[HN Gopher] GE to split into three separate companies
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GE to split into three separate companies
Author : JumpCrisscross
Score : 125 points
Date : 2021-11-09 14:49 UTC (8 hours ago)
(HTM) web link (www.ft.com)
(TXT) w3m dump (www.ft.com)
| lbsnake7 wrote:
| Is the clusterfuck that GE went through the last 10 years purely
| because they over extended their financing arm? I genuinely ask
| because their products are still in demand and they have huge
| market shares in the divisions they are in. On paper this
| conglomerate should've stayed together but it seems their
| financing division fucked them up?
| headShrinker wrote:
| The problem started in the 80s when Jack welsh was CEO. He
| thought it would be fun to invest in all sorts of specialized
| debt. At the time it made GE's balance sheets look great. Then
| the debt obligations started to show up, that's when things got
| bad. But not before Jack Welch retired with one of the biggest
| golden parachutes of all time.
|
| https://moneyinc.com/largest-golden-parachutes-ever/
|
| (skip to number 10)
| elliekelly wrote:
| Immelt shares quite a lot of the blame, too.
| wombat-man wrote:
| Wow that's insane, and sad for GE.
| markus_zhang wrote:
| A lot of people praised Welch back in the day. I don't
| understand all these but maybe he was not that shiny after
| all. So the trick to be a successful and loved CEO (or
| anything) is to take ownership of something, beautify the
| balance sheet and get out before it explodes.
|
| This also applies for software engineering. Try to start a
| new project in some company, and you get the privilege of:
|
| 1. No need to maintain other shit mountain;
|
| 2. Get to start your own shit mountain;
|
| 3. Can come back as consult and win big bucks
|
| 4. Can speak at conferences about "How X is implemented in
| company Y"
| version_five wrote:
| This is an almost universal problem in any endeavor.
| Everyone loves heros and visionaries, few give any respect
| to diligent maintainers, so we have a world of shiny,
| fragile new things on top of crumbling older ones that
| haven't kept up. Whether its software, infrastructure,
| equipment or corporate structure or whatever, incentives
| make it always like this.
| markus_zhang wrote:
| Yeah I believe it's just human nature. Can't do much with
| it except that in my career I'll pay more respect to the
| maintenance people and others who are sweating for
| someone else's glory. The glorious guys already get glory
| and big buck so they don't need anything else.
| ethagknight wrote:
| It's really amazing that these companies can afford these
| kinds of compensation commitments and still make payroll and
| remain competitive in the marketplace. Wild how much of a
| competitive moat that size is.
| sct202 wrote:
| They made some strategic errors beyond that like how they lost
| $8 billion on their merger/investment with Baker Hughes in the
| oil and gas sector.
| seren wrote:
| The $15 billion merge with Alstom Power for turbines was also
| likely a net loss as well.
| Iwan-Zotow wrote:
| Maybe not, EdF wants to buy Alstom back
| danielmarkbruce wrote:
| There is a book titled "lights out" about the downfall of GE.
| It's an interesting read.
| csours wrote:
| My impression is that there was a drive for 'growth' that lead
| to a bunch of 'creative accounting' aka juicing and in some
| cases lying. This worked for a while, but came crashing down as
| it always will... eventually. You can hide the rot for a
| season.
| [deleted]
| mathattack wrote:
| Maybe it's 15+ years of cluster? Combination of overextended
| finance arm, too much diversification and complexity, and a
| history of doing any accounting tricks needed to meet the next
| quarterly number. None of those involved meeting customer
| needs. You can only go so far on financial engineering. That's
| better for dismantling the company rather than growing it.
| greenail wrote:
| One of the problems I observed working with GE was they had
| pockets of a few smart folks who knew what they were doing and
| armies of people managing outsourcing without really having
| retained the industry specialization knowledge. It seemed like
| they barely knew their own business at times, they didn't
| understand the technology and they were highly specialized in
| dealing with external vendors. This would lay blame on execs
| like Gary Reiner who pushed outsourcing everywhere. They did
| try to turn that around and it is probably worthy of a book to
| review what they tried to bounce back from over-outsourcing,
| what worked, and what didn't.
