General Electric, the iconic industrial corporation of the late 20th century, once a powerful conglomerate renowned for its management prowess, is making a final break with its storied past.
The 129-year-old company announced on Tuesday that it planned to split itself into three publicly traded businesses, a remarkable change at a company whose reach into American life once extended from light bulbs in the home to the engines on jet airplanes.
In a conference call with analysts, H. Lawrence Culp, an outsider brought in as chief executive three years ago, described the planned breakup as a “defining moment” for G.E. and the culmination of his effort to remake it as a “more focused, simpler, stronger high-tech industrial company.”
G.E.’s plan is to spin off its health care division in early 2023 and its energy businesses a year later. That would leave its aviation unit as its remaining business, which would continue to be led by Mr. Culp.
In speaking to analysts, Mr. Culp also portrayed the move as being in step with the times, as other industry conglomerates have streamlined. The spinoff plan, he said, “heightens focus and accountability” and “just makes everybody better.”
Industrial conglomerates have fallen somewhat out of favor. In the last few years, G.E.’s big German rival Siemens has spun off its health care and energy businesses. And Honeywell International, another wide-ranging industrial company, has sold off some operations. But none have undergone as drastic an overhaul as G.E. has planned.
In its heyday, the G.E. corporate empire was fueled by rising profits. For years, it used that money to expand into new businesses. It owned NBC, powered locomotives and developed medical imaging technology. Its complexity was a part of the company’s pitch to investors.
G.E. also manufactured executives. The company became a training ground for them, creating a growing cadre of star managers. They were selected, trained and moved from one business to another every few years.
Ambitious young people flocked to the company to work there whether for a long career or for just a few years. Former managers at G.E. held top leadership roles at many American companies.
But in some ways, the fall of the company came because of mismanagement. Under Jack Welch, its leader for two decades until 2001, G.E. built up a huge finance arm. The assumption was that G.E.’s managers were the best in the world, and there was easy money to be made on Wall Street.
The buildup backfired when the financial crisis hit in 2008, putting G.E. in a credit crunch. Its chief executive at the time, Jeffrey R. Immelt, moved to drastically pare back the big finance unit, GE Capital.
Other businesses hit hard times because of the financial crisis as well, and some Wall Street firms collapsed. But few outside of Wall Street are still paying a price like G.E. Struggles and surprises have continued in the financial business, and in a big power-generation business, which overexpanded and misread demand.
Over time, analysts say, size worked against the company, as bureaucracy sapped corporate agility.
“G.E. got caught in the past — and now it’s the end, it’s over,” said Scott Davis, chief executive of Melius Research, an independent financial analysis firm.
In 2017, John Flannery, a longtime G.E. manager, replaced Mr. Immelt. He quickly made it clear that he thought the era of giant conglomerates was over, saying that G.E. would become smaller and simpler. But the company’s issues persisted, and financial performance continued to disappoint.
In June 2018, G.E., the last original member of the Dow Jones industrial average, was dropped from the blue-chip index. By the fall of that year, Mr. Flannery had been forced out, replaced by Mr. Culp.
The company has also paid hundreds of millions to settle charges that it misled investors.
Cost-cutting accelerated under Mr. Culp. G.E., which had more than 300,000 employees worldwide in 2014, now has 161,000 workers.
Investors, including Trian, the shareholder activist firm led by Nelson Peltz, have pressured the company to spin out or sell various businesses, and they cheered the move on Tuesday.
“Trian enthusiastically supports this important step in the transformation of G.E.,” a spokeswoman for Trian said.
Shares of G.E. climbed more than 6 percent in early trading Tuesday.
This is a developing story. Check back for updates.
Shares of Tesla fell sharply for a second consecutive day, dropping about 7 percent in early trading Tuesday, in a continuing shakeout after Elon Musk, the company’s founder, suggested on Twitter that he would sell 10 percent of his stake in Tesla.
Tuesday’s losses put the stock down more than 11 percent this week, nearly erasing the series of gains it had seen in the two weeks after Tesla’s market value exceeded $1 trillion for the first time.
On Saturday, Mr. Musk posted a poll to Twitter asking if he should sell some of his Tesla shares, saying that he would “abide by the results of this poll, whichever way it goes.” About 58 percent of respondents voted for him to sell shares.
Mr. Musk owns 17 percent of Tesla’s shares, a stake worth about $200 billion at the time he tweeted the poll. His weekend tweets were a pledge to sell about $20 billion of the stock.
Regardless of the Twitter poll, Mr. Musk may soon have needed to sell a big chunk of his shares anyway, Stephen Gandel reports for The New York Times’s DealBook. That’s because Mr. Musk holds nearly 23 million stock options that have vested and will expire in August 2022.
