The Rise and Fall of General Electric (GE)

In mid-2018, when the General Electric Company (GE) ended its more-than-100-year run as a component of the Dow Jones Industrial Average (DJIA), it was the last remaining original part of the index. The change merely confirmed what everyone knew. Growing out of one of the first electric companies under Thomas Edison in the late 19th century into a Jack Welch-led multinational, buying up RCA (and with it, the NBC television network), and soaring with GE Capital into the 21st, GE was now much diminished. Continuing to see its profitability flag as a multi-industry conglomerate, GE split itself up in 2024.

If successful, the spinoff into three companies, GE HealthCare, GE Aerospace, and GE Vernova (energy), would enable each to focus on its core strengths and growth opportunities. But what happened to a corporate giant that once defined what it meant to be an American corporate colossus? Below, we take a closer look at the rise and fall of a company central to American industry and corporate culture. 

1892: GE and the Birth of American Innovation

When most Americans think “GE,” they probably think about light bulbs, televisions, and washing machines. GE was born out of the race to provide affordable light and electricity to fuel the growth of industrial America. It quickly became a household name after incorporating in 1892 as a result of a merger between the Thomson-Houston Company and Thomas Edison's Edison General Electric Company.

GE’s earliest products were incandescent light bulbs, an electric locomotive, X-ray machines, and an electric stove. The company began mass-producing electric home appliances in the 1920s and was among the companies credited for changing the look and function of the American home.

In the decades that followed, GE helped create vacuum tube technology, which enabled the subsequent development of radar tracking systems. GE supplied the military with equipment and executives during World War II, and in 1949 launched the popular J-47 jet engine.

1981: 'Neutron Jack' Welch Takes Over

In two decades, beginning in 1981 under former chemical engineer Jack Welch, GE acquired RCA and NBC and expanded into the financial services sector. During his first four years as chief executive, Welch aggressively moved to streamline GE, divesting 117 business units and slashing more than a quarter of the company's jobs. The job cuts earned him the sobriquet Neutron Jack, a nickname suggesting that, like a neutron weapon, GE's people were eliminated while sparing its physical assets.

Welch pioneered the practice of annually firing the 10% of the employees with the lowest ratings on internal reviews, which has since been adopted at times by other companies, including Amazon.com (AMZN). His use of aggressive financial targets to assess executive performance, according to critics, led to a focus on short-term results by GE executives. The company became widely known for "managing" its reported earnings: adjusting its accounting to repeatedly beat Wall Street's consensus earnings estimates by $0.01 per share quarter in its heyday.

As GE's share price rose, Welch was celebrated in the business press, and his managerial strategies were widely copied. The company's market capitalization increased from around $14 billion to more than $410 billion in 2000 at the end of Welch's tenure.

GE's market capitalization, however, proved to be based on overly optimistic assessments of the sustainability of GE's earnings and the value of GE's financial assets. Jeffrey R. Immelt, Welch's chosen successor, continued the aggressive shuffling of businesses Welch popularized but never managed to arrest the stock's descent.

In 2004, GE settled a U.S. Securities and Exchange Commission (SEC) probe that concluded the company didn't correctly disclose Welch's retirement benefits, valued at $2.5 million annually, and included the unrestricted use of a corporate jet and a multimillion-dollar New York City residence.

Five years later, GE paid a $50 million penalty to settle a wide-ranging SEC accounting probe that alleged the company "used improper accounting methods to increase its reported earnings or revenues and avoid reporting negative financial results." The SEC cited four such instances in 2002-2003. In 2020, GE paid $200 million to settle SEC allegations it misled investors about the underlying profitability of its long-term health care and power units in 2016-2017.

2008: GE in Crisis

The 2008 financial crisis hit GE hard, with its stock dropping 42% that year. GE had been clearly overstretched and bloated in the eight years since Welch’s departure. Losses by the GE Capital financial segment nearly sank the company during the Great Recession.

Warren Buffett stepped in with a preferred investment, lending his reputation to GE’s operations, but at a price. GE’s troubles didn’t end with the financial crisis. Many considered its $9.5 billion purchase of French transportation company Alstom’s power business in 2015 a flop. Among them was GE CEO John L. Flannery, who said, "If we can go back in a time machine today, we would pay a substantially lower price than we paid. There's no doubt about that."

