It’s time for GE to let go of GE

Bloomberg photo by Ore Huiying
The logo of General Electric is featured on a banner in Plant 23 at the GE Aviation Engine Services facility in Singapore, on Nov. 22. 2021.

General Electric Co.’s three-way breakup is meant to be a moment of rebirth for the 130-year-old industrial giant.

This is the company that commercialized modern lighting, developed the X-ray machine, invented non-reflective glass and made the silicon rubber for the boots used by Neil Armstrong and Buzz Aldrin during their walk on the moon in 1969. A plane powered by jet engines that GE had a hand in developing takes off every two seconds, and its power equipment helps generate one-third of the world’s electricity.

But this is also the company that allowed its finance arm to grow so opaque and unwieldly that wrong-way bets almost sank the industrial parent during the financial crisis and more recently created a surprise $15 billion reserve shortfall tied to a long-term care insurance business. Since the start of this century, GE has developed a reputation for making bad acquisitions – from the 2015 purchase of Alstom’s energy business, which resulted in a $22 billion writedown, to its ill-fated foray into oil and gas and expensive bets on a digital reinvention that failed to pan out – and for taking a loose approach to financial reporting. Former Chief Executive Officer Jack Welch once described GE as “the greatest people factory in the world,” but his management style and business culture is now being blamed for breaking the company, those that its executives parachuted in to run, such as Boeing Co., and perhaps the American capitalist model altogether.

While current CEO Larry Culp has made meaningful progress in cleaning up GE’s act and streamlining its operations, the stock has floundered since November, when he announced plans to split the company in three. Many investors seem to prefer to wait for the opportunity to own shares of the new companies rather than ride out the messy and long process of unraveling the GE behemoth – particularly amid concerns about a recession. So it’s surprising that given the opportunity to cast its businesses in a new, independent light, GE is choosing instead to anchor them in name to the parent’s legacy.

GE announced on Monday the branding for the three companies it plans to create. The health-care division is scheduled to be spun off first, in early 2023, and will be called GE HealthCare. The amalgamation of GE’s gas power, renewable energy and digital assets, which is set to be carved out in early 2024, will be called GE Vernova. The remaining aerospace operations will be called GE Aerospace. The last business will retain the rights to the GE trademark, which it will license long term to the other companies. GE says its brand is valued at almost $20 billion and provides a competitive advantage with customers. But it also comes with a lot of baggage, particularly in the eyes of investors. If the lesson of GE’s past is that it was too bold when it should have been cautious, the lesson of its present may be that the company is too cautious about letting go of its legacy when it should be bolder.

When Culp’s former company, Danaher Corp., announced it was breaking into two in 2015, Steven Winoker – then an analyst at Sanford C. Bernstein & Co. but now GE’s head of investor relations – had this to say: “Two Danahers? What’s not to like about that?” It’s difficult to imagine anyone saying the same about three versions of GE. It’s also worth noting that despite its sterling reputation, Danaher didn’t pass down its name; the spinoff of its industrial business was called Fortive Corp.

The new GE names are boring, and that has its benefits. Keeping all three entities inside the GE master brand will likely have relieved the company’s lawyers, who were saved the tricky commission of securing a trio of novel global trademarks. Notwithstanding the company’s ups and downs, the GE monogram has been evolving elegantly since the 1890s and is not to be discarded lightly, nor without a better alternative.

The most imaginative of the new names is GE Vernova. The explanation for how the company came up with that branding suggests it’s probably for the best that the creative impulses ended there. “Ver” is derived from “verde” and “verdant,” to signal the greens and blues of the Earth, while “nova” comes from the Latin word “novus,” which means new. This is meant to capture “a new and innovative era of lower carbon energy that GE Vernova will help deliver.” Sure.

There is a plausible path for that energy-focused business to eventually become known as just Vernova. This would be akin to how Baker Hughes Co. eventually dropped the name Baker Hughes, a GE Co. – a mouthful of a moniker that was adopted upon the merger of the two companies’ oil field services businesses in 2017 and became significantly less desirable after the GE parent ran into financial difficulties. GE still owns about 4% of Baker Hughes. It makes sense that the Vernova energy businesses would have the most direct route to a non-GE future as they are the ones with the most checkered past and the most challenged financial outlook. By contrast, it seems unlikely that GE HealthCare will one day simply call itself “HealthCare,” while the aerospace business goes by “Aerospace.” This branding leaves limited room for the resulting companies to carve out their own identity.

Design-wise, GE’s spinoffs follow in the footsteps of Facebook’s recent restrained rebranding as Meta Platforms Inc. – an attempt to reframe the company within the metaverse without provoking undue controversy.

There is also an echo of Volvo’s earnest sensibility, as parodied in the 1990 movie “Crazy People”: “Buy Volvos. They’re boxy but they’re good. We know they’re not sexy. This is not a smart time to be sexy anyway, with so many new diseases around. Be safe instead of sexy. Volvo. Boxy, but good.”

If GE’s color choices are predictable – “compassion purple” for GE HealthCare, “evergreen” for GE Vernova and “atmosphere blue” for GE Aerospace – they at least have pretensions to the poetic. But the variety of sans-serif typefaces is a tad more chaotic. GE HealthCare uses approachable curves and a cute rotation of its a’s and e’s; GE Vernova is set in bland all-caps, with a clunky tag line to explain the name; and GE Aerospace deploys an industrial, almost federal face which feels more New Deal than next century.

There is nothing screamingly wrong with GE HealthCare and GE Aerospace as brand names. For all the negativity surrounding GE in financial circles, investors have short memories. The company’s challenges are also fairly complex, and there is a broader world beyond Wall Street in which the average person doesn’t spend much time dwelling on long-term care insurance foul-ups and acquisition writedowns. GE’s reputation has never been tarnished in the same way as, say, Monsanto Co., which is associated with the Agent Orange herbicide used in the Vietnam War and genetically modified crops. Bayer dropped the Monsanto name when it acquired the company in 2018. But there is nothing particularly inspiring or exciting about the names GE HealthCare or GE Aerospace, either, and typically companies embarking on a reinvention want at least some inspiration and excitement.