GE Is Haunted by Its Sprawl
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GE’s Slowly Dimming Bulb
General Electric Co. did something today that might have disappointed both Thomas Edison and Jack Donaghy.
GE said it’s basically folding its locomotive business into a Pennsylvania company called Wabtec Corp. The “W” in “Wabtec” stands for Westinghouse, notes Brooke Sutherland – as in George Westinghouse, the bitter rival of GE founder Thomas Edison. (And they were bitter; Edison electrocuted several animals with Westinghouse’s alternating current just to embarrass him. "Oh, if Edison were alive today," Brooke writes.)
As for Donaghy, GE’s fictional Vice President of East Coast Television and Microwave Oven Programming might be averse to abandoning the kitchen-sink conglomerate approach he embodied. But that stopped working a long time ago. The stock collapsed ahead of the 2001 recession and has never recovered:
GE's biggest problem – on top of mismanagement by former CEO Jeff Immelt and others – may be that it's just too complicated; Brooke has argued convincingly for a breakup. Immelt tried to turn it into a software company, selling some divisions and bulking up in digital. But he bailed just before GE’s earnings collapsed. New CEO John Flannery has leaned into the selling-divisions thing, but maybe not enough.
The Wabtec deal, though, could be a hint of what's to come. GE will keep a stake in Wabtec, but it "will be a GE business in legacy only," Brooke writes. A big question is whether GE can do enough of this to deal with another legacy of its sprawl: its bloated pension liabilities.
The Bloomberg View
The Trump administration is set to propose taking federal funding away from women’s health clinics that either provide abortions or make abortion referrals. It’s a way to strip women of rights the courts have long upheld, write Bloomberg’s editors. It could also endanger women’s health.
Tuberculosis is no longer a big problem for wealthy nations, but it’s still a scourge of the poor, killing more than 4,000 people every day, mostly in places where people suffer from ill health and malnutrition. The UN wants to eradicate TB by 2030; that will take a big financial investment, Bloomberg’s editors write.
The Italy Problem
Italy’s about to be ruled by a populist coalition that features “the high-spending ambitions of the left with the low-tax ambitions of the right,” writes Clive Crook. That is a recipe for budget destruction, warn Bloomberg’s editors. Of course, it's possible Italy’s new leaders will struggle to pass much of what they’ve promised. But to the extent Italy does manage to set its budget on fire, Crook points out, it can be a bigger menace to the strength of the European Union than Brexit.
Meanwhile, the European Central Bank can’t stand by while Italy’s borrowing costs soar. If it doesn’t stop the bleeding soon, then it will trash the investor confidence it earned with Mario Draghi’s promise to do “whatever it takes” to protect European bond markets and the euro, warns Marcus Ashworth.
If you want to know the future of electric vehicles, keep an eye on China, writes Liam Denning. It’s leading the way in adapting the new technology, which is bringing down costs, which in turn could speed their proliferation everywhere. And that has knock-on effects for oil demand, Liam notes: “while EVs compound the expected decline in U.S. road-fuel demand, in China they turn a growth market into a profile of flat to declining consumption. … This is the ball game.”
As if that weren’t enough of a headache for traditional energy players, David Fickling points out that storing all the power generated by renewables is the “next big thing in energy.”
U.S. companies are taking a big risk by levering up just ahead of rising interest rates, warns Stephen Gandel, channeling Lloyd Blankfein.
Emerging-market companies are taking the same risk, warns Mark Whitehouse, channeling the Ghost of Emerging Markets Crises Past.
The federal government can fix homelessness, without spending very much. – Noah Smith
Trump just keeps attacking the independence of the Department of Justice. – Jonathan Bernstein
Supposed Republican political strengths going into the midterms are turning out to be weaknesses. – Al Hunt
Legalize marijuana, sure, but maybe don’t put it in our faces all the time. – Tyler Cowen
One way to track how well Trump is doing is by following the popularity, or lack thereof, of the baby name “Donald,” writes Stephen Mihm.
Note: Please send baby names and kicker ideas to Mark Gongloff at email@example.com.
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