| paleotrope wrote:
| I don't think that's specific to GE.
|
| I am coming around to thinking that all good things are
| driven by small teams of less than 10 people maybe even less
| than 5, who all have a shared vision and drive to accomplish
| something. Everyone else is just along for the ride.
| kazinator wrote:
| GE to split into four companies:
|
| - 500 hour LED bulbs.
|
| - Silicone-based kitchen and bath miracle mildew growth formula.
|
| - Uninspiring appliances.
|
| - Other.
| [deleted]
| jpmattia wrote:
| Relevant: Bill Gates posted (back in June) a book review about
| GE:
|
| Lights Out, What happened to GE? The fall of one of America's
| great companies.
|
| https://www.gatesnotes.com/Books/Lights-Out
| dayofthedaleks wrote:
| Because the FT's paywall is particularly onerous:
|
| https://archive.md/Mmj55
| protomyth wrote:
| I didn't realize that GE appliances was a separate company with
| separate ownership (Haier & KKR). Its amazing how many of the old
| prestige brand names are now just licensing or separate
| companies.
| lordnacho wrote:
| Which should alarm people more than it does. The signalling
| value of a brand is greatly diminished when it's just a label
| that can be moved around, created or hollowed out at will.
|
| It's a kind of obfuscation in many cases. How many people know
| that P&G or Unilever are behind a huge number of supermarket
| goods?
| dmix wrote:
| Saab turned into a Chinese car company then a defence
| contractor bought it then it kinda just died on the shelf.
| klelatti wrote:
| Not sure why the cases you cite are alarming. I actually
| think there are two levels of signalling in these cases 1.
| what the brand promises - and the corporate owner will
| usually want to protect that and 2. The reputation of a P&G
| or Unilever.
|
| I think problems often happen when the big corporate owners
| sell to private equity who are more often interested in
| boosting short term earnings.
| lordnacho wrote:
| 1) Multiple brands for one producer: something bad happens,
| we cut the brand loose, move the staff who caused the
| problem elsewhere, or replace them, nobody knows. If it's
| really bad the mother co has enough money to place
| everything on the brand, with PR. The financial news will
| know it's P&G or Nestle or whatever, people on the street
| will see "Something Crunch is unhealthy and is
| discontinued".
|
| 2) Unknown holding company: yes, people can have general
| knowledge and to a degree it's their own fault for not
| knowing. But it also isn't, nobody has time to read about
| what thousands of brands are out there.
|
| > I think problems often happen when the big corporate
| owners sell to private equity who are more often interested
| in boosting short term earnings.
|
| Absolutely. I remember going to Ed's Diner here in the UK.
| They made a great burger in SoHo before I left the country
| for a few years. When I came back, they'd expanded across
| the country, which was a bit surprising to me, but I went
| in to eat there because of my previous experience. I took
| one bite, it was terrible, and I immediately told my wife
| "this tastes like private equity". I go on google, guess
| what, it was indeed bought by PE and they'd totally changed
| the burger. This is a form of lying to people that should
| not be tolerated but of course is a grey zone because it
| not easy to define when you've changed the burger so much
| that you can't call it the same thing.
| klelatti wrote:
| I remember Ed's Diner in Soho going downhill! One of the
| great malaises of the UK high street is that almost every
| mid range restaurant chain is owned by PE. They buy an
| upcoming chain, expand massively using debt, try to sell
| at the top and if not when recession comes they cut costs
| to make the experience awful and then go bust.
|
| I think we probably mostly agree on the whole brands
| thing. My point was really that P&G / Unilever are
| probably better than most in practice at being decent
| stewards of the brands they own.
