General Electric (GE) is one of the biggest names in corporate America, with a history dating back to the earliest days of electricity and its founding by Thomas Edison, among others. Throughout the 20th century the company was one of the largest in the country, often in the top five through the early 2010s. But since then the company has seen itself fall from grace, placing 18th on the 2018 Fortune 500 list and being dropped from the Dow Jones Industrial index of which it had been a founding member in 1896.
With dozens of business units involved in a variety of different industries, GE’s business was schizophrenic, ranging from healthcare to light bulbs to nuclear reactors. But today the company finds itself in decline. Its total assets have declined by more than half since 2013, while its debt to asset ratio has risen from 79% to 83%. Its total assets of $309 billion are barely more than its total assets in 1997 of $304 billion. And in a bid to help cut expenses and draw down much of its debt, the company has taken to selling off portions of its business.
Most recently GE sold off its biopharmaceutical business to Danaher for $21.4 billion. Expect to see more sales in the future as GE moves to reduce its footprint in numerous business sectors in favor of focusing on its core power business. With production of industrial turbines and aircraft engines among its most profitable ventures, that’s what the company hopes to focus on. But that fall from greatness has to hurt. And there are still no guarantees that a leaner GE will continue to remain successful in the future.
The fate of GE resembles that of many other large American conglomerates and of the United States as a whole. Once prosperous and profitable, successive generations of managers mismanaged the company, loaded it with debt, and eventually caused its ruin. By the time GE is done selling off business units it will likely be a shadow of its former self. It’s a cautionary tale that too many managers, executives, and politicians fail to understand. The decline of GE and companies like it isn’t occurring in a vacuum either; it mirrors the decline and fall of the United States.