When General Electric’s new CEO John Flannery spoke to investors and analysts last month, he acknowledged things are bad.
“I was forced to confront a lot of sort of deeper questions about this company,” he said. “Why do we exist? How do we impact the world for the next 100 years the same way we have for the last 100 years?”
General Electric is one of the most storied corporations in American history, co-founded by Thomas Edison and re-defined by legendary CEO Jack Welch.
For more than a century, GE’s products — from dishwashers to MRI machines — changed the way Americans live. But now the company is in deep trouble. Its stock price plummeted over the last year, losing more than 40 percent of its value while the market as a whole soared.
To get a sense for just how shocking the decline at GE is, NPR traveled to Schenectady in upstate New York, headquarters of the company’s power and energy division. Five thousand GE employees live and work here and it’s a place where magic used to happen.
Bill Buell, a local newspaperman who has written for years about GE and the company’s history, points to the place where Ernst Alexanderson lived. “[He] did the first television broadcast anywhere in the U.S. right here in his home here.”
Schenectady’s boom years started in the 1890s when Thomas Edison built laboratories and factories here.
For more than a century, GE’s global operations seemed unstoppable. The company built everything from TVs and dishwashers to jet engines and power grids. It became one of the most reliable market performers, while reshaping American culture.
Along the way, the company’s scientists won two Nobel Prizes. The cursive GE logo and “we bring good things to life” catch-phrase seemed as much a part of the nation’s identity as Coca-Cola or McDonald’s.
Bill George, former CEO of Medtronic and a fellow at Harvard Business School, said GE helped invent America’s corporate culture.
“Throughout my lifetime, GE has been the leader in coming out with new ideas, new organization structures and has always been 5 to 10 years ahead of everyone else. So all the rest of the corporations looked to them for setting the standards,” George said.
The last decade, however, that storied history seemed to unravel. Bold new products stopped appearing. The company was hit hard by the financial crisis and whole divisions — including the broadcast network NBC — were sold off. Other corporations, like Amazon, Apple and Google, moved to the center of corporate culture.
In the past year, GE’s stock has plummeted and Flannery was forced in November to slash the company’s dividend by 50 percent. “We understand this is an extremely painful action for our shareholders, our owners,” he said.
Flannery’s plan for reinventing GE is focused on simplification. He says the company will sell off $20 billion in assets, including the lighting division, which means that Thomas Edison’s company will no longer make light bulbs.
GE will now focus on three major product lines: energy, aviation and medical technology.
So far, a lot of analysts, including Bill George at Harvard, say they’re not impressed.
“GE could become a typical industrial company and perform reasonably well,” he said. “But that’s not the GE we knew.”
It’s not that people doubt GE can still make and sell good products. This remains one of the biggest corporations in the world, with nearly 300,000 employees. But George says investors once looked to GE for something bigger, more exciting.
During his mid-November call with analysts, Flannery asked them to withhold judgment and to give GE one more shot. “It’s a heavy lift but I think for our teams this is really the opportunity of a lifetime to reinvent an iconic company,” he said.
Bill Buell, the newspaperman in Schenectady, agrees there’s a lot at stake, not least for places like his home town. In the 1980s, GE employed more than 25,000 people here, but wave after wave of layoffs has reduced that number to 5,000, and people are afraid.
“I know right now they’re worried about people losing their jobs. It’s a pretty sad story,” Buell said. “Hopefully it won’t get any worse than it is.
Flannery hasn’t released details, but part of his reorganization plan involves cutting $2 billion in annual operating costs, with much of that savings stripped out of the company’s power and energy division, headquartered right here in Schenectady.