Following a strategic review, GE has announced a focus on aviation, power and renewable energy – creating what the company calls a “simpler, stronger, leading high-tech industrial company.”
In addition to the pending combination of its transportation business with Wabtec, GE plans to separate GE Healthcare into a stand-alone company; pursue an orderly separation from Baker Hughes, a GE company, over the next two to three years; make its corporate structure leaner; and substantially reduce debt.
GE’s board of directors has unanimously approved the plans, which were announced today.
“Today marks an important milestone in GE’s history,” states John Flannery, chairman and CEO of GE. “We are aggressively driving forward as an aviation, power and renewable energy company – three highly complementary businesses poised for future growth. We will continue to improve our operations and balance sheet as we make GE simpler and stronger.”
GE says its energy strategy, driven by GE Power and GE Renewable Energy, is based on offering a range of energy solutions across the electricity value chain. Notably, last December, GE Power announced plans to reduce its global headcount by approximately 12,000 positions. Recently, GE Power tapped former AES and RES Americas executive Robert Morgan to lead its new energy storage unit. One of Morgan’s principal roles is growing and expanding the newly launched Reservoir energy storage platform.
Earlier this year, GE Renewable Energy announced what it calls the world’s “largest, most powerful” offshore wind turbine, the 12 MW Haliade-X, which is slated to start shipping in 2021.
Today, GE announced it is also making fundamental changes to how it will run the company, including a smaller corporate headquarters focused primarily on “strategy, capital allocation, talent and governance.” This is expected to generate at least $500 million in corporate savings by the end of 2020. Under the new GE Operating System, most resources and services traditionally held at the headquarters level will be realigned to the businesses.
GE is targeting an industrial net debt-to-EBITDA ratio of less than 2.5 times and a long-term A credit rating. GE also plans to reduce industrial net debt by approximately $25 billion by 2020 and maintain more than $15 billion of cash on the balance sheet.
GE has also announced that the board’s independent directors have completed the previously announced lead director transition, electing Larry Culp, former CEO of Danaher, to succeed Jack Brennan, who is completing his last term on the board. The change is effective today. Culp will also chair the board’s management development and compensation committee. He joined the GE board as an independent director earlier this year.
Today’s announcements follow a series of changes GE has made in the past year, the company says. With the announced sales of the distributed power, industrial solutions and value-based care businesses and the pending combination of its transportation business with Wabtec, GE says its $20 billion divestiture target is substantially complete.
Flannery concludes, “GE’s mission and technology change the lives of billions of people around the world. We will now move forward with purpose to make our company simpler and stronger and accelerate growth across our businesses. I’m confident that today’s actions, in conjunction with other changes we have already made, will produce improved operating results and increased shareholder value going forward. We are focused on executing the strategy and implementing the structure we’ve laid out today to position our businesses for future growth.”