What Happened to General Electric: The Decline
What Happened to General Electric: The Decline
General Electric, or simply GE, was at one time one of the biggest and most successful conglomerates in the US, and was a leader and pioneer in various fields such as lighting, power, renewable energy and so much more. When you hear the name General Electric, the first things that probably comes to mind are lightbulbs as well as electric machines such as television and washing machines. This is probably due to the fact that GE was formed so as to provide affordable light as well as electricity to help with the industrial boom of the early 1890s, as explained by the subject matter experts over at the excellent runrex.com. They started off with incandescent lightbulbs, electric stoves and early x-ray machines and then began to mass-produce electric home appliances in the 1920s that completely changed for the better the American home landscape. General Electric can also be credited with pioneering the development of radar and microwave systems, which also saw it become a very valuable asset to the military. The good times for GE continued to roll when Jack Welch, affectionately known as “Neutron”, took over as CEO in 1981 and massively grew the company; so much so that by the time he left in 2001, the company had grown from being worth $25 billion to $130 billion when he left. So, what happened to them that they went from being so successful to suffering the decline they suffered? Well, this is what we will look to examine.
Well, I’m afraid when talking about the decline of General Electric, poor management, especially by the now retired CEO Jeff Immelt has to be top of the list of the reasons why. It might seem a tad harsh placing the blame for something so big on one person, but the fact that he took so many punts on businesses that most often than not never panned out really makes him the prime candidate to take the blame. Take for example his decision to purchase two explosive detection companies for over a billion dollars in the wake of the World Trade Center attacks, that to be honest sounded like a good, although a bit cynical, idea at that time. As was the case with most of his ideas however, this one was a big burst and he was forced to sell a large majority of the two explosive for just a bit over $750 million. The bad deals just kept coming as he also spent $10.1 billion in buying the French company Alstom, a deal that also led to the company losing billions of dollars; with more on all these deals to be found over at the excellent runrex.com
Their decision to diversify and expand to other areas other than their core business has also been attributed to being one that also contributed to their decline. Of course as explained in detail over at runrex.com, not all decisions to expand and diversify ended up badly. Their decision to begin to produce power generation equipment as well as industrial plastics and locomotives was a big success, so much so that their jet engines continue to do well even now. However, the decision to go into the financial services industry was an ill-timed one that definitely contributed to their decline. When the financial crunch hit and the financial sector was undergoing all sorts of turmoil, they were hit hard especially since they had invested heavily and therefore felt that they had to try and at least salvage something from this arm of their company. They then ended up sinking even more money on this rescue mission, something that definitely didn’t help their bottom line and their numbers and definitely contributed to their decline.
Yet another reason that led to their decline is due to problems in the power industry, a sector that had previously been one of their strong points and one where they had posted really impressive numbers. The fact that they had previously posted some very good results had led to them going in with high expectations, which were unrealized especially on large gas turbine shipment for example and other power shipped units. They had gone in with high expectations of shifting a lot more units than the ones they ended up shifting, and this definitely affected their bottom line. As is explained by the gurus over at runrex.com, they had booked revenue due to these high expectations and when the results weren’t as good, they ended not receiving any cash. A combination of receiving lower than anticipated receivables as well as equipment and service contracts, all of which were long-term, not doing well all affected their bottom line and definitely contributed to their decline. When the power industry slowed down, they suffered and this was definitely a big contributor to their decline.
Remember, there is more to be uncovered on this and other related topics over at the excellent runrex.com and therefore, you should make sure you check them out.