GE gets back to basics

  @FortuneMagazine May 6, 2013: 9:35 AM ET
WMA20 general electric
(Fortune)

World's Most Admired rank: 11
Headquarters: Fairfield, Conn.
Employees: 305,000
The business: Designs and manufactures appliances plus energy, health, aviation, and transportation equipment; operates a financial services company.

From the light bulb to locomotives to MRI screeners, nuclear reactors, commercial lending, Seinfeld, and -- yes -- even the kitchen sink (GE introduced the first garbage disposal, the Disposall, in 1935), few companies have the reach and brand recognition of GE (GE, Fortune 500), which was founded in 1878. The company's grand tradition of M&A began not long after, when Edison General Electric merged with its competitor, Thomson-Houston, in 1892. In the 120 years since, GE has become an industrial juggernaut (it's the world's largest producer of commercial jet engines), a symbol of American innovation, and a perennial on Fortune's Most Admired Companies list; in 2013 it rated 11th and topped the electronics category, as well as the Fortune 500, where it's ranked eighth this year.

Keep it simple

The single surviving company on the original 1896 Dow Jones industrial index, GE had its own close call in 2008: Troubles with its financial services arm, GE Capital -- which had quietly ballooned to become the source of nearly half of GE's profits -- forced it to slash its sacred dividend and ask Warren Buffett for emergency cash. The wake-up call heeded, GE set about simplifying, a campaign that has resulted in a still-shrinking GE Capital, the sale of NBCUniversal, and a portfolio refocused on its traditional core industries.

Past is prologue

Last year, GE started making water heaters -- its first new product line in 50 years -- in aptly named Appliance Park, Ky. It had used the same site less and less, favoring cheaper factories overseas. In 2009, GE announced that it would bring those jobs back. The result is a cheaper, nimbler production thanks to a domestic supply chain.

GE and R&D

A stat that CEO Jeff Immelt loves: GE doubled its R&D budget over the past decade. He backs that up with a pledge to be a company that can develop a new engine and gas turbine not every decade, but every year. It's also investing in the "industrial Internet," an effort to harness big data to make more efficient machines. Bank of America analyst Andrew Obin says the move will tie GE more closely to its customers and add to its already significant service revenue, which accounts for about a third of its industrial arm.

This story is from the May 20, 2013 issue of Fortune. To top of page



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