Welcome to Tech Stuff, a production from I Heart Radio. Hey there, and welcome to tech Stuff. I'm your host, Jonathan Strickland. I'm an executive producer with iHeart Radio, and I love all things tech and it is time for us to conclude the g E Saga. Now. These were a series of episodes that originally published back in two thousand nineteen. I did reruns this week because in case you hadn't listened to any of the other ones, I'm on vacation this week. I am. I am vacating. Actually, as you listen to this, I'm probably getting ready to head back to Atlanta. But yes, I was on vacation and I didn't want to leave you without any episodes. So, because GE recently announced it was going to split up into three separate companies in the near future, I thought it would be good to go back and review the history of Ural Electric. It's a long and storied and at times very bumpy history, and so we are going to listen to the g E of today. Although keep in mind the today in that title refers to two thousand nineteen, because this episode originally published on September eleven, nineteen. I hope you enjoy and I'll talk to you again, really really soon, like next week when I'm back in the office. We have come to the end of our journey covering the history of General Electric up to today, and just a heads up, this episode is going to focus a lot on the business side of General Electric rather than the tech side of General Electric. I could have ended this series with the last episode as far as the technological innovations go. And that's not to say GE hasn't continued to innovate in the post Jack Welch era, but rather that the innovations the company is most known for span the previous one years of its existence. The last twenty years, the most recent twenty years have been more marked with controversy and business practices and market issues. And I think it's important to understand what's happened since two thousand one because GE has been such an incredibly important part of the modern technological landscape. I mean, that's one of the main companies that helped spread the electrical infrastructure in the United States. You know, without GE, it would have taken much longer for that to have happened, and the world would be very different today if GE had not existed. But in the last episode, I told you guys about Jack Welch, the g E CEO who pushed the company to incredible profitability, mainly by selling off businesses where General Electric wasn't in first or second place in the industry. He sold off more than seventy of g S businesses just in his first two years of being CEO. He also laid off more than one hundred thousand employees, which earned him the nickname Neutron Jack, because like a neutron bomb, he eliminated people without damaging the assets. And he also led efforts to acquire financial institutions like banks and insurance companies in order to launch this financial and insurance business, and that would end up giving g E an enormous revenue boost. It would become incredibly important for the company in the nineteen eighties and beyond for different reasons. Now. One exception to Welch's amazing victories was an acquisition of a securities firm called Kidder, Peabody and Company, which was actually an even older company than General Electric. If you looked at the origin for Kidder, Peabody and Company, that firm traced its history all the way back to eighteen sixty five, more than a decade before even the earliest of companies that formed General Electric. Welch led the acquisition effort in nineteen six, But then there were a series of scandals centered around insider trading that brought a lot of suspicion and scrutiny on Kidder Peabodies business and therefore GE Capital, the financial division of General Electric. And a year after the acquisition, the global stock markets crashed on October nineteenth, n seven and what was called Black Monday. The combination of events convinced Welch that he had made an error in judgment acquiring Kidder Peabody, and it took several more years and more scandals centering on Kidder Peabodies record keeping and allegations of reporting false profits, but GE would eventually sell Kidder Peabody off at a huge loss. Now that embarrassment aside, GE for the most part did very well in the eighties and nineties. The stock price for g E rose four thousand percent. Some sources state that when you take all the factors into consideration, it was more like five thousand two. Under Welch's command, he put off his retirement in order to secure an acquisition of Honeywell International. If you listen to my last episode, you know that didn't go well. The European Commission denied the merger for anti competitive reasons, and the man who hated to lose, Jack Welch, had to go out on a down note. But compared to GE, you could say Jack Welch got off easy. Now, this episode will cover what happened to General Electric since two thousand one, including the events that would create massive problems for the huge company. And there is ongoing disagreement as to whether most of the blame should fall on Welch's successor, or if Welch himself should shoulder some of that responsibility or some other party. So what the heck actually happened? Well, first, let me talk a little bit about g S stock, because that's going to come back around later in this episode a few times. So, for years, g E paid out a dividend on its stock. Not all companies do this, and a dividend is a payment that a company makes to distribute some of its revenue to its shareholders. So a company makes money and then distributes some of that money amongst the people who hold shares in the company. It's usually not very much per share. In fact, it's typically less than a dollar. Ges case, it was around thirty one cents for a long time. In the US, there are no rules about how frequently a company actually pays out dividends. Most companies will do it quarterly, so you would get one quarter of your dividend four times a year. So if it was a dividend of forty cents, that means every three months you would get a check for ten cents for every share you own. So it's not very much, but if you own a lot of shares, it starts to add up. And besides distributing revenue, it's also meant to incentivize shareholders to reinvest and buy more shares of stock in that company. So the idea is, oh, you got a dividend payout, it's enough for you to buy another share in the company, So you spend that dividend buying another share. That's the logic there. Well, when Welch first took over g E stock wasn't doing so great, it wasn't super high. A lot of investors thought of the stocks as essentially a dividend payout and not much else, so you wouldn't buy g E stocks with the idea of selling them at a higher price leader on the road. You know, you weren't thinking, I'm gonna buy now, because in five or ten years this stock is going to be worth two or three times as much. You bought g E stock because it paid out a dividend, So it would take a long time, but you would eventually make more money than you invested if that dividend were to hold steady. Now, when Welch took over, the stock price actually dipped a little bit after he had been run ge for a year or two, but another year later the entire stock market took a turn and it started to climb in value. This would be the beginning of eighteen years of a climbing market, a bull market in other words, even with events like Black Monday in Night seven taken into account, so you had moments where the market was not bullish, where it was crashing, but it would recover and then go back on its bullish route trajectory. If you will now collectively the SMP five hundred index, it would climb by two thousand and this was the same time that we started seeing packages like four oh one K plans replaced traditional retirement plans. Now that meant that stock market performance would become far more important to weigh more people. Like in the old days, it was just people who traded in stocks, and largely it was a lot of businesses that did that trading. Your average person didn't play the stock market that much. But now stuff like our retirement was tied directly into stock market performance. So suddenly everybody was really really focusing on the stock market, and it meant that it became far more important for stocks to do well. See before the nineteen eighties, stock market performance was you know, it was an indicator of a company's overall health, but most people didn't consider it the metric against which all companies should stand. You would worry more about the company's profitability, how much revenue is it bringing in, how much does it cost to do business, and how much profit is the company making. The share price wasn't as big a deal. That changed around the same time that Welch took over at GE, and Welch's philosophy happened to match this general shift in how businesses operated in the United States. Now, I don't say this to diminish Welch's contributions or GEES performance because the company's own stock outperformed the general market significantly. But I do also want to take the overall market performance into consideration, because while I don't want to take any credit away, I also don't want to give too much credit to Welch and his impact beyond what it actually was. Anyway, as the market improved, and as GEES performance in particular made its stock price rocket upwards, ge stocks were seen as more than just a dividend payout. The company continued to pay dividends, though, which again is going to be important later. Those dividends were largely funded by the incredible performance of g E Capital, that's the financial services division of General Electric. In the last year of Welch's tenure as CEO, gees stock price did take several hits, but then so did just about everybody else. In March two thousand, the stock markets performance shifted. It was no longer bullish. It was going into a bear market, so instead of growing, it was receding. The dot com bubble had crashed and that caused a bit of a stock market crisis. Companies that were in the dot com industry obviously they suffered the most. Many of them just were blinking out of existence after it became clear that those companies had no way to deliver upon the promises that they were making or to be able to justify the crazy speculation that drove their stock prices into the stratosphere before the companies had even figured out how to generate ascent in revenue. But even companies like General Electric, which were traditional, established, giant conglomerate companies, were affected by this change in the market. Between March two thousand and when Welch would hand over the CEO role to his successor, Jeff Emilt, in early September two thoe, the stock price for g E had fallen by twenty four percent. Now I point that out because often the simplified story about what happened to GE was that Jack Welch stepped down and Immolt fumbled the ball, that Emilt was a terrible CEO and he could not follow Welch's lead. But in