This is an audio transcript of the Behind the Money podcast episode: ‘GE Vernova tries to shake its parent’s problems’
Michela Tindera
Big conglomerates used to define corporate best practice. They were like business royalty that drove American industry.
Voice clip
How can I help you guys out?
Amanda Chu voice clip
We’re journalists. We’re here to do a story about GE.
Voice clip
OK. Do you have a badge to get on?
Michela Tindera
And arguably, no one was more powerful than General Electric. They were known as the everything company.
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What you need to do is spin right around this guard shack and that one, you’re making a U-turn.
Michela Tindera
My colleague Amanda Chu recently drove up to GE’s old headquarters in Schenectady, New York.
Amanda Chu voice clip
So there’s a massive GE sign when you drive in. You can’t really miss the plant. I think the whole place has its own zip code, 12345.
Michela Tindera
Schenectady is the place where Thomas Edison — yeah, that Thomas Edison — decided to build this plant way back in 1886.
Amanda Chu voice clip
I mean, I think, this place was entirely built and then almost disappeared because of GE.
Michela Tindera
For a long time, Schenectady’s economy was tied to General Electric’s fortunes. And for decades now, GE’s kingdom has been fading.
News clips
General Electric has announced it will shed more than $20bn worth of assets in the coming months.
The Dow has kicked out industrial giant General Electric.
General Electric has confirmed it’s axing 12,000 jobs at its global power business.
Michela Tindera
Then, in 2021, GE announced that it was splitting into three companies. One of those was a power business called GE Vernova. That spun off and started trading about a year ago.
Amanda Chu
It, for a long time, was sort of the weakest link in General Electric, but now it’s seen a turnaround and it’s arguably the most successful part of its business.
Michela Tindera
At the old headquarters in Schenectady, GE Vernova’s expanding capacity — that’s thanks to a surge in demand for energy. But can the company capitalise on this moment without repeating General Electric’s mistake?
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I’m Michela Tindera from the Financial Times. Today on Behind the Money, we’re looking at whether deconglomeration is the answer to America’s industrial challenges or just another Wall Street fad. And GE Vernova is our test case.
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GE Vernova is in the electrification business. It makes things like gas and steam turbines that hook up to power plants and the electrical grid here in the US and around the world.
Amanda Chu
GE Vernova is an electrical equipment maker. It’s the largest gas turbine manufacturer. It also produces wind parts like blades and nacelles.
Michela Tindera
Amanda Chu covered energy for the FT. She’s been keeping tabs on GE Vernova since it broke off from General Electric last April.
Amanda Chu
GE Vernova, it contracts with developers to supply components. The US is its largest base, but it also produces for other countries.
Michela Tindera
So Amanda, just how well has GE Vernova been doing since the spin-off from big General Electric about a year ago?
Amanda Chu
So it’s been doing surprisingly well. When I started covering energy, the talk was that its power and renewables business was losing money. But then, a year ago, it seems like the world changed overnight. And suddenly, there was so much power demand from artificial intelligence and from onshoring, the return of manufacturing. And this completely changed GE Vernova’s fortunes, and now they’re making money.
Its most recent quarter, for example, they reported a positive net income of $264mn and their share price has seen an astronomical rise in the past year — it’s more than double than when it began trading. And when it comes to orders for gas turbines, it’s stretched out into 2028 and they’re getting orders for 2029, 2030 now.
Michela Tindera
GE Vernova chief executive, Scott Strazik, is revelling in the good news. He’s confident about the future.
Scott Strazik
This is just the beginning. I mean, we’re going into an investment super cycle that we are very well positioned to serve. There’s a lot of reasons to get up in the morning and work right now.
Michela Tindera
Scott Strazik, the CEO of GE Vernova, tell me a little bit more about him. How did he become CEO?
Amanda Chu
I think Scott Strazik would be best described as a company man. He’s never worked on the factory floor, but he grew up in Binghamton, which is two hours from Schenectady and is a rustbelt town.
Scott Strazik
Most of my life was in New York state, and one of the many things that drew me to GE right out of college was the fact that it represented an incredible laboratory to learn and to experiment.
Amanda Chu
He began in GE right out of college at Cornell and he hasn’t left. He’s been there for more than two decades and he climbed through various roles at General Electric.
Scott Strazik
My first location in GE was in Pittsfield, Massachusetts, with our plastics business in the summer of 1999. And there have been many chapters within that 25 years.
Amanda Chu
He started in the power business in the 2010s, and then was appointed the head of GE Power in 2018, which becomes GE Vernova after its spin-off.
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Scott Strazik
And now, after what was 24 years with GE, I have this unique opportunity and privilege to take a lot of the best of what kept me in GE for years while also trying to recreate the company.
Michela Tindera
Scott’s seen his fair share of corporate history over the years. He witnessed the dramatic collapse of General Electric.