| diveandfight wrote:
| > 1) Multiple brands for one producer
|
| Was literally in a conversation just a couple months ago
| where I was expressing that I had finished deleting
| facebook for privacy-related reasons.
|
| They chimed in with, "I know right! That's why I only use
| Instagram..."
|
| I think the me of a few years ago would have discounted
| point 1). Today, I think it's a fairly salient point,
| with regards to actual market effects. Albeit, I'm not
| advocating for any action(s) to be taken with regards to
| it.
| Animats wrote:
| Westinghouse. RCA. Magnavox. Once they were great American
| companies. They're now just shells that do licensing of the
| name.
| reaperducer wrote:
| Packard Bell. Lenovo. Magnavox. Crosley. Gold Bond. Radio Shack
| (It's a little messy). Circuit City. And a hundred more you see
| on late night TV commercials.
|
| Sometimes when a company goes bankrupt, the most valuable asset
| sold is the brand name and the goodwill that goes with it.
|
| As for GE Appliances, I had them in every apartment I lived in
| for about ten years. Never thought much about it until I moved
| to a place that had Maytag appliances. They were ten years old,
| but still better than the new GE ones in my previous place.
|
| Now my apartment is all KitchenAid in the kitchen and Maytag
| elsewhere. It's was like stepping into time capsule to the
| future.
| nunez wrote:
| Appliances is kind-of an incestuous industry. All of the
| high-end brands are owned by "low-end" bigger brands.
|
| Example: KitchenAid is a subsidiary of Whirlpool, a huge
| competitor against Haier/GE Appliances.
|
| Viking, who makes perceivably high-end ranges and
| refrigerators, is owned by Amana, who makes all of the cheap
| appliances you see at Costco.
|
| See here for more:
| http://www.appliance411.com/purchase/make.shtml
|
| As for me: I absolutely love my GE appliances. Have their
| washer and dryer set as well as one of their newer french
| door refrigerators; love them all.
| The-Bus wrote:
| Amana is owned by Whirlpool. Viking is owned by Middleby.
| hinkley wrote:
| It's the same model as automotive. A luxury brand where
| they try out new tech, then spread it to the cheaper models
| once they've amortized the R&D far enough.
|
| Or you have the manufacturing ladder, where you start out
| making low end goods until you've built up QA and
| engineering practices that let you go up-market. Sony was
| once cheap electronics only, and eventually LG took over
| that crown before rebranding and moving to high end too.
|
| Kia seems to have taken the latter approach, introducing
| the Genisis name for luxury goods only recently.
| belval wrote:
| Consumer reports had a page explaining that they rated most
| fridges in the low 6 because they all had high compressor
| failure rate. Turns out that every major manufacturer was
| using the same subsidiary for their compressor and
| consequently everyone was stuck with low-quality parts.
|
| So even across the "big" brands it's mostly the same thing.
| m0llusk wrote:
| There are lots of interesting issues with how designs and
| production concepts are handled. MagicChef introduced
| electric ignition stoves and ovens and did quite well with
| that at first, but the more mature brands like Maytag knew
| how to sell and eventually squeezed MagicChef and bought
| them out. The remains of the company then got passed
| around. As a result most stove and oven designs are
| extremely similar to each other and to the later MagicChef
| designs which were superior in efficiency of construction,
| use, and maintenance but not so much in marketing and
| sales.
| Animats wrote:
| Maytag is just a brand of Whirlpool now. And the appliances
| are not as good.
| reaperducer wrote:
| Sad to hear. The ones i had were from 1996. Even though it
| was 2017, they still ran very well. Was that before the
| Whirlpool acquisition?
| Gravityloss wrote:
| https://www.ge.com/news/reports/ge-announces-plans-to-form-t...