reality, I think the story is far more nuanced, and we have to remember that the market itself was changing during this transition. It wasn't the case of Emilt being handed a profitable company on a silver platter and nothing was going wrong, and he just messed it up from there. Uh, he did make a ton of decisions that would not turn out to be great for Ge. So I don't want to diminish his responsibility either. I just think it's important for us to take all these factors into consideration. Okay. So Welch stepped down on September six, two thousand one. Emilt took over on September seven, and four days later, the United States was rocked by a series of terrorist attacks that shook the country to its core. Those effects were widespread. The tragedy touched thousands of people directly, tens of thousands millions of people indirectly. It transformed the New York City Escape permanently, and it caused disruption in the markets as well. Wall Street made the decision to not open the New York Stock Exchange the morning of September eleven, two thousand one, fearing that the terrorist attacks would prompt panic selling amongst shareholders, making a truly horrible situation even more dire. Both the New York Stock Exchange and the NASDAC would remain closed until September two thousand one, when trading resumed, The market fell by nearly seven hundred points. That was a decline of almost mobile actually more than seven percent, and that was just the first day of trading. Losses actually continued throughout that week. I hate even talking about this, but it is important in order for us to understand ges story. At this stage in the company's history, business philosophies had changed significantly in the United States in the nineteen eighties and nine nineties. We had created a new environment where share value was the most important metric for a business, the company's stock price. If the stock price was going up, that was good. That was pretty much the end all be all. A company wasn't thought of doing well unless its stock price was growing year over year, or at least the overall value of the company when you take in at stock. Because of course, companies can do things like stock splits so that the price of an individual shaff stock goes down, but because you've doubled the number of stocks or a number of shares i should say, out on the market, the value of the company itself remains stable and can continue to grow. This drove a lot of business decisions that put shareholders above just about everything else in the company, including customers. Now, in my opinion, It's one of the biggest economic mistakes made in recent decades, as it has created a world in which many company executives Phoe becus very much on the short term to mid term gains as opposed to long term strategies. So often I think companies are making choices that hurt the company's chances to survive in the long term, all in an effort to drive that stock market price further up. Anyway, this disaster impacted gees stock price along with countless other companies, and you can't lay that blame on Emilt. It's not his fault that this series of awful attacks happened four days after he took control of the company. In the wake of nine eleven, all airline operations in the United States stopped for several days. That had a direct impact on gees business, which included building stuff like jet engines for the airlines and also leasing out parts for various companies. All of that was put on hold. On top of that, gees insurance business was suddenly inundated with claims which to come and he had to make good on For one thing, ge was responsible for the insurance policy for the World Trade Center, which as I'm sure you all know lost the two towers that made the center iconic back in two thousand one as a result of those attacks. Prior to September eleven, it wasn't unusual for ge to lean a bit heavily on ge capital to kind of smooth things over. The branch was so profitable, that division of ge was so profitable that could help conceal if another division weren't quite doing so well. A lot of gees accounting practices have over the years been called opaque, meaning that you might get the end result of how well the overall company is doing, but you might not know how it got there, which divisions are doing well versus which ones are not. The overall performance of the company was what mattered, right, so who cares what's happening in the individual divisions. Well, Emil would get to work selling off parts of gees insurance business, though the company would still maintain some of that business up to present day. I'll explain more about that in a little bit. And he also began to look at possible acquisitions. So what things turn out well, we'll find out. But spoiler alert, no they don't. But before I get into that, let's take a quick break. One thing I want to mention before I forget it is that during Emilt's run as CEO of GE, there was a particularly wasteful practice going on that would later get a lot of media attention when it was made public. Emilt traveled a lot. He would meet with various GE executives and facilities all around the world, as well as with other company and industry leaders and politicians. Particularly, he would do this when he was on the lookout for possible acquisitions, and he made a lot of those as he was the EO of g E. Now, to hop over to the other side of the world, he would take one of the g E owned business jets. They had six of them. But here's the curious thing. Every time you would travel, there would be a second empty jet that would follow along behind and stay at the same airport and wait there. And then when Emilt would fly back, so did the empty jet. Now the justification for that practice, which again eventually became public, in which a jet carrying only a crew no passengers, would burn through fuel it would generate pollution. The justification was that Emilt was a very important person on very important business and yes, I capitalized very important in my notes in this section. As such, he couldn't be delayed by mechanical failures. His business was far too important. So the empty jet was essentially a backup transport in cases Mary should experience a mechanical delay. It was his just in case measure, a very expensive, wasteful measure. The company would actually stop that practice in two thousand fourteen, which was a few years before Emilt would be replaced as CEO. Spoiler alert, will get there, all right, So back to the post two thousand one g E. In two thousand two, ge would acquire a business from a formerly huge company. That company was in Ron, which went bankrupt in two thousand one after its own massive scandal, which I'm not going to get into here it's outside the purview of this episode. But one of the many parts of in Ron to go up on the auction block after the bankruptcy was a wind power business. Emilt was, in his own words, not enthusiastic about wind power. He felt wind power wasn't profitable and it was too dependent upon subsidies, and those subsidies could disappear at any time, according to which way any government budget might be headed. So there was no way to control that. If the subsidies went away, you'd be saddled with a really expensive and nonprofitable business. But EMIL gave the authority to executives who really believed in that acquisition to go forward with it, and they went and purchased the division. It would end up becoming profitable and perhaps should have served as a lesson for future emilt And I'll get back into what I mean about that in just a little bit. In two thousand three, ge announced its intention to purchase a majority stake in Universal Pictures. That was a company that was under the control of another company called Vivendi, a French company. In this deal, g E would acquire eighty percent of Universal. Vivindi was going through kind of a financial crisis at the time, so g E merged Universal with NBC, creating NBC Universal and the deal included several cable television channels like Sci Fi Network, USA Network, as well as the un Reversal film studio the Universal Theme Parks. It did not include Universal Music that would remain completely under Vivendi's control, but lots of the other Universal properties were part of this deal. Vivendi would have twenty control of this, and then UH you would have GE with control and you got INBC Universal. GE would not hold onto this property forever. G was acquiring other companies as well at this time, adding them to the various divisions of General Electric. GE Healthcare was growing with companies like UH Instrumentarium and Amersham Plc. Those were being added as part of g E Healthcare. G Capital was also growing with similar acquisitions, including some subprime mortgage loan companies, and we'll get into that in a bit. And GE would also build out its industrial, consumer and energy businesses and made several acquisitions of companies in the oil industry, also in banking and that old horse of fossil fuels in general, because he really believed that that was going to be the mainstay for energy production or electricity production. I guess I should say for the foreseeable future. Throughout this time, GE Capital would remain the most profitable division of General Electric, and so the company would lean more heavily upon GE Capital in order to do things like pay out that dividend to shareholders that set up GE for disaster. Just a couple of years after GE purchased subprime mortgage businesses, the world plunged into a global economic crisis, which we often refer to as the two thousand eight financial crisis, but really the crisis first started becoming apparent in two thousand seven with the subprime mortgage market. So what the heck is a subprime mortgage Well, the short answer is it's an incredibly risky, predatory, and irresponsible market practice that depends upon people who are some of the most vulnerable folks out there. Maybe that's just me putting my own bias on things, but it's hard for me to see the whole concept as anything other than dumb and harmful. But here's how it breaks down, all right. So you know about credit scores, right, They're supposed to represent how much of a risk or a lack of risk a person is when it comes to paying off debt like loans. So if you have a high credit score, it means your history shows that you're diligent about paying off debt and that you represent a low risk for future loans. It does not mean that you've never had debt. You want to have some debt and then you want to be able to pay it off because that's what gets you that high credit score. But if you have a low credit score. It means that in the eyes of a lender, you represent a risk. Maybe you have a spotty employment history, maybe you have a lot of outstanding debt, maybe you've missed some payments on some loans. The purpose of these credit scores is to give lenders enough information to make responsible loan agreements. Subprime lending involves giving loans to high risk in individuals, and