Most stock grants allow executives to avoid paying taxes for years, and perhaps forever, as long as they don’t sell the shares they get from converting the option. But the structure of Mr. Musk’s options means that they might not entirely qualify for the preferential tax treatment, and he could owe more than $10 billion in taxes.
Separately, on Monday Mr. Musk’s brother, Kimbal Musk, disclosed in a regulatory filing that he had sold about $109 million worth of shares in Tesla on Friday.
Here’s what else is happening in markets:
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The S&P 500 was down about 0.5 percent, on track for its first daily decline after eight straight days of gains.
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Oil prices were slightly higher, with West Texas Intermediate crude up about 1 percent to $82.72 a barrel.
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Yields on government bonds were lower, with the yield on 10-year Treasury notes down as much as 0.09 percent, or nine basis points, to 1.42 percent.
Rolls-Royce, the British jet engine maker, said on Tuesday that it was forming a new business to build a series of smaller, cheaper nuclear reactors as Britain looks for ways to cut carbon emissions and to reduce the costs of nuclear energy.
The kind of reactor proposed by Rolls-Royce would cover about two soccer fields, or about one-tenth the acreage of a conventional nuclear power station, the company said.
These plants would generate less power — about one-seventh the output of the giant nuclear installation being built at Hinkley Point in southwest England.
But Rolls-Royce said it hopes to reduce construction costs to around £2 billion ($2.7 billion) each, compared to an estimated £22.5 billion for the Hinkley Point plant. Some of the savings would come from building a large number of plants and making modules in factories that can then be assembled at sites.
The company hopes to build 16 of the plants, known as small modular reactors, and said each could power around one million homes.
The British government will contribute a grant of £210 million to develop the plants, while Rolls-Royce and its partners, including Exelon Generation, an American nuclear power company, and BNF Resources, a private company, would together invest £195 million over three years.
The government is looking for sources of clean power to replace Britain’s aging nuclear plants, although the Rolls-Royce models are unlikely to come online for at least a decade.
Along with being a tool for hitting ambitious emissions targets, the government also views the small nuclear program as a way to deliver on its promise to generate jobs in northern England, where Rolls-Royce said much of the investment would be based. The government also hopes to create an export industry supplying such plants to other countries.
Britain, though, is likely to encounter competition from France, which recently announced its own small reactor program, and the United States, where operators are working on similar concepts. Last week, Nuscale Power, based in Portland, Ore., announced an agreement to build small modular reactors in Romania.
Despite risks from accidents, nuclear energy is attracting new interest in Europe and elsewhere as a tool for countries to hit increasingly ambitious targets to reduce the carbon emissions responsible for climate change. Nuclear plants are valued for providing large amounts of low-carbon electricity.
Rolls-Royce’s work with nuclear power includes designing the reactors aboard Britain’s nuclear submarines, work that began in the 1950s.
More than 300 employees at Hearst’s magazine division have signed a petition objecting to the company’s plan to have them return to the office starting next week, and their union has filed a complaint with the National Labor Relations Board.
Hearst, whose titles include Cosmopolitan, Esquire and Good Housekeeping, told staff in October that they would be required to return to U.S. offices starting Nov. 15.
For the first two weeks, workers are expected to come in once a week; then the requirement will be two days per week until early 2022. Eventually, workers will be required to be in the office — the Hearst Tower in midtown Manhattan for many — three days a week, the company has said. Hearst is also requiring that all employees be vaccinated.
“We recognize that returning to the office is a big step and that some people are apprehensive about it,” Debi Chirichella, Hearst’s president, said in an email to staff last month. “Adjusting to this new way of working will require the same flexibility, patience and collaboration that we all demonstrated when we began working from home.”
Employees have pushed back. Some 300 — representing a majority of the approximately 550 in the magazine division as well as the 450 in its union — sent their petition to a top Hearst executive on Monday. It calls for the company to do away with required office days, according to a spokesman for the Writers Guild of America, East, the union that represents Hearst journalists.
“We support a continuation of the functional norm that we have reached as a result of our extraordinary circumstances, with employees and teams able to make decisions that are appropriate for their work needs,” the petition said. “We have seen our colleagues adapt to unprecedented changes in our work lives without a drop in productivity.”
A Hearst spokeswoman did not immediately reply to a request for comment.
On Nov. 4, the Writers Guild filed an unfair labor practice charge against Hearst with the National Labor Relations Board, saying the company had failed to provide requested information over return-to-office protocols. The company’s journalists won a vote to unionize in July 2020 and are negotiating their first contract.
The bargaining committee has asked for a flexible arrangement, and the company rejected it, said Jason Speakman, an associate digital visuals editor at Men’s Health who is a member of the bargaining committee.
Mr. Speakman said that most of his colleagues don’t want to be required to return to the office, while others would accept mandatory office days, but not three per week. The reasons for the preference for remote work ranged “from the extra hour of sleep in the morning when they’re not commuting to the mental health toll of commuting on a crowded train to caring for family members in another part of the country,” he said.