Under Immelt, previously head of GE Medical Systems, the company reduced the size of GE Capital and returned to its roots in manufacturing. GE also divested billions of dollars in loans and real estate while selling off NBCUniversal, GE Plastics, GE Water, and GE Appliances.

In 2009, the company slashed its yearly dividend from $1.24 to $0.82 per share. Dividends fell even further in 2010. Immelt served as CEO of General Electric for 16 years and stepped down earlier than expected in 2017. He was later chair at Athenahealth.

2017-2019: GE Tries to Weather the Storm

As GE commemorated its 125^th anniversary in 2017, there was little to celebrate. In January 2017, the company announced it would cut 12,000 jobs, and the stock fell 45% over the course of the year. In November 2017, GE unveiled a broad restructuring and halved its quarterly dividend from 24 cents to 12 cents a share. In December 2018, the company cut the dividend to 1 cent per share.

In November and December 2017, GE laid off thousands of employees across all divisions. On Oct. 1, 2018, G H. Lawrence Culp replaced John Flannery as chair and CEO.

Culp aggressively reduced GE's debt and divested unwanted stakes and subsidiaries, including GE's stake in oil field services company Baker Hughes and the transportation unit, which merged with Wabtec. Both divestitures raised significant capital, and the share price rose 53% in 2019.

2020: COVID-19 Impact

The arrival of the pandemic cut short the rebound in GE's share price. On May 15, 2020, the stock fell to $43.92, a 28-year low.

GE's aviation unit was especially hit hard. The business segment makes airplane engines for Boeing (BA) and Airbus, and had been GE's most profitable unit. For example, in 2019, the aircraft engines business generated $32.9 billion in revenue, more than 34% of GE's total. Amid pandemic travel curbs, demand for aircraft engines and related maintenance plummeted. GE's aviation unit laid off 10% of its U.S. workforce in March 2020.

Post-COVID Restructuring

GE shares rose nearly 10% in 2021 amid a tentative global recovery. In March of that year, the company announced a deal merging its GE Capital Aviation Services aircraft leasing unit with AerCap Holdings. The transaction was completed in November, netting about $23 billion in cash and a 46% stake in the combined business. In December 2021, GE's health care unit completed a $1.45 billion acquisition of ultrasound technology developer BK Medical.

In 2023, GE announced plans to invest over $450 million in its existing U.S. manufacturing facilities. The company also had solid revenue growth, about 20%, for GE Aerospace in 2022.

2024: GE Splits into Three

In November 2021, GE said it planned to split into three independent public companies: one comprising the company's aviation business, one the medical equipment unit, and the third the power and energy business. In April 2024, GE officially broke up into three separate companies, marking the end of the industrial giant. Each newly independent company from GE's aviation, energy, and health care sectors is poised to focus more intensely on their specific markets. The move was driven by CEO Larry Culp's efforts to streamline operations.

The split of GE into independent entities had profound implications. It's not merely a reshaping of a legendary conglomerate but a reflection of a strategic shift in the corporate world toward specialization.

GE Aerospace

GE's aviation business provides jet engines and related services to major aircraft manufacturers like Boeing and Airbus. As a stand-alone company, GE Aerospace will continue focusing on designing, manufacturing, and servicing commercial and military aircraft engines.

The new company is expected to benefit from the surge in demand for aftermarket services because of jet delivery delays that still linger from the pandemic and troubles facing newer Boeing aircraft, forcing airlines to fly older planes for longer periods. After the spinoff, GE Aerospace retained the original "GE" stock ticker symbol and had a market value of over $168 billion.

GE Vernova (Energy)

GE's energy business, now known as GE Vernova (GEV), includes products and services related to power generation, renewable energy, and digital products for the energy sector. GE Vernova manufactures energy products, including wind, gas, and steam turbines, energy storage, and grid technologies.

GE HealthCare

GE's health care business was spun off earlier than the other two segments, becoming an independent company in 2023. GE HealthCare (GEHC) produces medical imaging, monitoring, and diagnostic equipment, and provides services for these products.

The Bottom Line

Despite GE’s well-publicized decline, it remains a force in its three main business sectors, employing hundreds of thousands of people worldwide. However, its former size didn't work in GE's favor. GE peaked in 2000, just as Jack Welch was retiring, and would never again match its stock price that year. In 2024, the company split into three, each focusing on a particular industry: aerospace, energy, and health care.