|
| > We'll pursue a tax-free spin-off of GE Healthcare, creating a
| pure-play company at the center of precision health. We'll
| combine GE Renewable Energy, GE Power, and GE Digital into one
| business, positioned to lead the energy transition. GE intends to
| execute the spin-off of Healthcare in early 2023 and the spin-off
| of the Renewable Energy and Power business in early 2024.
| Following these transactions, GE will be an aviation-focused
| company, shaping the future of flight.
|
| So to paraphrase, GE Energy, GE Healthcare and GE aviation.
| baybal2 wrote:
| I wonder, will this preclude GE Energy getting hands on new GE
| turbines?
|
| Most turbines GE Energy sells are aeroderived.
| metalliqaz wrote:
| GE Aviation's main competitor in the US is Pratt & Whitney, and
| PW's parent United Technologies did this same kind of maneuver
| in 2020. Two companies were spun off and the resulting company
| focused on aerospace. Then, quickly thereafter, UTX merged with
| Raytheon. So I expect GE Aviation will begin either a merger or
| go on an acquisition spree to expand their power in the defense
| contracting space. They are competing with other huge
| conglomerates like Boeing, Lockheed, Northrup, and General
| Dynamics. I wonder if they will try to merge with Honeywell
| (again). I'll bet they will at least examine it.
| greenail wrote:
| GE aviation is the most organically grown part of GE from my
| experience. I think they only ever did 2 major
| acquisition/mergers. GE Energy was packed with lots of
| acquisitions, not so sure about Power but I would guess it is
| also a hodge podge based on reorganizations. Digital is pretty
| new with very rapid growth. Healthcare kinda did their own
| thing from what I saw. I wonder how organic growth vs
| acquisition growth impacted the choices for how this split
| evolved. I also wonder how acquisitions vs organic growth
| impacts the long term survivability of giant corporations.
| Gravityloss wrote:
| I worked in a company that GE Healthcare acquired. It was
| "interesting" to see the change in company culture. The
| original company felt like the most important thing was
| trust. GE was more about competition.
| dmix wrote:
| That would explain why Aviation is the one keeping the GE
| brand.
| mercy_dude wrote:
| Does that mean they will have three tickers too? If so would the
| renewable side of the business a buy?
| fullstop wrote:
| I have a handful of GE shares, so this will be interesting.
| [deleted]
| dehrmann wrote:
| > If so would the renewable side of the business a buy?
|
| It looks like power is power, so it includes renewables, but
| also things like natural gas. It makes sense from an
| engineering perspective because they're all turbines and
| generators, but I can see why investors might want the pure
| renewable play.
| Naga wrote:
| Yes. FTA:
|
| > GE Healthcare will be spun off in 2023, with GE retaining a
| 19.9 per cent stake in the unit. GE Renewable Energy, GE Power
| and GE Digital will be combined into one energy-focused company
| that will be spun off in 2024. Once these transactions are
| completed, the original GE will focus on aviation.
|
| So there will be a GE Healthcare (20% owned by GE, the rest
| owned by individual shareholders), GE Energy starting in 2024
| (probably similar ownership structure) and GE. Shareholders of
| GE will be receiving shares of the other two, but the details
| of that aren't clear yet I think.
| skinnymuch wrote:
| Why is GE aviation keeping some ownership of the other two?
| Vs any other mechanism or ownership structure.
| intuitionist wrote:
| Probably Aviation is retaining a lot of GE's debt and plans
| to use its retained ownership interest in the others to
| generate cash to pay it down.
| tantalor wrote:
| The quote says "three... public companies"
| oblio wrote:
| It depends, will they get US subsidies?
| jeffbee wrote:
| Probably not anywhere near as much as Westinghouse collects
| for failing to build fission reactors.
| rickspencer3 wrote:
| So, now they will be Specific Electric?
| csours wrote:
| Specialist Electric.
| LeifCarrotson wrote:
| I recently read "The Value of Nothing: Capital vs Growth" [1].
