The history of General Electric Company is a significant part of the history of technology in the United States. General Electric (GE) has evolved from Thomas Edison’s home laboratory into one of the largest companies in the world, following the evolution of electrical technology from the simplest early applications into the high-tech wizardry of the early 21st century.
The company has also evolved into a conglomerate, with an increasing shift from technology to services, and with 11 main operating units: GE Advanced Materials, a specialist in high-performance engineered thermoplastics, silicon-based products, and fused quartz and ceramics used in a wide variety of industries; GE Consumer & Industrial, which is one of the world’s leading appliance manufacturers, stands as a preeminent global maker of lighting products for consumer, commercial, and industrial customers, and also provides integrated industrial equipment, systems, and services; GE Energy, one of the largest technology suppliers to the energy industry; GE Equipment Services, which offers leases, loans, and other services to medium and large businesses around the world to help them manage their business equipment; GE Healthcare, a world leader in medical diagnostic and interventional imaging technology and services; GE Infrastructure, which is involved in high-technology protective and productivity solutions in such areas as water purification, facility safety, plant automation, and automatic environmental controls; GE Transportation, the largest producer of small and large jet engines for commercial and military aircraft in the world, as well as the number one maker of diesel freight locomotives in North America; NBC Universal (80 percent owned by GE), a global media and entertainment giant with a wide range of assets, including the NBC and Telemundo television networks, several cable channels, and the Universal Pictures film studio; GE Commercial Finance, which provides businesses, particularly in the mid-market segment, with an array of financial services and products, including loans, operating leases, and financing programs; GE Consumer Finance, a leading financial services provider, serving consumers, retailers, and auto dealer in about three dozen countries; and GE Insurance, which is involved in such areas as life insurance, asset management, mortgage insurance, and reinsurance. The staggering size of General
Electric, which ranked fifth in the Fortune 500 in 2003, becomes even more evident through the revelation that each of the company’s 11 operating units, if listed separately, would qualify as a Fortune 500 company. GE operates in more than 100 countries worldwide and generates approximately 45 percent of its revenues outside the United States. Over the course of its 110-plus years of innovation, General Electric has amassed more than 67,500 patents, and the firm’s scientists have been awarded two Nobel Prizes and numerous other honors. Thomas Edison established himself in the 1870s as an inventor after devising, at the age of 23, an improved stock ticker.
He subsequently began research on an electric light as a replacement for gas light, the standard method of illumination at the time. In 1876 Edison moved into a laboratory in Menlo Park, New Jersey. Two years later, in 1878, Edison established, with the help of his friend Grosvenor Lowry, the Edison Electric Light Company with a capitalization of $300,000. Edison received half of the new company’s shares on the agreement that he work on developing an incandescent lighting system. The major problem Edison and his team of specialists faced was finding an easy-to-produce filament that would resist the passage of electrical current in the bulb for a long time.
He triumphed only a year after beginning research when he discovered that common sewing thread, once carbonized, worked in the laboratory. For practical applications, however, he switched to carbonized bamboo. Developing an electrical lighting system for a whole community involved more than merely developing an electric bulb; the devices that generated, transmitted, and controlled electric power also had to be invented. Accordingly, Edison organized research into all of these areas and in 1879, the same year that he produced an electric bulb, he also constructed the first dynamo, or direct-current (DC) generator. The original application of electric lighting was on the steamship Columbia in 1880.
In that same year, Edison constructed a three-mile-long trial electric railroad at his Menlo Park laboratory. The first individual system of electric lighting came in 1881, in a printing plant. But the first full-scale public application of the Edison lighting system was actually made in London, at the Holborn Viaduct. The first system in the United States came soon after when Pearl Street Station was opened in New York City. Components of the system were manufactured by different companies, some of which were organized by Edison; lamps came from the parent company, dynamos from the Edison Machine Works, and switches from Bergmann & Company of New York. In 1886 the Edison Machine Works was moved from New Jersey to Schenectady, New York.
While these developments unfolded at Edison’s company, the Thomson-Houston Company was formed from the American Electric Company, founded by Elihu Thomson and Edwin Houston, who held several patents for their development of arc lighting. Some of their electrical systems differed from Edison’s through the use of alternating-current (AC) equipment, which can transmit over longer distances than DC systems. By the early 1890s the spread of electrification was threatened by the conflict between the two technologies and by patent deadlocks, which prevented further developments because of patent-infringement problems. By 1889, Edison had consolidated all of his companies under the name of Edison General Electric Company. Three years later, in 1892, this company was merged with the Thomson-Houston Electric Company to form the General Electric Company.
