GE announced the results of its strategic review, and set a new goal to focus on Aviation, Power, and Renewable Energy. GE says its aim is to create a simpler, stronger, high-tech Industrial company.
“Today marks an important milestone in GE’s history. We are aggressively driving forward as an aviation, power, and renewable energy company—three highly complementary businesses poised for future growth. We will continue to improve our operations and balance sheet as we make GE simpler and stronger,” said John Flannery, chairman and CEO of GE.
GE’s energy strategy, driven by GE Power and GE Renewable Energy, is based on offering a full range of energy solutions across the electricity value chain that bring affordable, reliable, efficient energy to businesses and consumers. GE powers more than one-third of the world’s electricity and has a valuable installed base of approximately 7,000 gas turbines, with a track record of increasing productivity.
GE says it will continue to invest for the future and lead in innovative technologies like additive manufacturing and digital to lead the next wave of industrial productivity. However, the company is making fundamental changes to how it will run the company.
In addition to the pending combination of its Transportation business with Wabtec, GE plans to separate GE Healthcare into a standalone company, pursue an orderly separation from BHGE over the next two to three years, make its corporate structure leaner and substantially reduce debt. GE’s Board of Directors unanimously approved the new plans.
The new GE Operating System will result in a smaller corporate headquarters focused primarily on strategy, capital allocation, talent and governance. It also intends to result in better execution, increased speed and is expected to generate at least $500 million in corporate savings by the end of 2020.
Under the new GE Operating System, most resources and services traditionally held at the headquarters level will be realigned to the businesses. GE is targeting an Industrial net debt-to-EBITDA ratio of less than 2.5 times and a long-term A credit rating. It also plans to reduce Industrial net debt by approximately $25 billion by 2020 and maintain more than $15 billion of cash on the balance sheet.
“GE’s mission and technology change the lives of billions of people around the world,” added Flannery. “We will now move forward with purpose to make our company simpler and stronger and accelerate growth across our businesses. I’m confident that today’s actions, in conjunction with other changes we have already made, will produce improved operating results and increased shareholder value going forward. We are focused on executing the strategy and implementing the structure we’ve laid out today to position our businesses for future growth.”
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