| (Edit, it was here on HN [2] a week ago). It helped me understand
| the disconnect in the modern economy; the primary goal is to
| increase the value of assets and returns on capital rather than
| the underlying performance and economic growth. It's a long read,
| but here are a few paragraphs that look an awful lot like this
| split of GE into three separate companies:
|
| > _...A corporate sector dominated by institutional asset
| managers and executives whose compensation is based on near-term
| equity returns is highly incentivized to engage in activities
| intended to expand valuations even if there is no impact, or a
| negative impact, on earnings. Such strategies include spinoffs
| that aim to "unlock" value simply by isolating business units
| expected to trade at higher valuations, or other forms of
| financial engineering like stock buybacks._ ...
|
| > _Consider, for example, the case of IBM, which plans to spin
| off its IT infrastructure division this year in order to "focus
| on high-margin cloud computing." The move is being cheered on
| Wall Street because it is believed that the two businesses will
| be worth more as separate entities than as one. In particular,
| the remaining IBM cloud business should command a higher multiple
| once freed from lower-margin, slower-growing divisions._
|
| > _IBM has followed this same playbook for years: "We divested
| networking back in the '90s, we divested PCs back in the 2000s,
| we divested semiconductors about five years ago . . . ," said
| IBM's CEO, explaining the spin-off. As a result of this strategy,
| IBM's revenues and net earnings are lower today than they were in
| 1998. But its stock price and P /E ratio are higher._
|
| This is a positive outcome for their financing arm - they've
| generated an increase in the value of their assets without having
| to risk any capital expenditure. Investors can speculate up the
| value of GE shares in the energy industry, or healthcare, or
| defense, without worrying about the other two holding their
| investment back. Whether the resulting companies is any more
| productive of actual goods and services than the unified company
| is irrelevant.
|
| [1]: https://americanaffairsjournal.org/2021/08/the-value-of-
| noth...
|
| [2]: https://news.ycombinator.com/item?id=29053503
| 0xB31B1B wrote:
| By increasing value like this, they can raise more funding/sell
| debt to fund growth. The moves themself do not impact the
| company but the downstream impacts can be great. Most large
| businesses run on debt, most growth is fueled by debt, and
| increasing the total amount of money that investors are willing
| to give to companies by reorganizing organizations to make more
| attractive debt sales is a nearly costless way to fund growth.
| GDC7 wrote:
| Stock buybacks are just a tax efficient way to give money back
| to shareholders in lieu of dividends.
|
| Also this sort of phenomenons are rarely top-bottom. The
| American consumer is less and less prone to consume and more
| and more keen to invest.
|
| If you talk to people and look at discussions on the interwebz
| it seems to me that the goal is not so much making purchases
| today with the aim of enhancing quality of life, but
| accumulating potential spending capability in the form of paper
| net-worth which you have the option (but not the obligation) to
| spend on quality of life at a later date.
|
| Just look at Tesla, Bitcoin, real estate, interest rates etc.
| Basically every financial indicator says that people are more
| and more rejecting the marsh-mallow today, hoping to have
| multiple marsh-mallows in the future, which they'd also reject
| in the hope of having hundreds of marsh-mallows, which they'd
| also reject and on and on and on.
|
| The anticipation of pleasure and quality of life becomes the
| goal, and the anticipation is fed by people circlejerking over
| their net-worth number or their gains on their paper gains on
| the stock market.
|
| When you signal to executives that the company's most
| successful product is the stock that they sell, then it's not
| that hard to imagine that executives will be very receptive in
| treating the stock as a product, that's because they already
| have incentives as it is, then on top of that you have the
| populace asking to do exactly that and elevating those who do
| so as some sort of technoutopian cult leader making them rich
| (every reference to Lord Musk is incidental)
| ItsMonkk wrote:
| From 1945 to 1971 the value of assets was increasing faster
| than the value of gold mined, and dollars were directly
| connected to gold, so everyone wanted more dollars, so the
| stock value of companies was low even though they were
| growing at a much faster rate than companies are today.