Although this merger was the turning point in the electrification of the United States, it resulted in Edison’s resignation from GE. He had been appointed to the board of directors but he attended only one board meeting, and sold all of his shares in 1894, though he remained a consultant to General Electric and continued to collect royalties on his patents. The president of the new company was Charles A. Coffin, a former shoe manufacturer who had been the leading figure at Thomson-Houston. Coffin remained president of General Electric until 1913, and was chairman thereafter until 1922. Meanwhile, also in 1892, GE’s stock began trading on the New York Stock Exchange.
In 1884 Frank Julian Sprague, an engineer who had worked on electric systems with Edison, resigned and formed the Sprague Electric Railway and Motor Company, which built the first large-scale electric streetcar system in the United States, in Richmond, Virginia. In 1889 Sprague’s company was purchased by Edison’s. In the meantime, the two other major electric-railway companies in the United States had merged with Thomson-Houston, so that by the time General Electric was formed, it was the major supplier of electrified railway systems in the United States. One year after the formation of General Electric, the company won a bid for the construction of large AC motors in a textile mill in South Carolina.
The motors were the largest manufactured by General Electric at the time and were so successful that orders soon began to flow in from other industries such as cement, paper, and steel. In that same year, General Electric began its first venture into the field of power transmission with the opening of the Redlands-Mill Creek power line in California, and in 1894 the company constructed a massive power-transmission line at Niagara Falls. Meanwhile the company’s electric-railroad ventures produced an elevated electric train surrounding the fairgrounds of the Chicago World’s Fair in 1893. Electrification of existing rail lines began two years later.
By the turn of the century General Electric was manufacturing everything involved in the electrification of the United States: generators to produce electricity, transmission equipment to carry power, industrial electric motors, electric light bulbs, and electric locomotives. It is important to any understanding of the evolution of GE to realize that though it was diverse from the beginning, all of its enterprises centered on the electrification program. It is also worth noting that it operated in the virtual absence of competition. General Electric and the Westinghouse Electric Company had been competitors, but the companies entered into a patent pool in 1896. In 1900 GE established the first industrial laboratory in the United States.
Up to that point, research had been carried out in universities or in private laboratories similar to Edison’s Menlo Park laboratory. Initially, the lab was set up in a barn behind the house of one of the researchers, but the lab was moved in 1900 to Schenectady, New York, after it was destroyed in a fire. The head of the research division was a professor from the Massachusetts Institute of Technology. The importance of research at General Electric cannot be underestimated, for GE has been awarded more patents over the years than any other company in the United States. During the early decades of the 20th century General Electric made further progress in its established fields and also made its first major diversification.
In 1903 General Electric bought the Stanley Electric Manufacturing Company of Pittsfield, Massachusetts, a manufacturer of transformers. Its founder, William Stanley, was the developer of the transformer. By this time GE’s first light bulbs were in obvious need of improvement. Edison’s bamboo filament was replaced in 1904 by metalized carbon developed by the company’s research lab. That filament, in turn, was replaced several years later by a tungsten-filament light bulb when William Coolidge, a GE researcher, discovered a process to render the durable metal more pliable. This light bulb was so rugged and well suited for use in automobiles, railroad cars, and street cars that it was still employed in the early 2000s.
In 1913, two other innovations came out of the GE labs: Irving Langmuir discovered that gas-filled bulbs were more efficient and reduced bulb blackening. To this day virtually all bulbs over 40 watts are gas-filled. The first high-vacuum, hot-cathode X-ray tube, known as the Coolidge tube, was also developed in 1913. Coolidge’s research into tungsten had played an important role in the development of the X-ray tube. The device, which combined a vacuum with a heated tungsten filament and tungsten target, has been the foundation of virtually all X-ray tubes produced ever since, and its development laid the foundation for medical technology operations at General Electric.
Perhaps GE’s most important development in the early part of this century was its participation in the development of the high-speed steam turbine in conjunction with English, Swedish, and other inventors. Until this invention, all electricity (except hydroelectric) had been produced by generators that turned at no more than 100 rpm, which limited the amount of electricity a single unit could produce. An independent inventor had come up with a design for a very-high-speed steam turbine before the turn of the century, but it took five years of research before GE could construct a working model. By 1901, however, a 500-kilowatt, 1,200-rpm turbine generator was operating.