Twitter said on Tuesday that it would give users access to ad-free articles from The Washington Post, Reuters, BuzzFeed and other publications through its subscription service, called Twitter Blue.
The offering is part of Twitter’s push to find new sources of revenue. In January, the company acquired Revue, a service that enables people to create newsletters, and said it would take a small percentage of subscription fees from newsletter writers. And in May, Twitter bought Scroll, a subscription company that created ad-free reading services for publishers.
In June, the company announced Twitter Blue and a plan to charge users a small fee in exchange for extra features like the ability to organize bookmarks and undo tweets. On Tuesday, Twitter said it would ask users to pay $3 a month for those features, as well as access to the ad-free articles.
“In continuing our commitment to strengthen and support publishers and a free press, a portion of the revenue from Twitter Blue subscription fees goes directly to publishers within our network,” two Twitter project managers, Sara Beykpour and Smita Gupta, wrote in a blog post. “Our goal is to help each publishing partner make 50 percent more per person than they would’ve made from serving ads to that person.”
Twitter also said it would revive features associated with Nuzzel, a service offered by Scroll that alerted users about articles that were widely shared by people they follow on Twitter. Twitter shuttered Nuzzel when it acquired Scroll, prompting an outcry from users who said the service helped cut through the noise of their crowded social media feeds.
The company said it would also grant subscribers early access to new features, allowing them to test products and provide feedback. Twitter Blue is available in the United States, Australia, Canada and New Zealand, Twitter said.
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What’s your thought on cryptocurrency right now and potentially accepting it through Apple Pay or otherwise? Um, it’s something that we’re looking at. It’s not something we have immediate plans to do. I would sort of characterize it as there are things that I wouldn’t do like our cash balance. I wouldn’t go invest that in crypto, not because I wouldn’t invest my own money in crypto, but because I don’t think people buy an Apple stock to get exposure to crypto. And so if they want to do that, they can, you know, invest directly in crypto through other means. And so I wouldn’t do that and I’m not planning to in the immediate future to take crypto for our products as a mean of tender. But there are other things that we’re definitely looking at. Like what? Like, I wouldn’t want to have anything to announce today. Well, let me ask you a different question, because you just said that you might not do it personally. Do you own crypto in any Bitcoin or Ethereum? Or do you play around with this? I do. Yeah, I think it’s reasonable to own it as a part of a diversified portfolio, and I’m not giving anybody investment advice, by the way. When when did you get interested in it? I’ve been interested in it for a while and I’ve, you know, been researching it and so forth. And so I think it’s interesting.
While Apple might not offer users a way to pay with cryptocurrency anytime soon, its leader has invested in it personally.
Tim Cook, Apple’s chief executive, said at the DealBook Online Summit on Tuesday that he has bought cryptocurrencies. “I think it’s reasonable to own it as part of a diversified portfolio,” Mr. Cook told DealBook’s Andrew Ross Sorkin, quickly adding that he wasn’t giving investment advice.
It was a rare insight into how Mr. Cook manages a portion of his billion-dollar fortune. He said he has done some research on crypto and has been interested in it for “a while.” The typically volatile Bitcoin price hit a record at above $68,000 earlier on Tuesday.
The revelation came as Mr. Cook said that Apple itself did not intend to join a growing number of big businesses incorporating crypto in their operations. Tesla, for instance, began accepting Bitcoin as payment for its electric vehicles this year and bought $1.5 billion worth to hold in its corporate treasury.
Mr. Cook said, however, that Apple didn’t plan to buy any Bitcoin with its roughly $200 billion in cash — “I don’t think people buy Apple stock to get exposure to crypto,” he said — and added that it had no plans to make crypto an accepted method of payment anytime soon. “It’s not something we have immediate plans to do,” he said.
But never say never: Mr. Cook added, cryptically, “There are other things that we are definitely looking at.”
Ikea became the latest retailer to announce higher pay for hourly employees as companies work to attract staff in a tight labor market.
The company said on Tuesday that its United States division would raise its starting wage to $16 per hour starting on Jan. 1, and raise the average hourly pay to $20 per hour. The average starting hourly wage for entry-level roles at Ikea in the United States had been $14.79.
The announcement came shortly after the company said it would offer a bonus to those who were employees as of Aug. 31 who were still working at Ikea in January. That bonus is expected to total $900 for full-time employees and it will be prorated for part-time employees based on the hours they work.
Retailers have been offering new bonuses and higher wages to attract workers during the all-important holiday season. Macy’s said on Monday that it would raise its minimum wage to $15 an hour by May and start offering education benefits to employees in February.
Turmoil in China’s real estate sector could threaten the United States, the Federal Reserve said in a report on Monday.