typically you pair this with really high interest rates and other restrictions in order to mitigate the risk you incur when you give a loan out to one of these people who have a very low credit score. And so people who are looking to buy homes or to take out other loans were securing the money through financial institutions with these subprime mortgages and subprime loans, but with incredibly punishing restrictions on those loans, and surprise, surprise, a lot of folks found it impossible to pay off that debt, and ultimately many of the companies that were making those loans found themselves in a hole that they had dug themselves and it was too deep to climb out. Everyone was put in an awful situation and it had a really big ripple effect. Part of that ripple led to an investment bank called Lemon Brothers collapsing in September of two thousand eight. Other major financial institutions were in danger of following suit. The whole thing was leading to a global economic collapse, with the financial industry on the brink of total disaster. That's when various parties swooped in to rescue the situation, bailing out banks that had overextended themselves. This in turn ticked off a lot of folks who are directly affected by this problem. These were people who had been evicted from their homes because they weren't able to make their mortgage payments, or people who are otherwise hurt by the subprime mortgage crisis, either directly or indirectly. And it didn't help that many of these people saw the bailouts as being rewards for the same financial institutions that caused all the misery in the first place. Well. Ge Capital was one of those institutions, and it was hit hard by the two thousand eight crisis. Worse, because General Electric was so dependent upon ge Capital for revenue, it put all of General Electric at risk. To help whether the storm, the company announced it would attempt to raise twelve billion dollars through a common stock offering or in Buffett Investor Extraordinaire also helped out by investing billions of dollars in GE. In retrospect, many analysts have said that GE was playing an increasingly dangerous game since Welch had transformed GE Capital from a small division that helped consumers get financing to purchase big appliances like refrigerators, into a global financial institution. Gees more traditional divisions like it's lighting business, industrial equipment business, medical equipment business, it's a via Asian businesses. All of these secured for the company the respect of Wall Street because they were dependable parts of GE. They could make a dependable revenue, and they were traditional, They had a long history with the company that gave the company a lot of room to swing for the fences with GE Capital and thus engage in more risky behaviors in an effort to win big payoffs, drive that stock market price up, and again pay out those dividends. And that risk was somewhat necessary because of that changing climate of business. So you had to grow year over years. Traditional businesses usually had steady performance and they did grow, but they grew slowly, so that wasn't the kind of performance that would really when you the the front cover of various business magazines, you wanted to really go for it. So GE Capital was that method. That was how GE was going to be the leader. Then it became an anchor weighing the company down in the wake of this financial crisis. Emil would start trying to sell off parts of GE Capital, but it wasn't easy. Before Buffett rushed into help, GE famously couldn't secure overnight loans to keep the business afloat. Most investors felt it was far too risky to pour money into General Electric, so the house that Jack built was in danger of crashing to its foundations. Even with the influx of investment cash, not to mention an incredible one thirty nine billion dollars of federal government bailout money, GE was still struggling, and one thing barreling down at the company was that dividend payout. The dividend made g E stock one of the most popular stocks on the market. Tons of people owned g E stock because it paid out dividends, but paying out that dividend was going to put a huge burden on the company, It just wasn't going to have the cash to do it, so in two thousand nine, Emil decided to cut the dividend from thirty one cents a share down to ten cents a share. It would mark only the second time the company had reduced its dividend payout. The first time had been during the Great Depression, and spoiler alert, it would not be the last time they would have to cut the dividend. Also, in two thousand nine, the company announced its intention to sell off NBC Universal to cable provider Comcast. To do that, it would first have to a wire the other twenty percent of NBC Universal from Vivendi they still had that share. That process took some time, so it wasn't until two thousand eleven that GE would sell off a majority stake in NBC Universal to Comcast. At that time, GE would still retain a forty nine share in the company, although it did have the intention to sell the rest of those shares off a few years later. Uh This would become a common plot element and a source of jokes in the series Thirty Rock, just as ges ownership of NBC Universal had been a source for humor previously in that series. Two years later in Comcast would arrange to purchase the entirety of NBC Universal from g E, and g E would get out of the entertainment and media business and it would use some of that money to cover some of the debt that GE had accrued following the two thousand eight financial crisis. The NBC Universal deal was just one of several that GE pursued in the first decade of the two thousands. The company looked to sell off some of its businesses and divisions in an effort to refocus on core strategies. Emilt kept working on ways to extract g E from g E capital business, and he didn't have a whole lot of success with it, and he had his eyes set on another company to try and turn gees prospects around. The company in question was a French company that was making coal powered turbines. In other words, it was a company that built stuff for the energy electric industry electric utilities, right specifically for fossil fuel based power companies. The name of this company was Alstom A L S T O M. And, as it would turn out, the timing could not have been worse, though it is arguable over whether or not that was predictable. At that time, Emilt was hoping that Alston would become a key component in g ees Power division. He thought that GE could take this French company which had been struggling financially and used GES processes and pra this is to turn Alstom around. Then he would use Alstom to meet the electricity demands of clients all over the world, and all with fossil fuel based turbines. So what went wrong, Well, I'll tell you after we take this quick break. Not everyone at g was crazy about acquiring Alstom. Several executives felt that the asking price was far too high, but Emma was optimistic that g E could take Alstom and turn it into a profitable business. As it turns out, he wouldn't get the chance to stick around long enough to see how far Allston would fall. But I'm not quite there yet. GE needed to do something. The company's oil and gas services, which revolved around actually extracting oil, you know, making the equipment that would be used for that sort of stuff. Those were on the decline as energy prices were collapsing. But the power division, GE Power, the part of GE that actually reduced equipment that was used to generate electricity that was still a reliable revenue source. In fact, at that point it was the largest source of revenue for GE, and it had a high profit margin to boot. G E made a lot of money from that particular division. So if g E could do the same thing for Alstom and turn things around, then in Emilt's mind, the company would have a rock solid foundation from which to work. But a few big factors would hamper the success of Alstom. One was that there just wasn't as big a demand for turbines as Emilt had anticipated. They got fewer orders than what they were hoping for. In places like the United States, power companies were improving efficiencies and so they were able to do more with less. There wasn't as big a demand to add additional infrastructure to meet consumer needs. Then there was the fact that Alstom's employees were very highly compensated, which was good for them, but rough for GE. And regulations in the EU meant that Emilt couldn't just pull a jack well and start laying off employees in an effort to cut costs. EU had protections in place to prevent that sort of thing, so you couldn't just make the books look better by laying off a bunch of people. And the EU also blocked one part of the business from GE acquiring it. That was Alstom's service business, their maintenance business that would have supplied revenue as the company would provide maintenance services for its clients. That was off limits. And the other major factor was that the cost of building out renewable energy systems fell drastically not long after GE completed the ten billion dollar acquisition of Alstom in two thousand fifteen, So it looked like the wrong bet right buying a very expensive fossil fuel based company just as renewable energy prices were falling to the point where they were uh they could compete against fossil fuels. Now, around the same time that the Alstom deal was starting to take shape, GE would spin off its credit card business, which was part of GE Capital, and it would become Synchrony Financial. And I'm guessing it filled a lot of folks at GE with a bit of dismay to see that once it was free of General Electric, this former division actually outperformed all expectations. It did much better on its own than it did as part of General Electric. On top of that, the oil price crash pushed GE to merge its own oil and gas division with a company called Baker Hughes, and then g E got a majority ownership in the Baker Hughes company became Baker Hughes a GE company, at least for the time. Oh and two thousand fifteen, GE formed a unit called g E Digital. G E had been in various digital products for a while, but marked the move for the company to create an independent business unit. Most of the unit's focus was on a software product called Predicts, sort of a play on Prediction, and it was a business to business product. It was meant to help big companies like airlines identify strategies and managed assets. But over time that unit would experience slow revenues and technical issues, and in eighteen there was real serious talk of GE potentially selling off the division entirely. That is yet to happen. GE Digital still as part of GE, but GE did do a few rounds of layoffs, so things have not gone smoothly for that part of the company. Back to GS leadership woes. In October two thousand seventeen, GE announced that Jeff Emilt would be stepping down as CEO, and he had served in that role for about sixteen years. The company's stock