- General Electric used to be a byword for American innovation until a few years ago.
- Its 127-year history was marked by revolutionary technologies, immense profit, and now, alleged fraud.
- Here’s a look back at GE, a manufacturing company that became one of the biggest on Earth, but not without immense setbacks.
- Visit Business Insider’s homepage for more stories.
Ever since it was formed in 1892, GE has been a byword for American innovation – that is, until a few years ago.
GE hasn’t just gone through a tough period. It’s had a steady decline, caused by corporate turmoil, the 2008 financial crisis, falling market value, and bad subsidiary purchases. To top it off, last Thursday GE was accused of covering up $US38 billion by Harry Markopolos, an accounting expert who was one of the first whistleblowers of Bernie Madoff’s Ponzi scheme.
But in its heyday (which was most of its 127 years in business), GE was an example for businesses across America. It was one of the original 12 members of the Dow Jones industrial average – and the longest-standing. GE scientists and engineers invented or perfected light bulbs, X-rays, refrigerators, television, commercial jet engines, nuclear power plants, and so much more. GE’s legendary CEO, Jack Welch, defined corporate culture in the 1980s. His successors, Jeffrey Immelt, John Flannery, and Larry Culp saw the company fall from grace.
Here’s the story of GE, from manufacturer to global conglomerate to fallen giant.
1889-1892: Edison General Electric
In 1879, inventor Thomas Edison patented the incandescent light bulb after his laboratory tested 3,000 designs over two years.
By 1889, Thomas Edison had formed Edison General Electric from a handful of electricity companies he’d been operating. Three years later, The General Electric Company was formed after a merger with Thomson-Houston Electric Company, led by businessman Charles Coffin.
1896: The Dow Jones industrial average
Just four years after its formation, General Electric became one of the original 12 companies to be a part of the Dow Jones industrial average, which was created to measure the value of industrial companies.
Every other company was eventually removed from the Dow, except for GE, which was included, on and off, for most of its existence. That changed in June 2018, when it was replaced by Walgreens Boots Alliance as one of the present-day 30 companies included.
1896-1981: New technologies
Over the decades, GE spent much of its time developing new technologies, ranging from home appliances to commercial jet engines. Many of its innovations resulted from merging with smaller companies to gain access to their inventions.
Whatever GE didn’t invent, however, it perfected. As the New York Times reports, GE’s accomplishments include the following:
- In 1906, a Swedish engineer invented voice radio. Before that, the closest thing people had to it was telegraphs transmitted via the dots and dashes of Morse code.
- In 1922, GE began making electric home appliances, such as the first electric stoves, washing machines, and refrigerators.
- In 1927, GE developed the first television.
- In the 1930s, moldable plastic was developed, revolutionising mass-manufacturing.
- In 1941, GE built the first American jet engine.
- In 1957, GE opened the first nuclear power plant near Pittsburgh, which stayed open until 1982.
1981-2001: GE under Jack Welch
By the time GE’s best-known CEO, Jack Welch, took over in 1981, the company had been heavily investing in smaller businesses. Welch had a no-nonsense approach to profit, so he ordered that any GE business that wasn’t leading in its market should be fixed, sold, or closed. In his first two years as CEO, 71 businesses were sold.
But GE didn’t just sell off companies – it bought them, too. One of its biggest acquisitions was radio company RCA in 1986, which owned TV network NBC.
Welch didn’t think of GE as merely a manufacturing company –he thought of it as a “boundary-less” business. By the time he stepped down in 2001, GE had grown from a $US25 billion to a nearly $US130 billion behemoth.
2001-2017: GE’s next CEO, Jeffrey Immelt
After Jack Welch’s 20-year tenure came GE’s next CEO, Jeffrey Immelt, in 2001. For all the positive things GE employees and analysts have said about Welch, just as many accusations have been hurled at his successor.
Immelt was hand-picked by Welch, who publicly praised Immelt when he stepped down in August 2017. In a statement released to CNBC, Welch said, “Jeff brought his best every day for 16 years. I wish him the very best in the many good years ahead.”
Welch later admitted to other GE executives that the choice was one of his biggest mistakes, according to Fox Business.
A lot happened during Immelt’s 16 years running GE. The 2008 financial crisis dealt a huge blow to the company: Its stock fell 42% in 2008, forcing GE to rethink its operations. It went back to focusing on what it did before Welch took over – manufacturing. It quickly sold off some of its biggest past money-makers, like NBCUniversal, GE Plastics, and GE Water, and GE Appliances. Warren Buffett stepped in and invested $US3 billion to keep the company afloat.
For most of his tenure, Immelt had two private jets – one that he used regularly, and one that he kept as a spare, without telling GE’s board of directors. The board only found out after the Wall Street Journal reported it in October 2017.
Immelt stepped down with only seven weeks’ notice. The day he announced his retirement, June 12, 2017, GE stock went up 4%.
Despite investors’ relief at Immelt’s departure, GE’s stock hasn’t reached that height – $US28.94 a share – since.
2017-2018: John Flannery’s stint as CEO
Jeffrey Immelt was replaced by John Flannery, the head of GE’s health care business, who had been with the company for 30 years. He served as CEO for 14 months before being removed in October 2018 by a unanimous vote from the board of directors.
Flannery received an exit package worth $US10 million.
The company lost over $US100 billion in market value during his tenure.
GE’s most recent blow came when accounting executive Harry Markopolos accused the company of fraud, covering up $US38 million, worth 40% of its market value. In a 170-page report posted online on August 15, Markopolos, alleged that GE had been making fraudulent financial filings to cover up its immense debts.
Markopolos is reportedly working with an undisclosed hedge fund, which is betting that GE share price will drop.
“This is market manipulation-pure and simple,” current GE CEO Larry Culp said in a statement.
Markapolos said GE was “a bigger fraud than Enron,” referring to the failed energy corporation.