, which nearly bankrupted its most profitable business, GE Capital. The company also faced scrutiny and criticism for its business model, with concerns about its accounting practices and the creation of toxic waste. By 2018, GE's stock had fallen nearly 80% from its highs in 2000, and the company was struggling with weak profits and mounting debt. This prompted aggressive cost-cutting measures, including job cuts and dividend reductions, to improve cash flows and pay off debt.
In summary, GE's decline from its peak in 2000 was a combination of leadership challenges, economic disruptions, overreliance on GE Capital, and scrutiny of its business model and practices. The company's struggle to adapt and address these issues led to a significant decline in its stock price and market position over the years.
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GE's jet engine business suffering during the pandemic
General Electric (GE), once a global symbol of American business power, has seen a decline in its jet engine business during the COVID-19 pandemic. The pandemic dealt a severe blow to GE's lucrative jet engine business as global air travel was significantly impacted. With airline departures down from pre-pandemic levels, GE Aviation faced challenges, although it was not stagnant in its response.
The company's aviation business, including GE Capital Aviation Services (GECAS), which leases aircraft to airlines, encountered strong headwinds due to airlines' cash conservation, grounded planes, reduced maintenance spending, and deferred orders. However, GE Aviation's military engine business remained strong, with unit growth up 10% year over year.
To navigate the crisis, GECAS implemented a strategic plan to extend the lifespan of large jets by converting them into freighters. Additionally, they closely monitored the situation through a daily operational dashboard, allowing them to proactively identify areas of repossessing or restructuring exposure.
Despite the challenges, GE Aerospace, the aviation business post-split, is estimated to have a market value of over $100 billion. This is due to a surge in demand for aftermarket services as jet delivery delays force airlines to extend the use of older planes. GE Aerospace's focus on advancing aircraft engine technologies and collaboration within the industry further contribute to its positive outlook.
The pandemic's impact on GE's jet engine business highlights the vulnerability of the aviation industry to global events and the subsequent ability to adapt and recover.
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GE's debt and weak profits in 2018
General Electric (GE) has a long history, dating back to its founding by Thomas Edison in 1892. However, by 2018, the company was facing significant challenges, including weak profits and mounting debt.
In 2018, GE's new CEO, Lawrence Culp, took over and inherited a company struggling with weak profits and a large debt burden. The company's stock had fallen nearly 80% from its highs in 2000, and it had lost its spot in the Dow Jones Industrial Average after more than a century. GE's debt was a significant concern, with its credit rating downgraded to just three steps above junk status, and its bonds trading at junk bond levels. The company's leverage ratio, a measure of its debt balance, was extremely elevated at 5x, roughly three times the industrial average.
Several factors contributed to GE's weak profits in 2018. One key issue was the poor performance of its power segment, which had become very unprofitable due to operational issues and low profitability. In 2015, GE acquired Alstom's energy business for €12.4 billion, but this acquisition negatively impacted the segment's profitability, dragging the EBITDA margin down to just 3.5% in 2018. The oil and gas segment also faced challenges, with GE acquiring Baker Hughes at a time when the company's oil and gas business was struggling and oil prices were declining. This acquisition led to a decrease in the division's EBITDA margin from 21% in 2015 to 9% in 2018.
Inappropriate acquisitions and a soft management approach have been cited as primary reasons for GE's underperformance over the last decade, including the period in 2018. The delay in exiting the GE Capital business also played a role in the company's weak profits and mounting debt.
To address the debt and weak profits, Culp focused on paying off debt by selling assets and improving cash flows. He aggressively reduced GE's debt, divesting unwanted stakes and subsidiaries, including the company's stake in Baker Hughes and the transportation unit. These divestitures raised significant capital, and by streamlining operations and cutting overhead costs, Culp ushered in a recovery for GE.
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GE's stock price and performance on the New York Stock Exchange
General Electric (GE) has had a tumultuous history on the stock market, rising to become one of the most valuable US corporations and a global symbol of American business power, before experiencing a sharp decline.
In 2000, the year of CEO Jack Welch's retirement, GE's stock price peaked. However, the company's size worked against it, and it would never again attain the stock price heights of 2000. In 2017, GE's stock fell by 45% after the company announced it would cut 12,000 jobs. The company also halved its quarterly dividend and, in 2018, laid off thousands more employees.
GE's struggles continued into the 2020s, with the company weighed down by weak profits and significant debt. Its stock had fallen by nearly 80% from its highs in 2000, and it lost its spot in the Dow Jones Industrial Average. The COVID-19 pandemic further impacted GE's jet engine business. However, under the leadership of Larry Culp, who became CEO in 2018, GE aggressively reduced its debt and divested unwanted stakes and subsidiaries.
In 2024, GE completed a three-way split, breaking off from its past as a conglomerate. The aerospace and energy businesses, GE Aerospace and GE Vernova, began trading on the New York Stock Exchange as separate entities, while GE had previously spun off its healthcare business, GE Healthcare, in 2022. The breakup marked the end of the 132-year-old company as it was once known, allowing each new company to focus on its core strengths and growth opportunities in the aerospace, energy, and healthcare industries.
On its debut, GE Vernova's stock rose by about 5%, while GE Aerospace's shares were up about 2%. Analysts estimate the market value of GE Aerospace at over $100 billion after the spinoff, benefiting from increased demand for aftermarket services due to jet delivery delays.
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Frequently asked questions
General Electric is a company that was formed in 1892 when famed inventor Thomas Alva Edison merged Edison General Electric Co with a rival.
GE's stock fell nearly 80% from its highs in 2000 and lost its spot in the Dow Jones Industrial Average after over a century. In 2017, the stock fell 45% over the course of the year.
GE's decline has been attributed to a focus on short-term performance and financial engineering, bad investments, and the 2008 financial crisis. In addition, the company's lucrative jet engine business suffered during the coronavirus pandemic as global air travel came to a halt.
In 2024, GE completed a three-way split, breaking off from its past as a conglomerate. The company is now divided into three independent companies: GE HealthCare, GE Aerospace, and GE Vernova (energy). GE Aerospace shares were up about 2% at mid-afternoon on its launch day, while Vernova rose about 5%.
