Struggling for Survival, US GE Ultimately Divides into Three Companies as Last-Ditch Effort (Comprehensive)

[Asia Economy Reporter Yujin Cho] General Electric (GE) of the United States will split into three independent companies focusing on aviation, energy, and healthcare, and embark on independent management. As sales continue to plummet and debt reduction reaches its limit, the company has taken a last-ditch effort amid concerns that its very survival could be threatened.

According to the Wall Street Journal (WSJ) and others on the 9th (local time), GE announced that it will gradually separate and list its energy & power and healthcare business units by early 2024. The aviation business unit, which will remain as the surviving entity, will retain the name "GE" and plans to hold a 19.9% stake in the healthcare unit.

Lawrence Culp Jr., GE's Chief Executive Officer (CEO), will lead the aviation division while serving as the non-executive chairman of the healthcare division. In a press release on the same day, CEO Culp explained the reason for the spin-off, stating, "By establishing three leading global companies in the industry, we will gain higher operational focus, strategic flexibility, and advantageous capital utilization."

WSJ evaluated this split decision as the culmination of company-wide restructuring efforts that have been ongoing since 2018. GE, founded in 1892 by Edison as an electric consumer goods business, expanded into almost every field that could be powered by electricity, including home appliances, medical devices, aircraft and automobile engines, nuclear fuel, and nuclear power plants, growing into the world's largest manufacturer.

Having entered the financial industry early in 1932 and expanding its business tentacles with subsidiaries like GE Capital, GE grew its business based on an aggressive expansion strategy. However, it suffered irrecoverable losses in its capital business, which was its financial lifeline, due to the subprime mortgage crisis, and has been undergoing intensive restructuring since 2018.

Culp, who led life sciences company Danaher, was appointed in 2018 as the first external CEO in GE's history, taking on the role of a firefighter. He focused on simplifying the business structure by selling or spinning off various business units.

When Culp was first appointed as GE CEO, the GE board was pursuing a plan to spin off the healthcare division as a separate company and conduct an initial public offering (IPO), but Culp postponed this, stating he would "return to the basics of operations."

Foreign media analyzed that this corporate split decision is a self-help measure to simplify the business structure, reduce debt, and restore performance and the collapsed stock price.

GE aims to reduce its total debt to around $95 billion by 2023. However, GE's energy division has continued to post losses, with an operating loss of $4.6 billion last year, exacerbating its financial difficulties.

According to financial information provider FactSet, since 2009, GE's stock price has fallen by an average of 2% annually, contrasting with the S&P 500 index, which rose by an average of 9% annually during the same period. GE's revenue, which exceeded $180 billion in 2008, plunged to $79.6 billion last year, a drop of more than half.

The stock market responded positively to the split decision. After the announcement, GE shares listed on the New York Stock Exchange surged up to 17% in pre-market trading before narrowing gains to around 6% after the market opened.

Wells Fargo stated, "Although one-time costs will occur due to this move, the three separated companies could improve profitability through agile business operations."

This content was produced with the assistance of AI translation services.