In yet another sign of how mighty American corporations are going by the wayside, American conglomerate General Electric (GE) was just recently kicked out of the Dow Jones Industrial Index. GE’s place will be taken by Walgreens Boots Alliance. It’s a hard fall for GE, which was the only company in the Dow index that was also in the index at its inception in 1896. GE had been in the Dow index continuously since 1907.
The component companies of the Dow index have changed numerous times over the years, and it isn’t unprecedented for companies to leave the index and then return. Chevron was part of the Dow index from 1930 to 1999 and then returned in 2008. Coca-Cola was part of the Dow from 1932 to 1935 and rejoined in 1987, while IBM was part of the Dow from 1932 to 1939 before rejoining in 1979. But GE’s problems may very well preclude the company that traces its founding to Thomas Edison from returning to the Dow index anytime soon.
The company’s stock is currently trading at less than half of its 52-week high as the company’s well-publicized financial woes have executives thinking about breaking the company up. Like many other American legacy corporations, the majority of GE’s revenues come from its financial services arm, meaning that the company is arguably a financial services company that just also happens to engage in manufacturing. That’s similar to General Motors, which has been described as a financial services company that also manufactures cars.
Once a household name, GE has morphed over the years into an industrial conglomerate with products ranging from lighting to healthcare equipment to railroad locomotives. But as the company has grown ever larger, it has grown further and further from consumers. Many of its products are sold to businesses and governments, not to consumers. The few business units that still do or used to sell to consumers are slowly being spun off.
GE Appliances, for instance, which manufactured appliances such as refrigerators and washing machines, is now owned by Chinese conglomerate Haier. Like its one-time competitor Westinghouse, GE may very well end up spinning off or selling many of its core businesses, essentially becoming a brand name used or licensed by numerous independent companies. It has been a long, slow decline for GE, but that’s the nature of the marketplace. Legacy corporations that can’t continue adapting and serving consumer needs are destined to fall by the wayside as newer and more innovative companies outcompete them.