price was around a third of what it had been when he took control. Emerald had spun off numerous businesses over the years, including gees plastics division, if you remember, that's the division that Jack Welch had actually come to. He had also spun off the appliances business. He's spun off the insurance business, or a lot of it anyway, and more. And by that time much of the upper leadership at g E got caught in a shake up. There were members of the board who left, there were other executive members who left, and investors, employees, and retirees were all growing more and more unhappy. The company had lost and estimated one hundred billion dollars worth of shareholder wealth over the previous decade and a half. Critics stated the Emilt had a habit of chasing after fads, investing in businesses at the peak of their visibility and then later selling them off for less than what g had paid for them in the first place. And people said the ge method was to buy high sell low, which in general is the opposite of what you want to do. I think O don't. No, I'm not a business guy. Not every deal Emilt made went sour, by the way, the in Ron deal in which g took over that wind power business ended up being very profitable, though again Emilt initially opposed that deal, and when GE sold off its plastics division it was for a higher price than what a lot of analysts expected, but generally speaking, the deals didn't break in gees favor under Emilt's watch. Emeralt's successor was John Flannery, who had up to that point headed up gees healthcare business and had worked for GE for thirty years. Flannery's goal was to build a strong core for GE around its aviation business, its power business, and its healthcare business, and there was talk of the possibility that GE itself might break apart into several different companies. The reaction to that idea kind of fell across the spectrum. Some people saw it as a necessity if the various parts of GE were to stabilize. Others saw it as the end of a legacy, and they had a bit of a point. One of the discussions was about possibly selling off ges lightbulb business that was the business that started it all, really all the way back in eight seventy eight and the Edison Electric Light Company. But innovation could sometimes be a double edged sword. The move towards l e ED lights, which can last for thousands of hours, meant that there just wasn't as big a demand for light bulbs anymore. Because if you don't have to worry about the lightbulb burning out on a regular basis, there's not much call to buy new ones. You just buy the l e ed s. You might sell your house before you ever have to change that lightbulb. So lightbulb sales were starting to drop. There just wasn't enough call for them. I bet it made GE long for the days when it had formed that secret lightbulb Cartel in which companies agreed to limit the useful life of a lightbulb through engineering. And things were rough for shareholders too. Since GE had cut its dividend payouts a few years earlier, the payouts had slowly increased again. They had grown up to twenty four cents per share, so that was an improvement. It was still below the thirty one cents that it it had been at its peak, but it was better. But in late, G had to cut the dividend again, that time down to twelve sense, and then not too long after that they were forced to do another cut. They just realized that there just wasn't enough money to cover the dividend payout, so the dividend got cut down to just one cent per share. It just didn't have the money to cover the payments otherwise. In addition, G was having to deal with an unexpected cost. The company had not issued any long term care insurance policies since two thousand six, and in fact, it had spun off almost its entire insurance business with a company called gen Worth. However, in order to make that deal happen, GE was forced to agree to cover any losses from long term care insurance. It was just seen as too great a financial risk otherwise, so GE signed that agreement. Now, those long term care agreements are policies that are meant to cover the elderly, and it turned out that insures, not just a g E, but across the industry, had underestimated how long policy holders would actually live, and the medical costs, including things like nursing home fees, would tend to get higher as customers got older. So as people lived longer, they were creating a larger and larger drain on resources for these insurance companies. Like if you looked at it from a financial perspective, the person who was paying for the policy was getting way more benefits out of it than they were paying into it, and that was an issue. So this was a huge cost for GE, and it's no wonder that the company was continuing to try and find ways to get completely out of the insurance business. Now. To meet the obligation, Flannery had to redirect fifteen billion dollars of GES wealth in two thousand eighteen just to cover the obligations of that insurance policy stuff. And the company was also hit with a seven and a half billion dollar after tax charge, so things were really rough. Also in two thousand eighteen, GE would leave the dal Jones Industrial Average. If you listen to my previous episodes, you remember that GE was one of the original companies listed on that average when it was first created, and it was the only company of that original list that still existed in two thousand eighteen. It had been part of the Dow Industrial Average for a hundred eleven years. But the performance of the company, along with the perception that industrial companies in general weren't really key indicators for overall market performance meant that those days were over, so in its place, a different company would join the DOW. That was Walgreen's Boots Alliance drug store chain company. Meanwhile, a problem with most recent heavy duty gas turbines caused other issues for General Electric. A utility in Texas had to shut down two different power plants for repairs due to failures with these new turbines. That news would end up hurting GE power sales, which weren't doing super a gray at that moment. Already, Flannery's efforts were seen as insufficient by the board of directors, and on October one, two thousand eighteen, the company announced that Flannery had been removed from the position of chairman and CEO, and the board appointed an outsider, Lawrence Culp, to serve as the new chairman and CEO. Flannery had been CEO for about fourteen months and then he was out. That would give Flannery the unenviable distinction of having served the least amount of time as CEO of all g e C e O s, at least so far. Culp would be the third CEO to lead the company since two thousand seventeen. The company Culp took over, was in turmoil and there were pending investigations into g S accounting practices, which had for years, as I said earlier, been described as opaque. It's polite way of saying the company wasn't making it easy to see where money was coming from or where it was going to. G E had already settled sec charges in the past, but there were others that sought to find out more about the finances of the company. And then, of course there was no recent report from Marcopolis, the guy who was one of the early whistleblowers on Bernie made Off before everyone was aware of the Ponzi scheme that made Off was running. The Marcopolis report alleges that GE is essentially robbing Peter to pay Paul, shifting cash around frantically to fend off insolvency. It's kind of like a shell game to trying to move money around fast enough so that the company doesn't collapse. G E, I should add, disputes this report and says that the allegations are baseless and it cannot be ignored that Marcopolis himself actually stands to make a lot of money should ges stocks decline and value. So you could argue there is a motive for Marcopolis to try and drag ges name in the mud. Uh So their valid arguments on either side about whether or not this report is something you should pay attention to or if it's something that has ulterior motivations behind it. That being said, the fact that the Marcopolist report came out doesn't change the fact that there were already numerous investigations government investigations into g S businesses that could end up hindering the company further. So there seems to be smoke. There's just a question of is the fire what Marcoupolists is saying or is it something else? On top of all the problems the company faces is another external force that could really spell doom. Many financial analysts say that signs point to another global recession. Already, industries like manufacturing and freight are in a bit of a slide, so a recession would greatly exacerbate general electrics problems. So are we seeing the end of days for a company that helped launch the technological age? I don't know. I don't feel great about it, but it is a very large company. It's not like any of these things is definitively the death knell for General Electric. And there's a lot of stuff that could happen. We could see GE get broken up into smaller companies that individually are able to succeed much better than they can collectively. All of that remains to be seen, but it was fascinating to learn more about this company's incredible, rich history. And UH. I know that this last section was much lighter on the tech side, as I said at the beginning, but at the same time, I thought it was important for us to understand how a company that had been so instrumental in setting the tone for the technological age could be facing extinction UH in two thousand nineteen. So here's hoping that things turn around for GE, that the company is able to reconcile all these accounting practices, that it is able to deliver value two employees to customers, to retirees, and two shareholders, not just two shareholders. And that wraps up this episode. If you have suggestions for future topics of tech stuff, whether it's a company, a technology, a concept in tech, anything like that, let me know send me an email the addresses tech stuff at how stuff works dot com, or draw me a line on Facebook or Twitter. The handle of both of those is text Stuff hs W. You can also pop on over to our website that's tech stuff podcast dot com. You've got to find a link to the archive of all of our previous episodes there, so you can look up all the different stuff we talked about, including the previous episodes I did on g S History where Chris Pallette and I sat down and talked about it. But the show was very different back in those days. But if you want to hear a different take on this same sort of stuff, you can check that out. That one came out, I believe in two thousand twelve. And don't forget. We also have a link to our online store where every purchase you make goes to help the show and we greatly appreciate it, and I will talk to you again really soon. Text Stuff is an I Heart Radio production. For more podcasts from I Heart Radio, visit the i Heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows.