In its twice-yearly update on the American financial system, the U.S. central bank said it was concerned both with how high the levels debt had grown in China’s corporate sector and with how Beijing was tackling the debt.
The financial troubles of China Evergrande Group, the world’s most indebted developer with a $300 billion debt pile, has set off panic in global financial markets and at home. What initially emerged as concern over one heavily indebted company has spread to a number of other real estate companies. Those developers are showing their own signs of stress as they struggle under mountains of debt and a property market slowed by tightening government controls over borrowing.
The regulatory focus, the Fed said, “has the potential to stress some highly indebted corporations, especially in the real estate sector, as exemplified by the recent concerns over China Evergrande Group.”
These stresses, in turn, could spill over into the broader economy.
“Given the size of China’s economy and financial system as well as its extensive trade linkages with the rest of the world, financial stresses in China could strain global financial markets through a deterioration of risk sentiment, pose risks to global economic growth, and affect the United States,” the Fed said.
At least six Chinese property developers have defaulted on foreign bonds in recent weeks, rattling domestic financial markets and raising the cost of borrowing for all Chinese companies. Property prices are slowing and fewer people are buying apartments, worsening the outlook for the sector. Evergrande, which has more than one million unfinished apartments across the country, is facing a deadline on Wednesday to make at least $150 million in bond payments.
After decades of binge borrowing, Chinese regulators have cut off real state sector funding. Many developers sold apartments and took payments from home buyers before they had completed the properties, creating a difficult situation not just for banks and investors but also for individual homeowners.
For decades the British government has routinely approved offshore oil drilling projects in the North Sea.
But a proposed oil field in deep waters northwest of Scotland’s Shetland Islands has become a crucial test case for the government, environmental groups and the oil industry, The New York Times’s Stanley Reed reports.
Environmental activists want to stop the project from proceeding, and they have seized on Britain’s role as host of a major United Nations climate conference in Glasgow this month as an opportunity to confront the government over its continued support for the oil and gas industry. They point to studies that say new investment in fossil fuels must stop in order to curb global warming.
The energy industry says the British economy will need oil and gas for years to come.
Both sides agree that rejecting the project, known as Cambo, would signal death for the oil industry in Britain, and, perhaps, other countries.
“Rejection of Cambo would actually say we are not serious about energy policy in the U.K.,” said Mike Tholen, director for sustainability at Oil and Gas UK, an industry group.
For Caroline Rance, a campaigner for Friends of the Earth Scotland, “Cambo is a very egregious example of the U.K.’s climate hypocrisy,” she said. “This is the reason that Cambo has become such a big, iconic fight.”
A silicon shortage is upending the $500 billion chip industry, and many of the shifts are likely to outlive the pandemic-fueled dearth. The lack of the tiny components — which has pinched makers of cars, game consoles, medical devices and many other goods — has been a stark reminder of the foundational nature of chips, which act as the brains of computers and other products.
Chief among the changes is a long-term shift in market power from chip buyers to sellers, particularly those that own factories that make the semiconductors, The New York Times’s Don Clark reports. The most visible beneficiaries have been giant chip manufacturers like Taiwan Semiconductor Manufacturing Company, which offer services called foundries that build chips for other companies.
But the shortage has also sharply bolstered the influence of lesser-known chip makers such as Microchip Technology, NXP Semiconductors, STMicroelectronics, Onsemi and Infineon, which design and sell thousands of chip varieties to thousands of customers. These companies, which build many products in their own aging factories, now are increasingly able to choose which customers get how many of their scarce chips.
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The Biden administration on Monday argued that the federal government had all the power it needed to require large employers to mandate vaccination of their workers against the Covid-19 virus — or to require those who refuse the shots to wear masks and submit to weekly testing.
In a 28-page filing before the United States Court of Appeals for the Fifth Circuit, which temporarily blocked the mandate with a nationwide stay last week, the Justice Department argued that the rule was necessarily to protect workers from the pandemic and was well grounded in law.
Keeping the mandate from coming into effect “would likely cost dozens or even hundreds of lives per day, in addition to large numbers of hospitalizations, other serious health effects, and tremendous costs,” the Justice Department said in its filing. “That is a confluence of harms of the highest order.” READ MORE →
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Just days before workers at three Starbucks stores in the Buffalo area were scheduled to begin voting on unionization, both labor and management took steps that reflect the high stakes involved, including an attempt by Starbucks on Monday to delay the election.
The union filed a charge with the National Labor Relations Board last week accusing the company of unlawfully “engaging in a campaign of threats, intimidation, surveillance, solicitation of grievances and the closing of facilities” during the election campaign.
On Saturday afternoon, Starbucks closed stores in the area so workers could attend a talk by Howard Schultz, the company’s largest individual shareholder and its former chief executive, at a local hotel. READ MORE →
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