Amanda Chu
Scott Strazik joins GE when it’s at its peak. It was the largest company in America at the turn of the 21st century. And it made everything from like, appliances, to jet engines, to you know, gas turbines and had a financial services arm, it owned media companies. And then it ended up in fiscal problems because it became too large and unwieldy, and it made some poor acquisitions.
I mentioned that it owned a financial services arm — GE Capital — and this became disastrous for the company in the 2008 financial crisis. By the 2010s, it was knocked off of the Dow Jones industrial index. And so, like, within two decades, it just completely collapsed. Larry Culp comes in, he’s the CEO of GE, and he announces in 2021 that the company is going to break up into three entities, GE Aerospace, GE Vernova, and GE HealthCare.
Michela Tindera
During this turbulent time, General Electric never fully left its factory in Schenectady. The company continued to make steam and gas turbines there. And now GE Vernova is investing in the campus again.
Amanda Chu
GE Vernova is planning to ramp up hiring this year in Schenectady to serve the uptick in gas turbine demand. They’re also making some investments in their wind capacity there, too. And this is all part of their wider $600mn commitment to boost their capacity in the US, creating more than 1,500 jobs.
GE Vernova, like, isn’t based in Schenectady, even though, you know, GE’s former headquarter’s there. It’s based in Cambridge, Massachusetts. And the campus is much smaller than what it was, but they’re still investing in it and they see it as like an important part of their legacy.
Michela Tindera
So you went there yourself. Tell me about who you met there.
Amanda Chu
So when I went up to Schenectady, I talked to Brian Carlson — he’s the plant leader there now for GE Vernova, but has been with General Electric for a while.
Brian Carlson voice clip
I’ve got 27 years with the company. My dad retired after 42 years in 2010, and then my grandfather started in 1952. So we’ve got a pretty long legacy of Carlsons working on campus.
Amanda Chu
He and his father used to have lunch on Fridays when they were working on the plant at the same time.
Michela Tindera
Yeah, tell me a bit more about your experience with Brian at the plant. Like, what did you guys do and what did he show you?
Amanda Chu
He gave us a tour of Building 273.
Brian Carlson voice clip
Here is where we will need safety glasses.
Amanda Chu
Which is their factory building that produces everything from steam turbines, to onshore wind parts, to gas generators. And the factory is massive. It’s . . .
Brian Carlson voice clip
It is a quarter mile long and an eighth of a mile wide, and you can fit almost 30 football fields with inside this facility.
Amanda Chu
At the time when it was built after world war two, it was the largest factory in the country.
Brian Carlson voice clip
All right, so we’re gonna walk down through a couple of our machining centres and show you what we do here. Watch your step.
Amanda Chu
As soon as you walk in, you notice this smell.
Brian Carlson voice clip
It’s a mix of cutting fluid, cleaning agents, in some areas, sweat, a lot of hard work.
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Amanda Chu
You can see the old and new parts of GE, like, just walking the site. They have steel beds for machines from the 1950s, but then they also have, like, you know, robots and automated lines in other areas.
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Michela Tindera
And how do people like Brian feel about the current direction of GE Vernova and where things are headed?
Amanda Chu
Yeah, I mean, the people at the factory are very excited about GE Vernova. They’re hiring new people and they feel very proud about producing these parts.
Brian Carlson voice clip
The attitude is we’re growing, they’re investing in Schenectady. I’m getting 18-year-old kids whose dad has got 30 years and now he wants his son to work here for another 30. So we’re doing something right.
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Michela Tindera
So, according to Brian, there’s a lot of enthusiasm at the Schenectady plant again. And company financials, they’re in the green. It’s a big turnaround from just a year ago when GE Vernova split from its parent, General Electric. CEO Scott Strazik has been reflecting on the change.
Scott Strazik
What I often say about the GE of yesterday was, it has always been a company, or always was a company, that had great people with real ambition in industries that matter. Now, we weren’t always as focused.
Michela Tindera
We weren’t always as focused. Remember that line.
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Up next, how Scott plans to navigate a road full of potential potholes.
So, Amanda, tell me more about this approach that GE Vernova CEO Scott Strazik is doubling down on. They split from General Electric last year and he said that the GE of old wasn’t always so focused. So what lessons did Scott take away from that?
Amanda Chu
Yeah, so when you listen to like their earnings calls and go through like their annual report, the word that you’ll see over and over again is the word lean. You know, this is part of their strategy to boost efficiency and productivity. So, rather than investing in new manufacturing sites or doing major expansions, they’re identifying places where they can work smarter and be more efficient.
Brian Carlson voice clip
So this is what we call our 3P room, and this is a 120th scale model of Building 273.
Amanda Chu
When we were in Schenectady, Brian — the plant manager — showed us a room where they model out the entire factory floor and they map out any changes to production lines and their manufacturing process before implementing it on the ground.