Welcome to Tech Stuff, a production from I Heart Radio. Hey there, and welcome to tech Stuff. I'm your host, Jonathan Strickland. I'm an executive producer with iHeart Radio, and I love all things tech and it is time for us to conclude the g E Saga. Now. These were a series of episodes that originally published back in two thousand nineteen. I did reruns this week because in case you hadn't listened to any of the other ones, I'm on vacation this week. I am. I am vacating. Actually, as you listen to this, I'm probably getting ready to head back to Atlanta. But yes, I was on vacation and I didn't want to leave you without any episodes. So, because GE recently announced it was going to split up into three separate companies in the near future, I thought it would be good to go back and review the history of Ural Electric. It's a long and storied and at times very bumpy history, and so we are going to listen to the g E of today. Although keep in mind the today in that title refers to two thousand nineteen, because this episode originally published on September eleven, nineteen. I hope you enjoy and I'll talk to you again, really really soon, like next week when I'm back in the office. We have come to the end of our journey covering the history of General Electric up to today, and just a heads up, this episode is going to focus a lot on the business side of General Electric rather than the tech side of General Electric. I could have ended this series with the last episode as far as the technological innovations go. And that's not to say GE hasn't continued to innovate in the post Jack Welch era, but rather that the innovations the company is most known for span the previous one years of its existence. The last twenty years, the most recent twenty years have been more marked with controversy and business practices and market issues. And I think it's important to understand what's happened since two thousand one because GE has been such an incredibly important part of the modern technological landscape. I mean, that's one of the main companies that helped spread the electrical infrastructure in the United States. You know, without GE, it would have taken much longer for that to have happened, and the world would be very different today if GE had not existed. But in the last episode, I told you guys about Jack Welch, the g E CEO who pushed the company to incredible profitability, mainly by selling off businesses where General Electric wasn't in first or second place in the industry. He sold off more than seventy of g S businesses just in his first two years of being CEO. He also laid off more than one hundred thousand employees, which earned him the nickname Neutron Jack, because like a neutron bomb, he eliminated people without damaging the assets. And he also led efforts to acquire financial institutions like banks and insurance companies in order to launch this financial and insurance business, and that would end up giving g E an enormous revenue boost. It would become incredibly important for the company in the nineteen eighties and beyond for different reasons. Now. One exception to Welch's amazing victories was an acquisition of a securities firm called Kidder, Peabody and Company, which was actually an even older company than General Electric. If you looked at the origin for Kidder, Peabody and Company, that firm traced its history all the way back to eighteen sixty five, more than a decade before even the earliest of companies that formed General Electric. Welch led the acquisition effort in nineteen six, But then there were a series of scandals centered around insider trading that brought a lot of suspicion and scrutiny on Kidder Peabodies business and therefore GE Capital, the financial division of General Electric. And a year after the acquisition, the global stock markets crashed on October nineteenth, n seven and what was called Black Monday. The combination of events convinced Welch that he had made an error in judgment acquiring Kidder Peabody, and it took several more years and more scandals centering on Kidder Peabodies record keeping and allegations of reporting false profits, but GE would eventually sell Kidder Peabody off at a huge loss. Now that embarrassment aside, GE for the most part did very well in the eighties and nineties. The stock price for g E rose four thousand percent. Some sources state that when you take all the factors into consideration, it was more like five thousand two. Under Welch's command, he put off his retirement in order to secure an acquisition of Honeywell International. If you listen to my last episode, you know that didn't go well. The European Commission denied the merger for anti competitive reasons, and the man who hated to lose, Jack Welch, had to go out on a down note. But compared to GE, you could say Jack Welch got off easy. Now, this episode will cover what happened to General Electric since two thousand one, including the events that would create massive problems for the huge company. And there is ongoing disagreement as to whether most of the blame should fall on Welch's successor, or if Welch himself should shoulder some of that responsibility or some other party. So what the heck actually happened? Well, first, let me talk a little bit about g S stock, because that's going to come back around later in this episode a few times. So, for years, g E paid out a dividend on its stock. Not all companies do this, and a dividend is a payment that a company makes to distribute some of its revenue to its shareholders. So a company makes money and then distributes some of that money amongst the people who hold shares in the company. It's usually not very much per share. In fact, it's typically less than a dollar. Ges case, it was around thirty one cents for a long time. In the US, there are no rules about how frequently a company actually pays out dividends. Most companies will do it quarterly, so you would get one quarter of your dividend four times a year. So if it was a dividend of forty cents, that means every three months you would get a check for ten cents for every share you own. So it's not very much, but if you own a lot of shares, it starts to add up. And besides distributing revenue, it's also meant to incentivize shareholders to reinvest and buy more shares of stock in that company. So the idea is, oh, you got a dividend payout, it's enough for you to buy another share in the company, So you spend that dividend buying another share. That's the logic there. Well, when Welch first took over g E stock wasn't doing so great, it wasn't super high. A lot of investors thought of the stocks as essentially a dividend payout and not much else, so you wouldn't buy g E stocks with the idea of selling them at a higher price leader on the road. You know, you weren't thinking, I'm gonna buy now, because in five or ten years this stock is going to be worth two or three times as much. You bought g E stock because it paid out a dividend, So it would take a long time, but you would eventually make more money than you invested if that dividend were to hold steady. Now, when Welch took over, the stock price actually dipped a little bit after he had been run ge for a year or two, but another year later the entire stock market took a turn and it started to climb in value. This would be the beginning of eighteen years of a climbing market, a bull market in other words, even with events like Black Monday in Night seven taken into account, so you had moments where the market was not bullish, where it was crashing, but it would recover and then go back on its bullish route trajectory. If you will now collectively the SMP five hundred index, it would climb by two thousand and this was the same time that we started seeing packages like four oh one K plans replaced traditional retirement plans. Now that meant that stock market performance would become far more important to weigh more people. Like in the old days, it was just people who traded in stocks, and largely it was a lot of businesses that did that trading. Your average person didn't play the stock market that much. But now stuff like our retirement was tied directly into stock market performance. So suddenly everybody was really really focusing on the stock market, and it meant that it became far more important for stocks to do well. See before the nineteen eighties, stock market performance was you know, it was an indicator of a company's overall health, but most people didn't consider it the metric against which all companies should stand. You would worry more about the company's profitability, how much revenue is it bringing in, how much does it cost to do business, and how much profit is the company making. The share price wasn't as big a deal. That changed around the same time that Welch took over at GE, and Welch's philosophy happened to match this general shift in how businesses operated in the United States. Now, I don't say this to diminish Welch's contributions or GEES performance because the company's own stock outperformed the general market significantly. But I do also want to take the overall market performance into consideration, because while I don't want to take any credit away, I also don't want to give too much credit to Welch and his impact beyond what it actually was. Anyway, as the market improved, and as GEES performance in particular made its stock price rocket upwards, ge stocks were seen as more than just a dividend payout. The company continued to pay dividends, though, which again is going to be important later. Those dividends were largely funded by the incredible performance of g E Capital, that's the financial services division of General Electric. In the last year of Welch's tenure as CEO, gees stock price did take several hits, but then so did just about everybody else. In March two thousand, the stock markets performance shifted. It was no longer bullish. It was going into a bear market, so instead of growing, it was receding. The dot com bubble had crashed and that caused a bit of a stock market crisis. Companies that were in the dot com industry obviously they suffered the most. Many of them just were blinking out of existence after it became clear that those companies had no way to deliver upon the promises that they were making or to be able to justify the crazy speculation that drove their stock prices into the stratosphere before the companies had even figured out how to generate ascent in revenue. But even companies like General Electric, which were traditional, established, giant conglomerate companies, were affected by this change in the market. Between March two thousand and when Welch would hand over the CEO role to his successor, Jeff Emilt, in early September two thoe, the stock price for g E had fallen by twenty four percent. Now I point that out because often the simplified story about what happened to GE was that Jack Welch stepped down and Immolt fumbled the ball, that Emilt was a terrible CEO and he could not follow Welch's lead. But in