Yesterday, the biggest manufacturing company in the US announced that it was cutting its dividend in half — from 24 cents to 12 cents per share — in a bid to restructure its entire business.
In recent times, 125-year-old GE hasn’t been doing too hot: their stock is down 30% this year and is far and away the worst performer in the Dow Jones Industrial Average.
Now, the company’s new CEO, John Flannery, is trying to turn the ship around.
New chief in town
Over the past 3 decades, GE has made a massive push into conglomerate territory, getting its hands wet in a wide variety of enterprises, ranging from media, to financial services, to “smart” machines.
The company has historically valued this “complexity,” and has touted its ability to manage disparate moving parts. But now, it’s come back to hurt them.
Flannery, who became CEO in August, is making a big push to simplify GE, slashing budgets, and honing its focus on a few products — primarily aviation, power, and health care.
The master plan
GE’s new plan includes selling off upwards of $20B in assets — and everything is on the table, including its iconic light bulb and railroad divisions.
They’ll also be slashing as much as 25% of their home office staff, and cutting its board from 18 to 12 members.
“The GE of the future is going to be a more focused industrial company,” Flannery told investors on Monday. “This is the opportunity, really of a lifetime, to reinvent an iconic company.”
Not good enough?
In light of this news, GE stock plunged 7%, reaching its lowest price since the housing crisis. This, coupled with a terrible earnings report last month, has investors aching for a big shakeup.
And while GE did announce a restructuring effort, it seems like kind of a weak rebuttal to their financial woes: critics have been calling for a “full-scale breakup” of the business for years — and this plan falls far short of the dramatic announcement that was expected.