Orders for the turbines followed almost immediately, and by 1903 a 5,000-kilowatt turbine was in use at Chicago’s Commonwealth Edison power company. Such rapid progress led to rapid obsolescence as well, and the Chicago units were replaced within six years. As a result, GE shops in Schenectady were soon overflowing with business. By 1910 the volume of the company’s trade in turbine generators had tripled and GE had sold almost one million kilowatts of power capacity. At the same time, General Electric scientists were also researching the gas turbine. Their investigations eventually resulted in the first flight of an airplane equipped with a turbine-powered supercharger.
In the early days of electric power, electricity was produced only during evening hours, because electric lighting was not needed during the day and there were no other products to use electricity. GE, as the producer of both electricity-generating equipment and electricity-consuming devices, naturally sought to expand both ends of its markets. The first major expansion of the General Electric product line was made in the first decade of the 20th century. Before the turn of the century, light bulbs and electric fans were GE’s only consumer product. One of the first household appliances GE began to market was a toaster in 1905. The following year the company attempted to market an electric range.
The unwieldy device consisted of a wooden table top equipped with electric griddles, pans, toasters, waffle irons, pots, and a coffeemaker, each with its own retractable cord to go into any one of 30 plugs. The range was followed by a commercial electric refrigerator in 1911 and by an experimental household refrigerator six years later. At the same time two other companies in the United States were producing electric devices for the home. The Pacific Electric Heating Company produced the first electric appliance to be readily accepted by the public: the Hotpoint iron. The Hughes Electric Heating Company produced and marketed an electric range.
In 1918 all three companies were prospering, but to avoid competition with one another, they agreed upon a merger. The new company combined GE’s heating-device section with Hughes and Pacific to form the Edison Electric Appliance Company, whose products bore either the GE or the Hotpoint label. GE’s first diversification outside electricity came with its establishment of a research staff to investigate plastics. This occurred primarily at the prompting of Charles P. Steinmetz, a brilliant mathematician who had been with the company since the 1890s. All of the initial work by this group was devoted to coatings, varnishes, insulation, and other products related to electrical wiring, so that even this diversification was tied in to electrification.
A more radical branching of GE’s activities occurred in 1912, when Ernst Alexanderson, a GE employee, was approached by a radio pioneer looking for a way to expand the range of wireless sets into higher frequencies. Alexanderson worked for almost a decade on the project before he succeeded in creating electromagnetic waves that could span continents, instead of the short distances to which radios had been limited. In 1922, General Electric introduced its own radio station, WGY, in Schenectady. In 1919, at the request of the government, GE formed, in partnership with AT&T and Westinghouse, the Radio Corporation of America (RCA) to develop radio technology.
GE withdrew from the venture in 1930, when antitrust considerations came to the fore. General Electric also operated two experimental shortwave stations that had a global range. Other developments at General Electric contributed to the progress of the radio. Irving Langmuir had developed the electron tube. This tube, necessary for amplifying the signals in Alexanderson’s radio unit, was capable of operating at very high power. Other important developments by scientists at General Electric included the world’s first practical loudspeaker and a method for recording complex sound on film that is still in use today. Developments continued apace at GE in the electric motor field. In 1913 the U. S.
Navy commissioned General Electric to build the first ship to be powered by turbine motors rather than steam. In 1915 the first turbine-propelled battleship sailed forth, and within a few years, all of the Navy’s large ships were equipped with electric power. General Electric also owned several utility companies that generated electrical power, but in 1924 GE left the utilities business when the federal government brought antitrust action against the company. During the Great Depression the company introduced a variety of consumer items such as mixers, vacuum cleaners, air conditioners, and washing machines. GE also introduced the first affordable electric refrigerator in the late 1920s.
It was designed by a Danish toolmaker, Christian Steenstrup, who later supervised mechanical research at the GE plant in Schenectady. In addition, GE introduced its first electric dishwasher in 1932, the same year that consumer financing of personal appliances was introduced.