Brian Carlson voice clip
So we literally spent three, four months making foam parts of every machine and component in the entire building. We laid it out here. That’s kind of what lean is. It’s just removing the waste from the system. A good analogy one sensei gave me was it’s kind of like if you think of a candy cane and the waste is the white, like a perfect manufacturing line would be all red.
Michela Tindera
That sounds very thorough.
Amanda Chu
Yeah, it is, but this lean approach and the candy cane analogy that Brian mentions, they go beyond just making the manufacturing line more efficient. GE Vernova under Scott has so far ditched General Electric’s tendency to buy other companies. And this goes back to what we were talking about earlier in this episode. Strazik, he spent his entire career at the company and really saw what happens when a company gets too big.
And under GE Vernova, he’s been very conservative when it comes to spending it. They haven’t made major acquisitions and they’ve been very modest in terms of expanding their capacity to meet this soaring demand because the market could turn overnight. And so now that GE Vernova is its own company, it’s not burdened as much by the financial mis-steps of General Electric. And this goes into the more focused model that Scott is leaning into.
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Michela Tindera
This new corporate model from GE Vernova also comes at the same time as a huge surge in demand for power.
Amanda Chu
GE Vernova’s success is tied to a fundamental shift in the power market. For over two decades, US electricity demand has been flat. And then all of a sudden, about a year ago, with the arrival of artificial intelligence and onshoring, everyone woke up to the fact that we’re gonna have a lot more electricity demand and we need to rapidly build as much supply or generation to meet it. All of a sudden, you know, people are building gas plants again, and this has doubled demand for gas turbines for GE Vernova.
Michela Tindera
GE Vernova’s share price hit a record high in January. That was after US President Donald Trump announced his Stargate AI project.
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Amanda, can you just talk about what this project is and how you think its announcement influenced GE Vernova’s share price?
Amanda Chu
So Stargate, it’s a $500bn US data centre infrastructure project announced by Trump in his first days in office. And it’s billed as this massive project to boost the AI industry. GE Vernova is not an AI company and is not purely in AI play, but because so much that GE Vernova makes, from its gas turbines to its switch gears and its transformers, they eventually get hooked up and help power the data centres that process artificial intelligence. And so Wall Street treats GE Vernova as an AI stock. And when Stargate was announced, this drove its share price up even higher to its record.
Michela Tindera
But just days after the Stargate announcement, a new entrant into the AI space rocked financial markets.
News clips
Technology shares on Wall Street have fallen sharply in response to the emergence of a low-cost chatbot built by a Chinese artificial intelligence firm.
DeepSeek’s Chinese developers claim they trained its models for a fraction of the funds and computing power used by competitors.
A lot of questions over the level of spending and energy required to build the US AI industry.
Michela Tindera
How did this company out of China, DeepSeek, shake up GE Vernova’s trajectory?
Amanda Chu
Yeah, DeepSeek was right after Stargate. It’s a lot of whiplash in January. But the arrival of DeepSeek AI, it surprised a lot of people and woke up, I think, a lot of investors, because all of a sudden we have this model that’s much more energy-efficient and casts doubt over all of our assumptions about how much electricity powering AI will require. So after DeepSeek had its debut, GE Vernova’s stock fell almost 25 per cent.
Michela Tindera
So the AI boom might not be a total slam dunk for GE Vernova, but at the same time, not everyone’s convinced that this leaner corporate model will ultimately put the company on a better path than General Electric.
William Cohan
If you add up the pieces of GE now that are out there, they don’t approach what GE was when it was at its most valuable, when it was a conglomerate.
Michela Tindera
William D Cohan is the author of a book called Power Failure: The Rise and Fall of an American Icon. He’s been a columnist for the FT, and he’s kind of like the GE guy.
William Cohan
You know, I don’t want to always be a naysayer, but the GE power business was extremely troubled business. That’s why it was separated from GE. You know, one of the major reasons for the split-up of the company was the difficulties that the power business was having.
Amanda Chu
We wanted to talk to William because of his understanding of conglomerates and GE specifically and why they failed. We were really interested in hearing from him because he is very sceptical of GE Vernova’s success.
Michela Tindera
Yeah, tell me a bit more about that. Why is he sceptical?
Amanda Chu
Yeah, so William Cohan is interesting because the Wall Street analysts are very excited about GE Vernova. Even the most sceptical people think it’s a good stock. William is different in that he thinks that GE Vernova is riding a wave right now.
William Cohan
GE Vernova has benefited tremendously since it was spun off from the demand for artificial intelligence and the power needed to drive those businesses. That in itself is, of course, something that Wall Street has hyped up beyond any recognisable, sensical valuation levels.
Amanda Chu
And once the hype around AI falls, he expects GE Vernova’s hype will as well.