reality, I think the story is far more nuanced, and we have to remember that the market itself was changing during this transition. It wasn't the case of Emilt being handed a profitable company on a silver platter and nothing was going wrong, and he just messed it up from there. Uh, he did make a ton of decisions that would not turn out to be great for Ge. So I don't want to diminish his responsibility either. I just think it's important for us to take all these factors into consideration. Okay. So Welch stepped down on September six, two thousand one. Emilt took over on September seven, and four days later, the United States was rocked by a series of terrorist attacks that shook the country to its core. Those effects were widespread. The tragedy touched thousands of people directly, tens of thousands millions of people indirectly. It transformed the New York City Escape permanently, and it caused disruption in the markets as well. Wall Street made the decision to not open the New York Stock Exchange the morning of September eleven, two thousand one, fearing that the terrorist attacks would prompt panic selling amongst shareholders, making a truly horrible situation even more dire. Both the New York Stock Exchange and the NASDAC would remain closed until September two thousand one, when trading resumed, The market fell by nearly seven hundred points. That was a decline of almost mobile actually more than seven percent, and that was just the first day of trading. Losses actually continued throughout that week. I hate even talking about this, but it is important in order for us to understand ges story. At this stage in the company's history, business philosophies had changed significantly in the United States in the nineteen eighties and nine nineties. We had created a new environment where share value was the most important metric for a business, the company's stock price. If the stock price was going up, that was good. That was pretty much the end all be all. A company wasn't thought of doing well unless its stock price was growing year over year, or at least the overall value of the company when you take in at stock. Because of course, companies can do things like stock splits so that the price of an individual shaff stock goes down, but because you've doubled the number of stocks or a number of shares i should say, out on the market, the value of the company itself remains stable and can continue to grow. This drove a lot of business decisions that put shareholders above just about everything else in the company, including customers. Now, in my opinion, It's one of the biggest economic mistakes made in recent decades, as it has created a world in which many company executives Phoe becus very much on the short term to mid term gains as opposed to long term strategies. So often I think companies are making choices that hurt the company's chances to survive in the long term, all in an effort to drive that stock market price further up. Anyway, this disaster impacted gees stock price along with countless other companies, and you can't lay that blame on Emilt. It's not his fault that this series of awful attacks happened four days after he took control of the company. In the wake of nine eleven, all airline operations in the United States stopped for several days. That had a direct impact on gees business, which included building stuff like jet engines for the airlines and also leasing out parts for various companies. All of that was put on hold. On top of that, gees insurance business was suddenly inundated with claims which to come and he had to make good on For one thing, ge was responsible for the insurance policy for the World Trade Center, which as I'm sure you all know lost the two towers that made the center iconic back in two thousand one as a result of those attacks. Prior to September eleven, it wasn't unusual for ge to lean a bit heavily on ge capital to kind of smooth things over. The branch was so profitable, that division of ge was so profitable that could help conceal if another division weren't quite doing so well. A lot of gees accounting practices have over the years been called opaque, meaning that you might get the end result of how well the overall company is doing, but you might not know how it got there, which divisions are doing well versus which ones are not. The overall performance of the company was what mattered, right, so who cares what's happening in the individual divisions. Well, Emil would get to work selling off parts of gees insurance business, though the company would still maintain some of that business up to present day. I'll explain more about that in a little bit. And he also began to look at possible acquisitions. So what things turn out well, we'll find out. But spoiler alert, no they don't. But before I get into that, let's take a quick break. One thing I want to mention before I forget it is that during Emilt's run as CEO of GE, there was a particularly wasteful practice going on that would later get a lot of media attention when it was made public. Emilt traveled a lot. He would meet with various GE executives and facilities all around the world, as well as with other company and industry leaders and politicians. Particularly, he would do this when he was on the lookout for possible acquisitions, and he made a lot of those as he was the EO of g E. Now, to hop over to the other side of the world, he would take one of the g E owned business jets. They had six of them. But here's the curious thing. Every time you would travel, there would be a second empty jet that would follow along behind and stay at the same airport and wait there. And then when Emilt would fly back, so did the empty jet. Now the justification for that practice, which again eventually became public, in which a jet carrying only a crew no passengers, would burn through fuel it would generate pollution. The justification was that Emilt was a very important person on very important business and yes, I capitalized very important in my notes in this section. As such, he couldn't be delayed by mechanical failures. His business was far too important. So the empty jet was essentially a backup transport in cases Mary should experience a mechanical delay. It was his just in case measure, a very expensive, wasteful measure. The company would actually stop that practice in two thousand fourteen, which was a few years before Emilt would be replaced as CEO. Spoiler alert, will get there, all right, So back to the post two thousand one g E. In two thousand two, ge would acquire a business from a formerly huge company. That company was in Ron, which went bankrupt in two thousand one after its own massive scandal, which I'm not going to get into here it's outside the purview of this episode. But one of the many parts of in Ron to go up on the auction block after the bankruptcy was a wind power business. Emilt was, in his own words, not enthusiastic about wind power. He felt wind power wasn't profitable and it was too dependent upon subsidies, and those subsidies could disappear at any time, according to which way any government budget might be headed. So there was no way to control that. If the subsidies went away, you'd be saddled with a really expensive and nonprofitable business. But EMIL gave the authority to executives who really believed in that acquisition to go forward with it, and they went and purchased the division. It would end up becoming profitable and perhaps should have served as a lesson for future emilt And I'll get back into what I mean about that in just a little bit. In two thousand three, ge announced its intention to purchase a majority stake in Universal Pictures. That was a company that was under the control of another company called Vivendi, a French company. In this deal, g E would acquire eighty percent of Universal. Vivindi was going through kind of a financial crisis at the time, so g E merged Universal with NBC, creating NBC Universal and the deal included several cable television channels like Sci Fi Network, USA Network, as well as the un Reversal film studio the Universal Theme Parks. It did not include Universal Music that would remain completely under Vivendi's control, but lots of the other Universal properties were part of this deal. Vivendi would have twenty control of this, and then UH you would have GE with control and you got INBC Universal. GE would not hold onto this property forever. G was acquiring other companies as well at this time, adding them to the various divisions of General Electric. GE Healthcare was growing with companies like UH Instrumentarium and Amersham Plc. Those were being added as part of g E Healthcare. G Capital was also growing with similar acquisitions, including some subprime mortgage loan companies, and we'll get into that in a bit. And GE would also build out its industrial, consumer and energy businesses and made several acquisitions of companies in the oil industry, also in banking and that old horse of fossil fuels in general, because he really believed that that was going to be the mainstay for energy production or electricity production. I guess I should say for the foreseeable future. Throughout this time, GE Capital would remain the most profitable division of General Electric, and so the company would lean more heavily upon GE Capital in order to do things like pay out that dividend to shareholders that set up GE for disaster. Just a couple of years after GE purchased subprime mortgage businesses, the world plunged into a global economic crisis, which we often refer to as the two thousand eight financial crisis, but really the crisis first started becoming apparent in two thousand seven with the subprime mortgage market. So what the heck is a subprime mortgage Well, the short answer is it's an incredibly risky, predatory, and irresponsible market practice that depends upon people who are some of the most vulnerable folks out there. Maybe that's just me putting my own bias on things, but it's hard for me to see the whole concept as anything other than dumb and harmful. But here's how it breaks down, all right. So you know about credit scores, right, They're supposed to represent how much of a risk or a lack of risk a person is when it comes to paying off debt like loans. So if you have a high credit score, it means your history shows that you're diligent about paying off debt and that you represent a low risk for future loans. It does not mean that you've never had debt. You want to have some debt and then you want to be able to pay it off because that's what gets you that high credit score. But if you have a low credit score. It means that in the eyes of a lender, you represent a risk. Maybe you have a spotty employment history, maybe you have a lot of outstanding debt, maybe you've missed some payments on some loans. The purpose of these credit scores is to give lenders enough information to make responsible loan agreements. Subprime lending involves giving loans to high risk in individuals, and