G.E. BRINGS GOOD THINGS TO LIFE: New Version of G.E.

 The current plan..is to create “a simpler, stronger and more focused company.” – Todd Horwitz, Bubba Trading.

 

General Electric Co. unveiled plans Tuesday to shed two big business units, the culmination of a drastic effort to revitalize what once was one of the U.S.’s largest and most-valuable companies. Chief Executive John Flannery, whose first year on the job saw a sharp decline in GE’s stock price, said the company would spin off its health-care division and sell its ownership stake in oil-services company Baker Hughes. The two businesses, coupled with its railroad locomotive unit that is being sold, accounted for a third of GE’s $122 billion in revenue last year.

There are no plans to sell additional divisions or break apart GE’s two biggest remaining units, which make jet engines and power turbines, said people familiar with the discussions.

G.E., once the ultimate American conglomerate and a symbol of corporate power, had endured a painful decline in recent years. Executives could not sell the struggling parts fast enough. In the past year, shares in the company have fallen by half, cutting its market value by $120 billion.

The current plan, Mr. Flannery said in a conference call with analysts, is to create “a simpler, stronger and more focused company.” Shares in the company rose on Tuesday, closing 7.7 percent higher as investors welcomed the change.

For decades, G.E. added businesses as varied as home-mortgage lending and entertainment programming with NBCUniversal. The company shed its final stake in the television network and movie studio to Comcast in 2013. The thinking was that its corps of elite managers could make all the divisions profitable, even though they were in far different sectors. Jack Welch, who led G.E. for two decades until 2001, championed that model, becoming a superstar chief executive along the way.

But the weakness of the G.E. model eventually became evident, especially when the financial crisis hit. At the time, G.E. was the largest nonbank financial institution in America, and its liabilities weighed on the industrial company.

Keep those stops tight
Todd “Bubba” Horwitz

IN ASSOCIATION WITH

Financial Markets & Political Commentary

 

Tags

, , , , , ,

Related Posts

About the author

Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.