|
| From 1971 to today, being off the gold-standrd, the count of
| dollars is increasing at a rate much faster than the value of
| assets created, so everyone wants more assets.
|
| If you don't want to encourage rent-seeking behavior, you
| need to ensure that the count of dollars increases at a rate
| equal to the value of the assets being created.
| rileymat2 wrote:
| Does the count need to increase or simply the velocity of
| those dollars?
| tm-guimaraes wrote:
| Is it really rent seeking though?
|
| Without a peg like gold, the dollar keeps loosing value.
| Even if a company stays with the same "real value", with
| dollar actually being less valuable, it's fairly normally
| for people to park their savings in company ownership
| rather tan dollars. Are these people rent seeking? They
| simple want to keep their capital.
|
| > you need to ensure that the count of dollars increases at
| a rate equal to the value of the assets being created.
|
| How? You can't predict how business will do. If
| Apple/Tesla/Amazon/Microsoft will be much more efficient
| than yesterday or do a bad strategy decision.
|
| Money printing shouldn't be related whatsoever to how you
| think the big companies will fare. Whoever is trading stock
| simply must understand that Prices are in dollars, and
| dollars are deflating, so you can't compare the prices with
| old prices in a simple way.
| GDC7 wrote:
| > If you don't want to encourage rent-seeking behavior, you
| need to ensure that the count of dollars increases at a
| rate equal to the value of the assets being created.
|
| It's all textbook BS. Everybody is subject to this passion
| for accumulation vs. spending , hence government actions
| are baked into it as well.
| H8crilA wrote:
| I think there's a fundamental misunderstanding as to what
| capitalism is. Capitalism is a system in which the capital
| decides what gets done, within limits.
|
| If the market really thinks the company is better off split
| then that's what you as a company should do - the capital has
| spoken. If it's a bad idea then maybe next time the capital
| will take the opposite position.
|
| Same with bankruptcies, they're usually healthy. If your bonds
| trade at 50c on the dollar with an inverted yield curve you
| should file for it. Or the opposite - companies enjoying super
| low cost of capital (prime example - Tesla), if the capital
| thinks the company is so great the management should be trying
| to sell more shares and lock in some of that capital that's
| chasing it, assuming it can deploy additional capital in any
| meaningful fashion. And (existing or potential) competition
| should take notice.
|
| In short, the capital tells you what to do. Even the Fed is
| kind of subject to the market, every time they stay behind or
| ahead of the curve (like when the yield curve inversion
| happens) there are usually consequences down the line for such
| trespasses against the consensus.
| missedthecue wrote:
| _" the primary goal is to increase the value of assets and
| returns on capital rather than the underlying performance and
| economic growth"_
|
| They're the same thing. Getting more productivity out of a
| given asset is by definition an increase in performance and
| efficiency.
| markus_zhang wrote:
| I think Capitalism, from its birth, only cares about
| "increasing the value of assets and returns on capital". It
| happened to focus on technological advancement during the last
| few centuries, simply because technological advancement brought
| about the biggest returns on investment (capital), and nothing
| else.
|
| If technological advancement does not satisfy the return of
| capitals, it simply turns its focus elsewhere, be it making
| wars, dealing drugs or slaves, or whatever that brings about
| the biggest return of capital within acceptable risks.
|
| Nothing more, and nothing else. Technological advancement and
| others are simply by-products.
| baybal2 wrote:
| I for long had a feeling that GE behaves as if it was a some kind
| of financial company.
| TomAbel wrote:
| Relevant: This Week's IoT news posted(4 years ago) a newsletter
| on GE Digital
|
| GE discovers that industrial IoT doesn't scale
| https://mailchi.mp/iotpodcast/stacey-on-iot-if-ge-cant-maste...
|
| Also the HN discussion on the newsletter
| https://news.ycombinator.com/item?id=15155860 - September 2017
| (73 comments)
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