GE’s long life as giant industrial conglomerate enters new era, as company splits up on Tuesday

Launched to electrify America, GE grew into a far-reaching global conglomerate that branched out into everything from TV stations to toasters. But the company suffered in the 2000s under the weight of too many deals, and investors fled. Chief executive Larry Culp eventually decided it was time to do what would have been unthinkable in the Jack Welch days: to break up GE.

At first glance, this three-way split might seem like an inauspicious end for one of the world’s best-known companies. But executives at the three companies say it’s the beginning of a promising new era.

“We’re the stewards of the business at this point in time, and even though we go forward as three, we’ll share that brand, we’ll share that DNA,” Culp, who will lead GE Aerospace, said in a recent interview with Bloomberg TV. “And I’m sure Edison and everybody else looking down will be proud of what they see from these three businesses.”

Culp is referring to Thomas Edison. GE’s story goes back to 1892, when two rivals in the then-new electricity business — one led by the famed inventor, the other by Boston-area executive Charles Coffin — joined forces in 1892 as General Electric. Coffin, who became GE’s first chief executive, worked from an office in Boston, and GE board meetings alternated between Boston and New York, said Chris Hunter, vice president at the Museum of Innovation and Science in Schenectady, N.Y.

The company’s main plants at the time, Edison’s in Schenectady and Coffin’s in Lynn, remain in business today. The company soon diversified from making machines that generated electricity to include ones that consumed it.

“They realized pretty early on [that] if you wanted people to use more electricity, you needed to make more products for them to use,” Hunter said.

GE’s portfolio eventually ranged from jet engines, trains, and washing machines to commercial real estate and credit cards. However, GE’s abstruse finance arm, GE Capital, bulked up under Welch’s leadership, masked some underlying problems that would come back to haunt the company. GE Capital struggled during the Great Recession of 2007-2009, largely because of its ties to real estate and subprime lending markets.

Then-chief executive Jeff Immelt realized GE needed a different focus. He proceeded to exit financial services and sold off the appliance business. By the time of the Boston move, Immelt had grand visions of turning GE into a software company that would serve other manufacturers, while continuing to roll out turbines and turboprops.

GE, however, struggled under heavy debt from its acquisitions and failed to generate much cash flow. Immelt retired in 2017, amid what would become a precipitous stock plunge.

His successor, John Flannery, tried to right the ship by divesting more businesses, including trains and lighting. But Flannery didn’t last long as GE’s problems worsened, and its share price slid further. In 2018, the GE board replaced Flannery with Culp, GE’s lead independent director known for his solid tenure leading Danaher, a Washington-based life sciences conglomerate. Culp began paring back GE’s mountain of debt, while instituting a leaner culture that minimized waste and improved factory efficiency.

But the COVID-19 pandemic clipped Culp’s turnaround; the near-cessation of flying caused revenue to plunge in GE’s crown-jewel aviation business. Wall Street had grown impatient.

So, Culp turned to the break-glass-in-case-of-emergency plan: Split GE into three separate businesses. GE HealthCare, with nearly $20 billion in revenue last year, was the first to go. Now, GE Aerospace ($32 billion in revenue) and GE Vernova ($15 billion in revenue) are going their separate ways.

The company that was GE becomes GE Aerospace, which will keep the ticker symbol and license the use of the GE brand to HealthCare and Vernova. GE’s modest remaining corporate functions in Boston become part of GE Aerospace.

“[The breakup] wasn’t necessarily going to be the plan when Larry started,” said Joshua Aguilar, an analyst with Morningstar. “But I think it’s the one that makes the most sense.”

Aguilar said Culp couldn’t break up the company sooner because it had far too much debt — Culp trimmed more than $100 billion, out of $140 billion, as CEO — and the businesses needed to run more efficiently. Investors like the breakup in part, Aguilar said, because it allows them to be more selective about where to place their money, whether in health care equipment and software, aviation, or energy.

Shares in GE have nearly doubled in value in the past year, bringing GE’s market cap above $190 billion before the Vernova spin — around the same as when GE first moved to Boston six years ago as a much larger enterprise.

For Greater Boston Chamber of Commerce CEO Jim Rooney, the breakup comes with an important silver lining: GE Vernova’s workforce of 80,000 will be overseen by a leadership team based in Cambridge, albeit in a headquarters much smaller than what Immelt envisioned for Boston years ago. GE Vernova represents a return to the company’s energy roots, making products to generate and distribute electricity for homes and businesses as Charles Coffin’s company did more than 130 years ago.

“Remember when GE in 2016 left Connecticut and came to Boston with a great deal of fanfare? Jeez, we celebrated it for about three years,” Rooney said, only half joking. “The good news is ... now it begins to look like it may bear some fruit.”

Jon Chesto can be reached at [email protected]. Follow him @jonchesto.