January 15, 2021

General Electric, the clean slate of the great American company

General Electric, the clean slate of the great American company


Correspondent in New YorkUpdated:

An operation shook the markets with force last week: General Electric agreed to sell its biopharmaceutical business to Danaher. It is the most aggressive bet of your new CEO, Larry Culp, since he took charge of the business giant in October of last year. An operation of 21,400 million dollars that leaves the industrial and financial conglomerate without one of its big revenue sources in its sanitary branch, but that triggered the action of the company.

Culp came to the front of General Electric to administer a shock treatment to a legendary company, the industrial pride of the United States, which bottomed out at the end of last year. In December, its stock had plummeted 50% in the last year and its future had shadows. Culp has taken out the scissors to stabilize the company's income statement, in a divestment process that includes the sale of part of the company's stake in the oil services companies Baker Hughes and the merger of its transportation business with Wabtec .

These decisions have not marked the history of General Electric, a company that dominated the United States. based on conquering and leading markets. It was born in the late nineteenth century, the product of a brilliant invention – the bulb of Thomas Alva Edison – and the gift of the great operations of John Pierpont Morgan, the great financier of the time, who orchestrated the merger in 1892 of Edison General Electric and Thomson-Houston Electric Company to create General Electric. General Electric's ambition to grow beyond the bulb was not long in coming. It expanded to the tram, to the machinery of the trains, it was a pioneer in the business of the radio (RCA) and of the television (NBC) and its innovations in household appliances changed the face to the American homes.

During World War II, it became a key supplier of machinery and technology to the army. The Allied triumph and the US political and economic domination in the postwar era it meant the definitive launch of General Electric in almost all fields of human activity: airplane engines, medical equipment, computers, mining technology, energy production and even in the film industry the company flooded the economy with its products.

Giant among giants

At its height, just at the close of the twentieth century, the so-called "American Century", in August 2000, was the largest US company. It was valued at 600,000 million dollars, employed 350,000 people, operated 150 factories in the United States. and another 176 in 34 countries and distributed dividends to 600,000 sharestas.

Much of its expansion in the last two decades of the twentieth century featured Jack Welch, one of its emblematic executives. He directed the company with an iron fist: he required the directors of each division to fire 10% of the lowest-performing employees each year and look for new businesses with the same ease with which he got rid of those that did not work.

Much of that growth was supported by GE Capital, the financial arm of the conglomerate, which at that point of the company represented half of its profits. The retirement of Welch, the impact on its insurance and aviation business of 11S, wrong operations and, above all, the financial crisis of 2008 caused the gradual collapse of the company, accelerated since the summer of 2017, with a sustained drop in the action.

"You can see that the situation has begun to change," Culp said this week in an interview with "Bloomberg" after a recovery of the action in the annual. "We can focus a little more on the attack, and less on the defense."

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