BOSTON — General Electric announced Tuesday it plans to break itself up, forming three separate companies that each can focus on their own strengths and efficiencies.
The GE Power business, which has a major presence in Schenectady, would be spun off as a new company, as would the Healthcare business, leaving only the Aviation business to carry on as “General Electric,” one of the most storied names in American industry.
All three would be independent, publicly traded companies. Shareholder approval for the plan is not required, and there would be no tax liability to shareholders as a result of the move.
GE has a few thousand employees in the Capital Region, most at the sprawling GE Power campus in Schenectady and Rotterdam or the hilltop headquarters of GE Research in Niskayuna. A much smaller number work at a Healthcare imaging factory in North Greenbush. The company doesn’t release specific numbers for its facilities, which number about 20 in New York state.
The Schenectady/Rotterdam and North Greenbush sites both would be part of the spinoffs under the plan outlined Tuesday. GE Research would remain part of the new General Electric, a spokesman said.
The spokesman also said no impact on employees is anticipated at any Capital Region facility, at least two of which have seen a significant number of job cuts in recent years.
The spinoff plan announced Tuesday morning is a continuation of a long-running divestiture and streamlining process the money-losing company has undertaken as it tried to survive financial problems that reached a crisis point in recent years.
The electrical company formed by Thomas Edison in 1892 bloomed into a conglomerate that made everything from washing machines and jet engines to locomotives and MRI imaging equipment.
One of those new business lines, finance, lifted GE to unprecedented heights and made it the most valuable company in the world for a time, but underlying problems within GE Capital came home to roost during the Great Recession and its aftermath. This crisis, and more recently the COVID pandemic, have resulted in profound changes at the company.
GE Aviation, which will become the new GE, was General Electric’s most profitable business before the pandemic and the company has high expectations for its future.
In a call with industry analysts Tuesday, GE CEO H. Lawrence Culp Jr. pitched the plan as a defining moment in the company’s history, a continuation of years of reorganization by him and his predecessors. He expects to spend about $2 billion on the spinoff process, plus about $500 million for resulting taxes.
News of the breakup was received well if not exuberantly. Many analysts quoted in the financial media had a positive take on it, with at least one calling it the path to the future for other conglomerates.
GE’s stock hit a 52-week high during trading Tuesday but settled down and closed up only 2.65% higher in much heavier than average trading. The Nasdaq index as a whole closed 0.6% lower in average trading.
IUE-CWA Local 301, the union representing GE production workers in Schenectady, is looking for ways to boost production locally after the spinoff — which is essentially the same quest it has been on for years, without lasting success.
“We’re really hoping for the best for Schenectady and that we can get more jobs in here,” Business Agent Chris DePoalo said Tuesday.
But he said the company’s plans aren’t clear to him at this point.
“I don’t even know what we’re going to be named,” he said of the GE Power spinoff, which has no name at this early point.
Local 301 once organized tens of thousands of GE workers in the Electric City. It’s down to 800, just 600 of them at the GE plant in Schenectady.
The union has recently been pushing for new production lines in Schenectady, particularly for wind power turbines.
That will continue.
“We’re down here still fighting left and right for work,” DePoalo said.
What happens with the GE spinoffs in the Capital Region is unclear because so much about GE’s future is unknown or even unknowable at this point.
Healthcare isn’t scheduled to be spun off until early 2023 and the combination of GE Power, GE Renewable Energy and GE Digital is scheduled to spin off in early 2024.
Until they are spun off, they remain part of a company that is scrambling to cut costs and boost revenue and has revised its strategy repeatedly. Just three years ago, GE’s big new comeback plan was to retain Power, Aviation and Renewable Energy as its three core businesses and divest itself of other business.
After the two spinoffs are completed, the newly independent companies must devise their own business plans and must make those strategies succeed. Whatever GE predicts or expects today may have little or no impact on those decisions.
A GE spokesman Tuesday told The Daily Gazette that there are no anticipated job cuts in the Capital Region. Some other responses to questions from The Gazette:
- There’s no plan to remove the towering GENERAL ELECTRIC sign from Building 37, at the foot of Erie Boulevard in Schenectady.
- There’s no indication what the new name will be for the GE Power spinoff — which presumably will own and occupy Building 37 — but it won’t be “General Electric.”
- GE Research in Niskayuna will remain part of General Electric; the specific details of GE Research’s interaction with former GE businesses are not known at this early point.
- The GE pension plan is funded and secure; its obligations will be distributed among the businesses, and all employees will retain their accrued benefits.
GE remains an important part of the Capital Region economy, but Schenectady’s days as a company town are gone.
GE long ago moved its headquarters out of Schenectady, and more recently stopped calling Schenectady the headquarters for GE Power.
General Electric’s workforce at the Schenectady/Rotterdam campus has dropped roughly 90% in the last 50 years, and its Niskayuna workforce has shrunk by an undisclosed but lesser percentage.
Globally, the company dropped from 295,000 employees in 2020 to 174,000 in 2016, or 41%, through a combination of cuts and business sales. The four-year decrease was even greater within U.S. borders: 46%.
The domestic slide is even greater over time: The company placed its U.S. payroll in December 2020 at 56,000; IUE-CWA placed GE’s domestic workforce at 277,000 in 1989.
But the company is still a key piece of the industrial landscape, locally and around the world, and continues to position itself for the future.
Culp noted Monday that over a billion patient scans are done per year on over 4 million GE medical imaging devices, GE power equipment generates a third of the world’s electricity, and GE jet engines propel two-thirds of the world’s commercial flights. And it has cut its debt by $75 billion since 2018.
Locally, the GE Jobs web page lists 84 openings in Niskayuna and 97 in Schenectady, most of them engineering, scientific and managerial roles.