How GE’s Larry Culp divided Jack Welch’s empire built by Reuters

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© Reuters. PHOTO PHOTO: Larry Culp General Electric Co. the CEO is mixed with shareholders at the company’s annual meeting on May 8, 2019 in Tarrytown, New York, USA. REUTERS / Alwyn Scott / File Photo
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Anirban Sen and Rajesh Kumar Singh
(Reuters) – He escaped a generation that was broken General Electric (NYSE 🙂 With insiders.
When Larry Culpe, GE’s first CEO, convened a board earlier this month to give the green light to the division of the industrial conglomerate into three companies, he got his support.
One of Culp’s predecessors, Jack Welch, was far removed from board meetings in the 1980s and 1990s. The iconic entrepreneur managed to get the GE board to support his moves in the opposite direction, pushing GE into multiple businesses like mortgages, credit cards and TV entertainment and pushing the Federal Reserve to fail saying the company was too big.
Welch’s heirs, Jeff Immelt and John Flannery, sold many of GE’s businesses over the next two decades to raise the company’s share price.
But it was Culp who managed to push for GE’s latest release, with a plan to split it into three companies to position the health, aircraft and energy companies separately.
Culp, 58, became CEO of GE in October 2018 after joining the board as a board member six months earlier. He started discussing the idea of a breakup with GE management a year ago, according to a person who knew the subject, but discussions have intensified over the past six months as his plan materializes.
“With the progress of deleveraging, with the progress we have made with our operational transformation, with the lifting of the pandemic … there is no reason to wait a day,” Culp said in an interview with Reuters. “It’s the right thing to do.”
The idea of expanding health care was not new – Flannery publicly launched it in 2018, but never got it. The financial problems of GE’s energy business were exacerbated in a crisis, which caused the company to lose many of its profit targets and cost Flannery the job.
In the weeks following his appointment, Culpe, a former CEO of the industrial conglomerate Danaher Corp (NYSE :), conducted a top-down analysis of GE’s extensive business lines and numerous profit and loss lines, according to people familiar with the matter. . Analysts and investors praised GE for improving its profitability.
Culp decided in his time that the health care business, one of the major suppliers of equipment and tools, was too important for a money cow, that GE’s other two businesses were not yet self-sufficient to break up, one of them. said the sources.
READY TO ADVANCE
However, Culp wanted to continue with the idea, while GE cut through other deals. These included a $ 30 billion merger of GE’s jet-leasing unit with the Irish company AerCap, and the sale of a $ 21 billion biopharmaceutical business to Danaher.
Now, GE’s troubled energy business is finally making a profit. The company’s renewable energy business has also been able to improve its cost structure and take advantage of the transition to a low-carbon economy.
“We can turn health, we can do that first. It’s clear that this business is working well. A few years ago we had some preparations from the (abandoned) IPO (abandoned) IPO,” Culpe told Reuters.
“We’ve talked about some of the work we still need to do on renewables … but we’ll be really ready for this next step in early 2024.”
Hedge fund Trian Fund Management, an ally of Culp’s GE board, praised the recent moves, stating that it “enthusiastically supports this important step in GE’s transformation”.
Surely, Culp’s tenure at GE has not been without criticism.
Earlier this year, GE shareholders refused to pay Culp $ 230 million in a non-binding vote.
Institutional Shareholder Services Inc and Glass Lewis proxy consulting firms, which were opposed to pay packages, argued that GE had lowered Culp’s performance target bar in the COVID-19 pandemic and that its stock reward was too generous.
GE responded that the payment was necessary to promote Culp.
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