Michela Tindera
OK, sure, but what’s the context here? Because we’re talking about GE Vernova, a year after it split from this historical titan, General Electric. So help me understand this moment in the wider landscape of big industrial conglomerates.
Amanda Chu
Yeah, GE Vernova’s performance in the past year is really interesting, not only for power markets, but also for other conglomerates. Its share price rise was, you know, a clear signal of confidence from Wall Street in a leaner model that breaking up companies is a good thing. And that’s a big shift because, to give a bit of history here, conglomerates became a very popular business strategy and was rewarded for years after world war two, with the idea that the bigger you were as a company, the more protected you were from a downturn in one part of the market, because you could just offset those losses with, you know, a better-performing segment of the market.
William Cohan
You know, investment bankers, M&A guys thought, oh, well, if we just helped our clients buy the companies that they wanted and created, you know, conglomerates, the investors would get on board for that and the stocks would go up and everyone would benefit.
Amanda Chu
But this has completely changed now with companies breaking up and this idea that being leaner is better, having focused industries. We’re seeing Honeywell, Siemens Energy, and FedEx break up, too. But William thinks that all of this is more of like an investment banking exercise.
William Cohan
The risk is that it doesn’t work. It’s a great thought exercise for investment bankers, but it doesn’t work for investors. And who’s dreaming up the idea of conglomerates in the first place and who’s dreaming up that the better way to go is to deconstruct the conglomerates? It’s my friends on Wall Street, you know, the bankers who benefit either way.
Amanda Chu
And so this is great for Wall Street, but for GE, this is the break-up of an iconic American conglomerate that represented the country’s ingenuity and industrial power. And for William, GE Vernova’s stellar performance and hype isn’t the same as a rebirth for GE.
William Cohan
This is not success, this is the end of the line. This is it.
Michela Tindera
So, in the end, Amanda, do you think that CEO Scott Strazik’s approach of lean operations, this idea that smaller is better, do you think it’ll help GE Vernova avoid some of the problems that big, main GE faced in earlier years?
Amanda Chu
I don’t think it’s that black and white as William is describing. You know, like I said, Wall Street treats GE as an AI company, but it is not an AI company because AI is not the only driver of electricity demand. You have rising electric vehicle adoption that is raising demand for electricity. You also have the onshoring of manufacturing in the US. You also have increased demand for air conditioning and heat pump usage.
And I think Strazik knows that, you know, there is a lot of risks to this, which is why he hasn’t been investing a lot in new manufacturing sites. But I don’t think GE Vernova is gonna be what GE was. Like, I think that era is over of, you know, having this massive company that makes everything.
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Michela Tindera
There are other groups that are sceptical of GE Vernova’s future, too, like the people in Schenectady that relied on General Electric for years. They’ve already been burned once. The town went through a dark period after GE downsized roughly four decades ago.
Amanda Chu
So like, the history of Schenectady, when you talk to people there, they always talk about GE in life or death terms.
Bill Richards voice clip
It was the main artery. It was the main artery. When it pulled out — and it did — it devastated the entire area.
Amanda Chu
We talked to Bill Richards, who grew up in the area. We found him in a new pub called Katie O’Byrnes, having lunch with his 93-year-old mother.
Bill Richards voice clip
My mom, Dorothy, my dad was a car dealer here.
Amanda Chu
Schenectady is three hours north of Manhattan, and it is essentially GE town. When you’re driving up there, you see signs about GE. Everyone knows someone who used to work at GE. But the town has sort of moved on from General Electric and they’re not looking for a redo with GE Vernova.
Bill Richards voice clip
Well, they’re not a partner any more. You know, there’s the sign — the infamous sign — it was always lit up and it was just part of your life. And there it is, but they’re not a participant part of the growth.
Amanda Chu
GE Vernova is doing very well, but the people in Schenectady, you know, they haven’t seen a major difference in the past year as its stock has, you know, more than doubled. And it’s sort of, I think, emblematic of the realities of manufacturing in the US.
Bill Richards voice clip
America has evolved in a challenging way, in that those were the days when you had a pension, and those days from companies like that are gone.
Amanda Chu
There’s so much political talk right now about bringing back manufacturing, but it’s not going to be what we think it’s going to be. It’s gonna be much more automated than you remember.
So we have the story of GE Vernova and other successful spin-offs that have gotten the business community, investors, journalists very excited. But these new corporate solutions and fads, they haven’t really changed the economic realities for these old industrial towns. These communities, they’re not banking on these companies to come and save them.
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Michela Tindera
Behind the Money is hosted by me, Michela Tindera. This episode was produced by Kasia Broussalian. Sound design and mixing by Sam Giovinco. Original music is by Hannis Brown. Topher Forhecz is our acting co-head of audio. Thanks for listening. See you next week.
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