typically you pair this with really high interest rates and other restrictions in order to mitigate the risk you incur when you give a loan out to one of these people who have a very low credit score. And so people who are looking to buy homes or to take out other loans were securing the money through financial institutions with these subprime mortgages and subprime loans, but with incredibly punishing restrictions on those loans, and surprise, surprise, a lot of folks found it impossible to pay off that debt, and ultimately many of the companies that were making those loans found themselves in a hole that they had dug themselves and it was too deep to climb out. Everyone was put in an awful situation and it had a really big ripple effect. Part of that ripple led to an investment bank called Lemon Brothers collapsing in September of two thousand eight. Other major financial institutions were in danger of following suit. The whole thing was leading to a global economic collapse, with the financial industry on the brink of total disaster. That's when various parties swooped in to rescue the situation, bailing out banks that had overextended themselves. This in turn ticked off a lot of folks who are directly affected by this problem. These were people who had been evicted from their homes because they weren't able to make their mortgage payments, or people who are otherwise hurt by the subprime mortgage crisis, either directly or indirectly. And it didn't help that many of these people saw the bailouts as being rewards for the same financial institutions that caused all the misery in the first place. Well. Ge Capital was one of those institutions, and it was hit hard by the two thousand eight crisis. Worse, because General Electric was so dependent upon ge Capital for revenue, it put all of General Electric at risk. To help whether the storm, the company announced it would attempt to raise twelve billion dollars through a common stock offering or in Buffett Investor Extraordinaire also helped out by investing billions of dollars in GE. In retrospect, many analysts have said that GE was playing an increasingly dangerous game since Welch had transformed GE Capital from a small division that helped consumers get financing to purchase big appliances like refrigerators, into a global financial institution. Gees more traditional divisions like it's lighting business, industrial equipment business, medical equipment business, it's a via Asian businesses. All of these secured for the company the respect of Wall Street because they were dependable parts of GE. They could make a dependable revenue, and they were traditional, They had a long history with the company that gave the company a lot of room to swing for the fences with GE Capital and thus engage in more risky behaviors in an effort to win big payoffs, drive that stock market price up, and again pay out those dividends. And that risk was somewhat necessary because of that changing climate of business. So you had to grow year over years. Traditional businesses usually had steady performance and they did grow, but they grew slowly, so that wasn't the kind of performance that would really when you the the front cover of various business magazines, you wanted to really go for it. So GE Capital was that method. That was how GE was going to be the leader. Then it became an anchor weighing the company down in the wake of this financial crisis. Emil would start trying to sell off parts of GE Capital, but it wasn't easy. Before Buffett rushed into help, GE famously couldn't secure overnight loans to keep the business afloat. Most investors felt it was far too risky to pour money into General Electric, so the house that Jack built was in danger of crashing to its foundations. Even with the influx of investment cash, not to mention an incredible one thirty nine billion dollars of federal government bailout money, GE was still struggling, and one thing barreling down at the company was that dividend payout. The dividend made g E stock one of the most popular stocks on the market. Tons of people owned g E stock because it paid out dividends, but paying out that dividend was going to put a huge burden on the company, It just wasn't going to have the cash to do it, so in two thousand nine, Emil decided to cut the dividend from thirty one cents a share down to ten cents a share. It would mark only the second time the company had reduced its dividend payout. The first time had been during the Great Depression, and spoiler alert, it would not be the last time they would have to cut the dividend. Also, in two thousand nine, the company announced its intention to sell off NBC Universal to cable provider Comcast. To do that, it would first have to a wire the other twenty percent of NBC Universal from Vivendi they still had that share. That process took some time, so it wasn't until two thousand eleven that GE would sell off a majority stake in NBC Universal to Comcast. At that time, GE would still retain a forty nine share in the company, although it did have the intention to sell the rest of those shares off a few years later. Uh This would become a common plot element and a source of jokes in the series Thirty Rock, just as ges ownership of NBC Universal had been a source for humor previously in that series. Two years later in Comcast would arrange to purchase the entirety of NBC Universal from g E, and g E would get out of the entertainment and media business and it would use some of that money to cover some of the debt that GE had accrued following the two thousand eight financial crisis. The NBC Universal deal was just one of several that GE pursued in the first decade of the two thousands. The company looked to sell off some of its businesses and divisions in an effort to refocus on core strategies. Emilt kept working on ways to extract g E from g E capital business, and he didn't have a whole lot of success with it, and he had his eyes set on another company to try and turn gees prospects around. The company in question was a French company that was making coal powered turbines. In other words, it was a company that built stuff for the energy electric industry electric utilities, right specifically for fossil fuel based power companies. The name of this company was Alstom A L S T O M. And, as it would turn out, the timing could not have been worse, though it is arguable over whether or not that was predictable. At that time, Emilt was hoping that Alston would become a key component in g ees Power division. He thought that GE could take this French company which had been struggling financially and used GES processes and pra this is to turn Alstom around. Then he would use Alstom to meet the electricity demands of clients all over the world, and all with fossil fuel based turbines. So what went wrong, Well, I'll tell you after we take this quick break. Not everyone at g was crazy about acquiring Alstom. Several executives felt that the asking price was far too high, but Emma was optimistic that g E could take Alstom and turn it into a profitable business. As it turns out, he wouldn't get the chance to stick around long enough to see how far Allston would fall. But I'm not quite there yet. GE needed to do something. The company's oil and gas services, which revolved around actually extracting oil, you know, making the equipment that would be used for that sort of stuff. Those were on the decline as energy prices were collapsing. But the power division, GE Power, the part of GE that actually reduced equipment that was used to generate electricity that was still a reliable revenue source. In fact, at that point it was the largest source of revenue for GE, and it had a high profit margin to boot. G E made a lot of money from that particular division. So if g E could do the same thing for Alstom and turn things around, then in Emilt's mind, the company would have a rock solid foundation from which to work. But a few big factors would hamper the success of Alstom. One was that there just wasn't as big a demand for turbines as Emilt had anticipated. They got fewer orders than what they were hoping for. In places like the United States, power companies were improving efficiencies and so they were able to do more with less. There wasn't as big a demand to add additional infrastructure to meet consumer needs. Then there was the fact that Alstom's employees were very highly compensated, which was good for them, but rough for GE. And regulations in the EU meant that Emilt couldn't just pull a jack well and start laying off employees in an effort to cut costs. EU had protections in place to prevent that sort of thing, so you couldn't just make the books look better by laying off a bunch of people. And the EU also blocked one part of the business from GE acquiring it. That was Alstom's service business, their maintenance business that would have supplied revenue as the company would provide maintenance services for its clients. That was off limits. And the other major factor was that the cost of building out renewable energy systems fell drastically not long after GE completed the ten billion dollar acquisition of Alstom in two thousand fifteen, So it looked like the wrong bet right buying a very expensive fossil fuel based company just as renewable energy prices were falling to the point where they were uh they could compete against fossil fuels. Now, around the same time that the Alstom deal was starting to take shape, GE would spin off its credit card business, which was part of GE Capital, and it would become Synchrony Financial. And I'm guessing it filled a lot of folks at GE with a bit of dismay to see that once it was free of General Electric, this former division actually outperformed all expectations. It did much better on its own than it did as part of General Electric. On top of that, the oil price crash pushed GE to merge its own oil and gas division with a company called Baker Hughes, and then g E got a majority ownership in the Baker Hughes company became Baker Hughes a GE company, at least for the time. Oh and two thousand fifteen, GE formed a unit called g E Digital. G E had been in various digital products for a while, but marked the move for the company to create an independent business unit. Most of the unit's focus was on a software product called Predicts, sort of a play on Prediction, and it was a business to business product. It was meant to help big companies like airlines identify strategies and managed assets. But over time that unit would experience slow revenues and technical issues, and in eighteen there was real serious talk of GE potentially selling off the division entirely. That is yet to happen. GE Digital still as part of GE, but GE did do a few rounds of layoffs, so things have not gone smoothly for that part of the company. Back to GS leadership woes. In October two thousand seventeen, GE announced that Jeff Emilt would be stepping down as CEO, and he had served in that role for about sixteen years. The company's stock