http://www.timesunion.com/business/article/GE-s-Flannery-says-he-s-reconsidering-GE-s-future-12501180.php
GE's Flannery says he could spin off GE Power, other units
Updated 4:38 pm, Tuesday, January 16, 2018
Boston
General Electric Co. CEO John Flannery said Tuesday that he could do what was once unthinkable and break GE into smaller, independent companies, including Schenectady-based GE Power, the company's oldest and largest unit that dates back to the days of Thomas Edison.
Since taking over for former CEO Jeff Immelt in August, Flannery has said would stick with three core business units, which includes the healthcare division he used to run, as well as GE's aviation and power businesses.
But in a conference call with analysts on Tuesday in which he announced major problems with GE's reinsurance business, Flannery said his thinking on GE's future has since evolved and he is trying to figure out the "best structure or structures for our portfolio to maximize the potential of our businesses " for GE to take moving forward.
"It's a kind of thing that could result in many, many different permutations, including separately traded assets really in any one of our units, if that's what made sense," Flannery told analysts during the call, mentioning two former GE businesses, Baker Hughes and Synchrony Financial that GE took public. "Those are two, I'd say, examples of how that might work. And that's something we'd consider for other parts of the company. Whether that's (GE Power), aviation or healthcare."
Shares of GE ended trading Tuesday at $18.20, down 56 cents, or 2.99 percent. That's about $1 above the 52-week low for the stock, which is $17.25.
GE was founded in Schenectady in 1897 and has been home to substantial GE operations ever since, growing to 40,000 employees at the height of World War II when GE was a major defense supplier.
Today, GE's Schenectady workforce is one-tenth that size, but it has become a source of local pride as the headquarters for GE Power, which has installed one-third of the world's power generation capacity around the world.Nearby Niskayuna is also home to the GE Global Research Center, home to 2,000 scientists who work to innovate GE's various businesses and a crown jewel of the Capital Region's high-tech economy.
The spin-off of GE Power into a stand-alone would potentially jeopardize GE's legacy in Schenectady and give GE less of a reason to keep operating the Niskayuna lab as well, although GE could keep the power operations as its core business and instead spin off the health care and aviation divisions, which have higher potential profit margins.
It is unclear if GE would spin off just one or all of its three main units, although some news reports said Flannery would make his decision by the spring.
A GE spokeswoman declined to comment on whether GE Power would be part of any spinoff.
Flannery has been upset with GE Power's results as the demand for new power plants has sagged. The unit is cutting 12,000 jobs worldwide through 2019 and that has included some jobs in Schenectady, where the company has 4,000 employees.
In November, Flannery also cut GE's dividend in half and said the company would sell off $20 billion in assets to make the company leaner.
The conference call was to address issues that GE has with its reinsurance business. Although the reinsurance business is no longer active, Flannery said GE recently realized it had to take $6 billion in charges on the unit and would have to recapitalize the unit with $15 billion over seven years.
The issue only impacts GE Capital, a GE financial services unit that GE has been treating separately as it winds down the unit.
"We strongly believe this is contained inside of the GE Capital framework," Flannery said.
