General Electric As We Knew It Is No More

Just over 20 years ago, there was no company more admired than General Electric, a business that dates its origins to Thomas Edison. It was the largest company by market capitalization, its executives were routinely recruited to run other companies and its CEO, Jack Welch, was enjoying a reputation as blunt-speaking business guru.

In the years since, GE has been in steady decline, at first slowly, then irreversibly. The business world’s attention moved from manufacturing to the internet, and the empire Welch constructed turned out to be erected on a foundation of sand. Its market cap is now $91 billion, down from nearly $600 billion in 2001, and is now ranked just 143rd in the world.

Welch’s GE will effectively end today, Jan. 4, when the company spins off GE Healthcare as a separate company. The final blow will come in 2024, when GE Vernova—a collection of its energy businesses— is spun off, leaving GE Aerospace as the remaining company.

The breakup of General Electric may have been inevitable. There are few industrial conglomerates remaining in the U.S., as investors tend to prefer their companies confined within one sector, where it’s easier to compare them to peers. But it was surely hastened by decades of poor management and short-term decision making, starting with Welch’s embrace of GE’s financial arm as a driver of growth. Free of the regulatory requirements that burdened banks, GE branched out from lending to the companies that bought its locomotives and power plants into insurance and consumer finance. By 2004, its financial units were generating $83 billion in annual revenue, more than its energy, healthcare and transportation businesses—combined.

It was a great time to be a GE shareholder until the music stopped, which it did in 2008 during the financial crisis. Suddenly, the bets on finance made by Welch and his successor Jeff Immelt looked precarious, and the company began to take on water. Immelt, who unloaded GE’s appliances business and ownership of NBC, made matters worse by taking on debt to buy French power company Alstom for $10.6 billion. Few things went right, and Immelt was replaced first by John Flannery, who lasted less than two years, then Larry Culp, the architect of the breakup plan.

GE, and its successor companies, still makes lots of useful things. From jet engines, MRI machines, to wind turbines, it still has useful things to sell. What it can no longer sell, however, is its image of America’s invincible corporation.