price was around a third of what it had been when he took control. Emerald had spun off numerous businesses over the years, including gees plastics division, if you remember, that's the division that Jack Welch had actually come to. He had also spun off the appliances business. He's spun off the insurance business, or a lot of it anyway, and more. And by that time much of the upper leadership at g E got caught in a shake up. There were members of the board who left, there were other executive members who left, and investors, employees, and retirees were all growing more and more unhappy. The company had lost and estimated one hundred billion dollars worth of shareholder wealth over the previous decade and a half. Critics stated the Emilt had a habit of chasing after fads, investing in businesses at the peak of their visibility and then later selling them off for less than what g had paid for them in the first place. And people said the ge method was to buy high sell low, which in general is the opposite of what you want to do. I think O don't. No, I'm not a business guy. Not every deal Emilt made went sour, by the way, the in Ron deal in which g took over that wind power business ended up being very profitable, though again Emilt initially opposed that deal, and when GE sold off its plastics division it was for a higher price than what a lot of analysts expected, but generally speaking, the deals didn't break in gees favor under Emilt's watch. Emeralt's successor was John Flannery, who had up to that point headed up gees healthcare business and had worked for GE for thirty years. Flannery's goal was to build a strong core for GE around its aviation business, its power business, and its healthcare business, and there was talk of the possibility that GE itself might break apart into several different companies. The reaction to that idea kind of fell across the spectrum. Some people saw it as a necessity if the various parts of GE were to stabilize. Others saw it as the end of a legacy, and they had a bit of a point. One of the discussions was about possibly selling off ges lightbulb business that was the business that started it all, really all the way back in eight seventy eight and the Edison Electric Light Company. But innovation could sometimes be a double edged sword. The move towards l e ED lights, which can last for thousands of hours, meant that there just wasn't as big a demand for light bulbs anymore. Because if you don't have to worry about the lightbulb burning out on a regular basis, there's not much call to buy new ones. You just buy the l e ed s. You might sell your house before you ever have to change that lightbulb. So lightbulb sales were starting to drop. There just wasn't enough call for them. I bet it made GE long for the days when it had formed that secret lightbulb Cartel in which companies agreed to limit the useful life of a lightbulb through engineering. And things were rough for shareholders too. Since GE had cut its dividend payouts a few years earlier, the payouts had slowly increased again. They had grown up to twenty four cents per share, so that was an improvement. It was still below the thirty one cents that it it had been at its peak, but it was better. But in late, G had to cut the dividend again, that time down to twelve sense, and then not too long after that they were forced to do another cut. They just realized that there just wasn't enough money to cover the dividend payout, so the dividend got cut down to just one cent per share. It just didn't have the money to cover the payments otherwise. In addition, G was having to deal with an unexpected cost. The company had not issued any long term care insurance policies since two thousand six, and in fact, it had spun off almost its entire insurance business with a company called gen Worth. However, in order to make that deal happen, GE was forced to agree to cover any losses from long term care insurance. It was just seen as too great a financial risk otherwise, so GE signed that agreement. Now, those long term care agreements are policies that are meant to cover the elderly, and it turned out that insures, not just a g E, but across the industry, had underestimated how long policy holders would actually live, and the medical costs, including things like nursing home fees, would tend to get higher as customers got older. So as people lived longer, they were creating a larger and larger drain on resources for these insurance companies. Like if you looked at it from a financial perspective, the person who was paying for the policy was getting way more benefits out of it than they were paying into it, and that was an issue. So this was a huge cost for GE, and it's no wonder that the company was continuing to try and find ways to get completely out of the insurance business. Now. To meet the obligation, Flannery had to redirect fifteen billion dollars of GES wealth in two thousand eighteen just to cover the obligations of that insurance policy stuff. And the company was also hit with a seven and a half billion dollar after tax charge, so things were really rough. Also in two thousand eighteen, GE would leave the dal Jones Industrial Average. If you listen to my previous episodes, you remember that GE was one of the original companies listed on that average when it was first created, and it was the only company of that original list that still existed in two thousand eighteen. It had been part of the Dow Industrial Average for a hundred eleven years. But the performance of the company, along with the perception that industrial companies in general weren't really key indicators for overall market performance meant that those days were over, so in its place, a different company would join the DOW. That was Walgreen's Boots Alliance drug store chain company. Meanwhile, a problem with most recent heavy duty gas turbines caused other issues for General Electric. A utility in Texas had to shut down two different power plants for repairs due to failures with these new turbines. That news would end up hurting GE power sales, which weren't doing super a gray at that moment. Already, Flannery's efforts were seen as insufficient by the board of directors, and on October one, two thousand eighteen, the company announced that Flannery had been removed from the position of chairman and CEO, and the board appointed an outsider, Lawrence Culp, to serve as the new chairman and CEO. Flannery had been CEO for about fourteen months and then he was out. That would give Flannery the unenviable distinction of having served the least amount of time as CEO of all g e C e O s, at least so far. Culp would be the third CEO to lead the company since two thousand seventeen. The company Culp took over, was in turmoil and there were pending investigations into g S accounting practices, which had for years, as I said earlier, been described as opaque. It's polite way of saying the company wasn't making it easy to see where money was coming from or where it was going to. G E had already settled sec charges in the past, but there were others that sought to find out more about the finances of the company. And then, of course there was no recent report from Marcopolis, the guy who was one of the early whistleblowers on Bernie made Off before everyone was aware of the Ponzi scheme that made Off was running. The Marcopolis report alleges that GE is essentially robbing Peter to pay Paul, shifting cash around frantically to fend off insolvency. It's kind of like a shell game to trying to move money around fast enough so that the company doesn't collapse. G E, I should add, disputes this report and says that the allegations are baseless and it cannot be ignored that Marcopolis himself actually stands to make a lot of money should ges stocks decline and value. So you could argue there is a motive for Marcopolis to try and drag ges name in the mud. Uh So their valid arguments on either side about whether or not this report is something you should pay attention to or if it's something that has ulterior motivations behind it. That being said, the fact that the Marcopolist report came out doesn't change the fact that there were already numerous investigations government investigations into g S businesses that could end up hindering the company further. So there seems to be smoke. There's just a question of is the fire what Marcoupolists is saying or is it something else? On top of all the problems the company faces is another external force that could really spell doom. Many financial analysts say that signs point to another global recession. Already, industries like manufacturing and freight are in a bit of a slide, so a recession would greatly exacerbate general electrics problems. So are we seeing the end of days for a company that helped launch the technological age? I don't know. I don't feel great about it, but it is a very large company. It's not like any of these things is definitively the death knell for General Electric. And there's a lot of stuff that could happen. We could see GE get broken up into smaller companies that individually are able to succeed much better than they can collectively. All of that remains to be seen, but it was fascinating to learn more about this company's incredible, rich history. And UH. I know that this last section was much lighter on the tech side, as I said at the beginning, but at the same time, I thought it was important for us to understand how a company that had been so instrumental in setting the tone for the technological age could be facing extinction UH in two thousand nineteen. So here's hoping that things turn around for GE, that the company is able to reconcile all these accounting practices, that it is able to deliver value two employees to customers, to retirees, and two shareholders, not just two shareholders. And that wraps up this episode. If you have suggestions for future topics of tech stuff, whether it's a company, a technology, a concept in tech, anything like that, let me know send me an email the addresses tech stuff at how stuff works dot com, or draw me a line on Facebook or Twitter. The handle of both of those is text Stuff hs W. You can also pop on over to our website that's tech stuff podcast dot com. You've got to find a link to the archive of all of our previous episodes there, so you can look up all the different stuff we talked about, including the previous episodes I did on g S History where Chris Pallette and I sat down and talked about it. But the show was very different back in those days. But if you want to hear a different take on this same sort of stuff, you can check that out. That one came out, I believe in two thousand twelve. And don't forget. We also have a link to our online store where every purchase you make goes to help the show and we greatly appreciate it, and I will talk to you again really soon. Text Stuff is an I Heart Radio production. For more podcasts from I Heart Radio, visit the i Heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows.