General Electric, once a dominant manufacturing conglomerate, said Tuesday it will divide its business into three public companies focused on aviation, health care, and energy.
The move comes three years after chairman and chief executive Larry Culp took the helm of the company in an effort to turn it around after GE failed to recover from the financial crisis of 2008.
“Today is a defining moment for GE, and we are ready,” Culp said in a prepared statement. “By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees.”
GE said it plans to spin off its health care business in early 2023 and its energy segment — which will combine its renewable energy, power, and digital businesses — in early 2024, ending its era as a conglomerate. That will leave GE with an aviation business that has its largest footprint in Massachusetts, where the company operates a jet engine plant in Lynn.
After the second spinoff, GE said, Culp will lead the aviation business; John Slattery remains its chief executive for now. GE’s stock was up 6.5 percent at at $114.85 when the markets opened on Tuesday.
Culp said GE is splitting its businesses from a position of strength. But in a call with investors Tuesday, he said the company is still “managing through significant challenges,” because of supply chain disruptions and a decline in onshore wind turbine sales due to a potential tax credit extension in the US.
At the end of last year, GE employed about 56,000 people in the US and 3,200 in Massachusetts.
Founded in 1892, GE became a conglomerate that once played a big role in electricity, appliances, radio, and television. Under CEO Jack Welch, during the late-1990s boom into 2000, GE became the most valuable company in the world, worth more than $600 billion.
But the company was hit hard during the financial crisis of 2008, and never fully recovered from the recession, in large part because of its financial division, GE Capital. For the past six years the company has been shedding businesses to focus on its industrial roots. In a milestone for GE’s transformation, Culp announced in March a $30-billion-plus divestiture of its aircraft leasing business, which made up most of GE Capital’s revenue last year.
Down to four manufacturing businesses, GE today is worth about $120 billion. Becoming a simpler, more focused company is progress that Culp said “positioned us to play offense.”
He said part of the the reasoning behind dividing the company into three firms came down to a question he asks company leaders at their annual strategic meeting: “What game are we playing and how do we win?”
Aviation is the most profitable part of GE’s business. The company produces jet engines, aerospace systems, replacement parts and maintenance services for commercial, executive, and military aircraft including fighters, bombers, tankers and helicopters.
GE’s health care arm will spin off with BK Medical, a firm it acquired in September for $1.45 billion to strengthen its position in the market beyond diagnostics and move into surgical and therapeutic products. GE will maintain a 19.9 percent stake in its health care unit, and Culp will become its non-executive chairman.
Peter Arduini will serve as president and chief executive of GE Healthcare effective January 1, 2022. The company announced in June that the division’s current president, Kieran Murphy, would retire at the end of the year.
Scott Strazik will become chief executive of GE’s combined renewable energy, power, and digital business. GE said Tuesday that it expects operational costs of approximately $2 billion related to the split, which will require board approval.
Material from Bloomberg was used in this report.