Everything is ‘on the table’ at embattled GE, CEO says
General Electric is weighing a breakup of the iconic conglomerate familiar to generations of Americans for everything from home appliances to insurance, health care and more.
GE CEO John Flannery on Tuesday told Wall Street analysts in a special conference call the embattled company is considering a range of possibilities — including separately traded assets for some of the company’s units.
The assessment came as GE said it would take a $6.2 billion after-tax charge to address problems with its insurance subsidiary, a hit that will be reflected in the company’s upcoming earnings report for the fourth quarter.
Shares of the Boston-based company fell almost 3% Tuesday, closing at $18.21. Since President Trump’s inauguration through last week, shares of GE stock fell 40%.
Flannery, who was named former CEO Jeff Immelt’s successor in June, said everything is “on the table.”
“We are looking aggressively at the best structure or structures for our portfolio to maximize the potential of our businesses, continue to deliver outstanding products and services to our customers, enhance our ability to provide attractive opportunities for our employees while maximizing value for our shareholders,” Flannery said.
Flannery said the company would report further details in the spring.
GE traces its history to the 1892 merger of companies founded and led by electrical pioneer and inventor Thomas Edison and rival Charles Coffin. Over the years, GE grew into a manufacturing and financial services giant as it acquired other companies and launched new subsidiaries. Much of that growth was quarterbacked by former CEO Jack Welch.
As a result, millions of U.S. homes have GE stoves, refrigerators or other appliances. And many companies have gotten commercial lending and leasing services via GE Capital, the company’s financial services unit. However, GE’s corporate integration of its home appliances, jet engines, health care technology, power generation and financial services at times proved unwieldy.
In December, GE announced plans to cut 12,000 power division jobs as the company grappled with a decline in business for coal and natural gas products. That followed dismantling plans for the bulk of the GE Capital business Immelt announced in 2015 amid a $26.5 billion sale of its factories, commercial loans and apartment complexes.
The slimmed-down unit’s insurance portfolio was the focus of GE’s latest financial problem. The company exited most of the insurance business from 2004 to 2006 but decided to keep current books of insurance-related business based on the view that “a gradual runoff would yield the better economic result,” Flannery said. “In hindsight, we underappreciated the risk in this book.”