Depth report

　　

General Electric (GE), which has been in the diversification strategy for many years, may face a spin-off fate this spring.

    General Electric CEO John Flannery said that it is studying further spin-offs, a move that will mark the company's further bid farewell to the corporate group model advocated in the Jack Welch era.

    John Flannery, who took over at General Electric in August last year, told analysts on a conference call that the company is studying options in its power equipment, aviation, and healthcare sectors, "which could lead to many different Permutations and combinations, including multiple separately traded assets in any of our divisions".

    The partial or complete divestiture under consideration will represent the latest step in the dismantling of Welch’s large conglomerate; Welch took charge of General Electric from 1981 to 2001, during which time the company expanded into many areas, from financial services To reality TV show.

    In the past 2017, the US stock market performed well, but GE underperformed the market. The stock has fallen 40% in the past 12 months, while the S&P 500 index has risen 22.5% over the same period. GE is already the worst performer among the constituent stocks of the Dow Jones Index in 2017. In addition, its performance is also lower than that of competitors such as Honeywell, ABB, Siemens and other industrial giants. With continuous layoffs in 2017, GE has become the US company that announced the most layoffs.

    Including the 12,000 layoffs in the power generation business announced on December 7, 2017, the troubled manufacturer has announced 19,242 layoffs last year. In the latest layoff, Russell Stokes, head of GE Power, said: “This is a painful decision, but it is necessary; the downturn in the power generation market has led to products and services. The sales of GE Power have dropped significantly, and GE Power needs to respond."

    Flannery once said that 2018 will be a "reset year." He emphasized the need to transform GE into a small and sophisticated company. After the reorganization, GE will only focus on the three core businesses: electric power, aviation and medical equipment, while exiting some smaller businesses. Unlike the relatively stable business strategies of most industrial giants, Flannery’s predecessor, Immelt, pursued a more aggressive strategy. Through the capital transfer of nearly US$600 billion, GE was completely transformed into a future-proof company. Industrial companies embracing the Internet in embryonic form. But now it seems that this strategy is facing uncertainty in the continuous spin-off of GE.

    According to the transformation plan announced last year, GE will divest at least US$20 billion in assets through sales and spin-offs. These business sectors include transportation, industrial solutions, electricity and lighting, and several small and medium business sectors. The reporter asked GE about how this will affect the business sector in the Chinese market. As of press time, no response from GE has been received. However, the reporter noticed that the R&D center created by former global vice president Chen Xiangli has been closed.

    In fact, the reduction of US$20 billion in business will mean a self-weight reduction of about 17% for industrial giants with annual revenues of about US$126 billion. Flannery pointed out that GE will "quite sensibly" abandoning some of its businesses, and only retain growth, market-leading, and market-sharing divisions. Prior to this, GE has already begun to divest related assets. In September 2017, Swiss industrial giant ABB announced that it would acquire GE Industrial Solutions, GE's global industrial solutions business, for US$2.6 billion, which will be integrated into ABB's Electrical Products division.

    However, Duan Xiaoying, senior vice president of GE and president of China region, once told reporters earlier, “In the internal operations of GE, mergers and acquisitions and divestitures are things that GE has to do every quarter. Therefore, mergers and divestitures are for GE’s internal operations. It’s a normal thing."

    In addition to the business spin-off, CBN reporters noted that on January 16th, local time in the United States, GE Capital, a financial services arm of GE, stated that it had reassessed the company's insurance business and planned to withdraw US$6.2 billion in the fourth fiscal quarter.

    GE Capital also stated in a statement that it expects to contribute approximately US$15 billion in statutory surplus reserves in the next seven years. It is expected that the first quarter of this year will be 3 billion U.S. dollars, and it will be 2 billion U.S. dollars each year from 2019 to 2024. For this reason, the company will suspend the payment of dividends to the parent company in the foreseeable future. US industry analyst Wendy ZHU told the CBN reporter that this will strengthen the market's awareness of the severe challenges GE is facing. After the above news came out, on Tuesday, local time, General Electric's stock price fell more than 4% to $17.96 before the opening of the US stock market.

    At present, it seems that GE, which is struggling in the differentiation and integration of business sectors, still has a difficult time to pass. However, the industrial Internet gene injected into GE by former CEO Immelt may become an important means for GE's future revival. Duan Xiaoying once told CBN reporters more than once that the industrial Internet genes injected into GE by his predecessor Immelt may not undergo major adjustments, and this is widely regarded in the industry as an important weight for GE's rebirth. one.

    However, GE, as the first to put forward the concept of the industrial Internet, is by no means rest assured. ABB, which recently acquired GE's global industrial solutions business for US$2.6 billion, has released ABB AbilityTM digital solutions and platforms in June last year. Liu Qianjin, Chief Technology Officer of ABB China, told the CBN reporter that since 2014, ABB Group has already begun its digital transformation.

    Gu Chunyuan, President of ABB Group’s Asia, Middle East and Africa Region, told China Business News: “ABB will use leading robotics and customized automation solutions to help companies fully realize automation transformation, and provide integration of the Internet of Things, industrial big data and industry. Experienced digital solutions will push production efficiency and innovation capabilities to new heights, and work together to create an efficient and interconnected smart factory of the future."