Is GE’s Split An End Of The Conglomerate Era? 

  • 19th Nov'21
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‘Change is the only constant’, says Greek philosopher Heraclitus. 

The SARS Covid-19 pandemic changed various dimensions and dynamics of the market. While some made profits, many including industry giants had to suffer heavy losses. This compelled them to make some moves, that will have a long-term impact on the working of the market, nationally and globally. 

General Electric Company (GE), the American conglomerate, is one such company. GE has created a buzz when it announced its split on November 09, 2021. Experts quote this move as an end to the conglomerate era. This decision is the culmination of a tedious effort of long years of reshaping the American manufacturing business. The company will form three units that will focus on aviation, healthcare, and energy. 

According to the reports, GE Healthcare will be focused on precision healthcare and will be separated from its parent organization by 2023. GE Renewable Energy, GE Power, and GE Digital will be declared separate entities by 2024. Will shaft its comFollowing this, GE will solely focus on aviation and shaping the futures of flight. 

Before we dig deeper into the split of GE, let us first understand the concept of the conglomerate, to give us a better insight into the reason for its split. 


What is a conglomerate? 

A conglomerate refers to a company that owns and runs several businesses. However, none of these businesses are related to each other. In a conglomerate, one mother firm controls various smaller businesses that though are governed by the parent company, run separately. 

The Walt Disney Company, Johnsons & Johnsons are some global giant conglomerates. 


GE splitting in three companies


The breakup of the Giant - General Electric (GE)

If experts are to be believed, the complex business structure is said to be one of the reasons for the split of the giant. Over decades, the business model and structure of GE were built in such a manner that every sector it dealt with supported the other. Such a structure was intended to multiply profits and mitigate risks by overcoming business downturns through diversification. 

However, things began to get complicated on the balance sheets. It made a wide mess and began pumping money from profitable organizations to the ones making losses. This made the finances of the company go weaker, for those entities making profits were putting in money in those divisions of the company which were making losses. 

For instance, GE Capital, the financial service provider of the company, siphoned money to different divisions to cover up for their operational losses. This made the company think to execute a long time in the discussion plan of splitting the company. 


Also Read: Robinhood's Meme Stock status fuels IPO Uncertainty. 


Was wrong leadership the real reason for the split? 

Larry Culp is GE’s first outside hired CEO in its 140 years. Though this move has been appreciated, experts believe that some decisions made by his predecessor are the reason for the downfall of this behemoth. Talks are around the corner that some missteps under the leadership of Jeff Immelt as CEO. 

Interestingly, before Immelt, GE was the eye candy at Wall Street under the leadership of Jack Welch. It had become the world’s most valuable company. However, at the beginning of the new millennium, around 2001, the conglomerate model of GE that includes diversified industries begin to falter. GE stocks saw a fall of 25 % in the share market. 


GE splitting in three companies


The sequence of the leaderships that in some way or the other affected the working of GE is as mentioned below: 

  • Jack Welch was made the CEO of GE in 1981. 
  • His motion of interchangeable management expertise and interchangeable parts in the assembly, lead to some major strategic stumbles under his leadership. 
  • He moved GE into businesses that were too many to even count. 
  • This led to scandals that hampered the credibility of the company, which started leading to heavy losses. 
  • GE capital then became a cookie jar to smooth the quarterly results, but since the calculated risks were not transparent, things got worse. 
  • When Culp took over as the CEO, he figured out that splitting the company was the best way to deal with this. 


About General Electric Company 

General Electric Company was established in 1892. It was incorporated in New York and has its headquarters in Boston. Before announcing its split, the company operated through aviation, power, renewable energy, digital industry, weapons manufacturing, locomotives, and venture incubation and finance. 



The split of the conglomerate has raised a lot of questions in this diversified industrial model. Many experts are quoting this as an end to the conglomerate era. 


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About the author:

Prachi Chouksey (Editor), Super admin

An artist by heart and a writer by profession, Prachi is a vivacious reader.  She believes in hard work and her dedication has never let her down. She puts her heart and soul in everthing she does. Though life has not been a bed of roses for her, she affirms that the best way to live it is to maintain an equillibrium between the tunes of life.  

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