Remember GE?

In the Wall Street Journal, Thomas Gryta and Ted Mann remind us,

...At its peak, General Electric was the most valuable company in the U.S., worth nearly $600 billion in August 2000. That year, GE’s third of a million employees operated 150 factories in the U.S., and another 176 in 34 other countries. Its pension plan covered 485,000 people. With nearly 10 billion shares outstanding, GE was also among the most widely owned stocks. The company paid dividends to more than 600,000 accounts, from individual investors to major mutual funds that served millions.

GE had moved in and out of businesses since 1892: airplane engines, plastics, cannons, computers, MRI machines, oil-field drill bits, water-desalination units, television shows, movies, credit cards and insurance. The big machines were always GE’s beating heart. But it was a willingness to expand into growing businesses and shed weaker ones that helped make it the rare conglomerate to survive the mass extinction of its rivals.

...GE Capital sucked in debt and spat out money. Created in the first half of the last century to help people buy home appliances, it now financed fast-food franchises, power plants and suburban McMansions, and leased out railroad tank cars, office buildings and airliners. The industrial spine of the company gave GE a AAA credit rating that allowed it to borrow money inexpensively, giving it an advantage over banks, which relied on deposits. The cash flowed up to headquarters where it powered the development of new jet engines and dividends for shareholders.

Disaster hit immediately after Welch left. The Sept. 11 terrorist attacks—four days after his handpicked successor, Jeff Immelt, took over—hammered GE’s insurance businesses and grounded the airline industry. Immelt began revamping the Welch portfolio, selling off the plastics division and most of the insurance lines. He didn’t rein in the lending at Capital, which accounted for 38% of GE’s revenue in 2008.

When the financial crisis hit, Capital fell back to earth, taking GE’s share price and Immelt with it. The stock closed as low as $6.66 in March 2009. General Electric was on the brink of collapse. The market for short-term loans, the lifeblood of GE Capital, had frozen, and there was little in the way of deposits to fall back on. The Federal Reserve stepped in to save it after an emergency plea from Immelt.

...If you bought $100 worth of GE stock in the beginning of 1980, it would be $10,670.59 at its Aug. 28, 2000 peak. Today it would be $2,269.51.

...The collapse has been so complete that there is little left to lose. JP Morgan analyst Steve Tusa, who led the pack in arguing that GE was harboring serious problems, removed his sell rating on the stock this week. GE’s biggest skeptic still thinks the businesses are broken but the risks are now known. The stock climbed back above $7 on Thursday, but is down more than 50% for the year and nearly 90% from its 2000 zenith.

As far and as hard as the fall looked to those on the outside, it felt even farther and harder to those who had been on the inside, the true-believers like Jack Welch and Jeff Immelt and John Flannery, GE men through and through. Today as they try to reconcile how a company valued at nearly $600 billion 18 years ago is now worth a tenth of that, they can’t help but feel the deep sting of the slights of history.

...To Flannery, Immelt, Welch and the others schooled in Crotonville, Larry Culp’s ascension punctured a deep and abiding conviction: General Electric made the greatest managers in the world, who could run anything better than anyone else. When the company they loved needed them most, though, the heirs to Edison’s ingenuity had run out of ideas.

In the cruelest of codas, the last CEO of America’s last great industrial conglomerate would be an outsider.

Read more here.