GE Struggles To Show It Still Has Magic Touch General Electric has had a steep fall from grace this year. Its stock has dropped and it's halving its dividend. Now GE watchers are wondering if the new CEO can pull off a dramatic turnaround.
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GE Struggles To Show It Still Has Magic Touch

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GE Struggles To Show It Still Has Magic Touch

GE Struggles To Show It Still Has Magic Touch

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LULU GARCIA-NAVARRO, HOST:

General Electric is one of the most storied corporations in American history co-founded by Thomas Edison and redefined by legendary CEO Jack Welch. For more than a century, GE's products, from dishwashers to MRI machines, changed the way Americans live. But now the company is struggling. Its stock price is down more than 40 percent this year. As North Country Public Radio's Brian Mann reports, the company's current leadership says GE has to reinvent itself fast.

BRIAN MANN, BYLINE: A couple of weeks ago when GE's new CEO John Flannery spoke to investors, he acknowledged things are bad.

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JOHN FLANNERY: I have to admit I'd say the first 100 days didn't go maybe exactly the way I was expecting.

MANN: Flannery concluded that tweaks weren't enough. The company he said has to rethink its identity.

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FLANNERY: I was forced to confront a lot of other sort of deeper questions about the company. Why do we exist? How do we impact the world for the next hundred years the same way we have for the last hundred years?

MANN: To get a sense for just how shocking the decline at GE is, I drove to Schenectady in upstate New York, headquarters of the company's power and energy division. Five thousand employees live and work here. And it's a place where magic used to happen.

BILL BUELL: Right down here on the left is where Ernst Alexanderson lived. He did the first television broadcast anywhere in the U.S. from his home right here.

MANN: Bill Buell is a local newspaperman who has written for years about GE and the company's history. It started in the 1990s when Thomas Edison built laboratories and factories here. For more than a century, GE seemed unstoppable.

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UNIDENTIFIED MAN #1: Yes, sir. If you want real entertainment, the best place to find it is in front of a General Electric black-daylight, big-as-life television set.

MANN: GE built everything from TVs and dishwashers to jet engines and power grids - stuff that reshaped American life.

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UNIDENTIFIED SINGERS: (Singing) We bring good things to life.

UNIDENTIFIED MAN #2: At GE...

MANN: Bill George is former CEO of Medtronic and teaches at Harvard Business School. Speaking via Skype, he said GE helped invent America's corporate culture.

BILL GEORGE: Throughout my lifetime, GE has been a leader in coming out with new ideas, new organization structures and has always been five to 10 years ahead of everyone else. So all the rest of the corporations look to them who are setting the standards.

MANN: But the last decade, that gloried history unraveled. Bold new products stopped appearing. The company was hit hard by the financial crisis and whole divisions including the broadcast network NBC were sold off. In the past year, as the stock market soared, GE's stock plummeted. And last month, Flannery was forced to slash the company's dividends by 50 percent.

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FLANNERY: We understand this is an extremely painful action for our shareholders, our owners.

MANN: Flannery's plan for reinventing GE mostly involves simplifying. He says the company will sell off $20 billion in assets including the lighting division, which means Thomas Edison's company will no longer make lightbulbs. GE will now focus on three major product lines - energy, aviation and medical technology. But so far a lot of analysts like Bill George at Harvard say they're not impressed.

GEORGE: GE could become a typical industrial company and perform reasonably well. But that's not the GE we knew.

MANN: It's not that people doubt GE can still make and sell good products. This is one of the biggest corporations in the world with nearly 300,000 employees. But George says investors once looked to GE for something bigger, more exciting. During his call with analysts, John Flannery basically asked them to withhold judgment, to give GE one more shot.

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FLANNERY: So it's a heavy lift. But I think for our teams, this is the opportunity, really, of a lifetime to reinvent an iconic company.

MANN: Bill Buell, the newspaperman in Schenectady, agrees there's a lot at stake, not least for places like his hometown. In the 1980s, GE employed more than 25,000 people here. But the city has already been hit by wave after wave of layoffs. And he says people are afraid it's happening again.

BUELL: And I know right now they're worried about people losing their jobs. That's a pretty sad story. Hopefully, it won't get any worse than it is.

MANN: GE's Flannery says part of its reorganization involves cutting $2 billion in annual operating costs with much of that savings stripped out of the company's power and energy division headquartered right here. Brian Mann, NPR News.

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