General Electric is "getting out of the banking business," said Rob Cox at Reuters. It's a major corporate transformation, designed to "return GE to its industrial roots" — manufacturing jet engines, oil drills, and washing machines. Though GE Capital, the brainchild of former CEO Jack Welch, was a cash cow throughout much of the s and s, and remains the seventh-largest financial firm in the U. To understand this "landmark in American capitalism" — one of the most dramatic shifts in GE's year history — "you have to start with Jack," said The Economist.
As GE's CEO from to , Welch turned the company "into a closet bank," providing tens of billions of dollars in business loans, credit cards, and mortgages each year without much regulatory oversight. For years, that made Welch, already a corporate guru, "look like a visionary. He later accepted the position of chair at Athenahealth. The General Electric Company commemorated its th anniversary in But there was little to celebrate.
In November , GE announced plans for a broad restructuring and halved its quarterly dividend from 24 cents to 12 cents a share. In December , the company cut dividends to as low as they could go, to 1 cent a share. In that same month in , GE laid off thousands of employees across all divisions in the country. The company's stock fell by 3. On Oct. This was the latest in a series of measures that GE undertook in order to boost its financials.
Market analysts threw Culp a bone on Dec. Culp made significant improvements to the firm and helped turn it around slightly. He also sold off stakes and subsidiaries that were no longer core to the GE model. GE's stake in Baker Hughes, an oil field services company, was divested, and Culp sold off the transportation unit into Wabtec. Both moves raised significant capital for GE. Despite doing an admirable job in turning GE around, Culp has been hit like everyone else from the financial disaster that the COVID pandemic has caused.
GE's aviation unit was specifically impacted; a unit that is crucial to the company's profitability. With travel having been ground to a halt during the pandemic, airplane companies weren't ordering new planes or plane parts. Things began to look better for GE in , though. Profit margins began recovering, and free cash flow became positive again.
As of , GE consists of four segments: aviation, healthcare, power, and renewable energy. Though struggling over the past few years, GE has shown signs of improvement through non-essential business sell-offs and a reduction in debt.
It is a company doing business in over countries with nearly , employees worldwide. None of these factors should be taken lightly when looking at its prospects. On the downside, the market impact from the COVID has thrown a wrench in the company's profitability and possibly its future.
General Electric certainly isn't out of the running yet, but there's work to be done if it's ever to regain its footing as the quintessential U. GE Investor Relations. The Motley Fool.
Company Profiles. Top Stocks. Investing Essentials. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. And with the new month, GE has launched a bidding process for much of what remains.
Though GE initially indicated that it anticipates to close the majority of its financial assets sale by , the market for purchase of their assets is looking good and they now expect to complete majority of this process in Global Large Cap U.
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