Also in 1932 the first Nobel Prize ever awarded to a scientist not affiliated with a university went to Irving Langmuir for his work at GE on surface chemistry, research that had grown out of his earlier work on electron tubes. The years that followed witnessed a steady stream of innovation in electronics from the GE labs. These included the photoelectric-relay principle, rectifier tubes that eliminated batteries from home receivers, the cathode-ray tube, and glass-to-metal seals for vacuum tubes.
Many of these developments in electronics were crucial to the growth of radio broadcasting. The broadcasting division of General Electric achieved a breakthrough in the late 1930s. The company had been developing a mode of transmission known as frequency modulation (FM) as an alternative to the prevailing amplitude modulation (AM). In 1939 a demonstration conducted for the Federal Communications Commission proved that FM had less static and noise. GE began broadcasting in FM the following year. Of course, the light bulb was not forgotten in this broadening of research activity at General Electric. The world’s first mercury-vapor lamp was introduced in 1934, followed four years later by the fluorescent lamp.
The latter produced light using half the power of incandescent bulbs, with about twice the lifespan. Less than a year after the introduction of the fluorescent light, General Electric introduced the sealed-beam automotive headlight. Even though production of convenience items for the consumer halted during World War II, the war proved profitable for General Electric, whose revenues quadrupled during the war. The president of General Electric at the time, Charles Wilson, joined the War Production Board in 1942. GE produced more than 50 different types of radar for the armed forces and over 1,500 marine power plants for the Navy and merchant marine.
The company, using technology developed by the Englishman Frank Whittle, also conducted research on jet engines for aircraft. The Bell XP-59, the first U. S. jet aircraft, flew in 1942 powered by General Electric engines. By the end of the war this technology helped General Electric develop the nation’s first turboprop engine. When production of consumer goods resumed immediately after the war, GE promptly found itself in another antitrust battle. The government discovered that GE controlled 85 percent of the light bulb industry–55 percent through its own output and the other 30 percent through licensees. In 1949 the court forced GE to release its patents to other companies. In this period the first true product diversifications came out of GE’s research labs.
In the 1940s a GE scientist discovered a way to produce large quantities of silicone, a material GE had been investigating for a long time. In 1947 GE opened a plant to produce silicones, which allowed the introduction of many products using silicone as a sealant or lubricant. Meanwhile, as research innovation blossomed and postwar business boomed, the company began an employee relations policy known as “Boulwarism,” from Lemuel Boulware, the manager who established the policy. The policy, which eliminated much of the bargaining involved in labor-management relations, included the extension by GE to union leaders of a nonnegotiable contract offer. During the late 1940s General Electric embarked on a study of nuclear power and constructed a laboratory specifically for the task.
Company scientists involved in an earlier attempt to separate U-235 from natural uranium were developing nuclear power plants for naval propulsion by 1946. In 1955 the Navy launched the submarine Seawolf, the world’s first nuclear-powered vessel, with a reactor developed by General Electric. In 1957 the company received a license from the Atomic Energy Commission to operate a nuclear-power reactor, the first license granted in the United States for a privately owned generating station. That same year GE’s consumer appliance operations got a big boost when an enormous manufacturing site, Appliance Park, in Louisville, Kentucky, was completed. The flow of new GE products–hair dryers, skillets, electronic ovens, self-cleaning ovens, electric knives–continued.
Other innovations to come from GE labs during the 1950s included an automatic pilot for jet aircraft, Lexan polycarbonate resin, the first all-transistor radio, jet turbine engines, gas turbines for electrical power generation, and a technique for fabricating diamonds. Antitrust problems continued to vex the company throughout the postwar years. In 1961 the Justice Department indicted 29 companies, of which GE was the biggest, for price fixing on electrical equipment. All the defendants pleaded guilty. GE’s fine was almost half a million dollars, damages it paid to utilities who had purchased price-fixed equipment came to at least $50 million, and three GE managers received jail sentences and several others were forced to leave the company. During the 1960s and 1970s GE grew in all fields.
In 1961 it opened a research center for aerospace projects, and by the end of the decade had more than 6,000 employees involved in 37 projects related to the moon landing. In the 1950s General Electric entered the computer business. This venture, however, proved to be such a drain on the company’s profits that GE sold its computer business to Honeywell in 1971. By the late 1960s, GE’s management began to feel that the company had become too large for its existing structures to accommodate. Accordingly, the company instituted a massive organizational restructuring. Under this restructuring program, the number of distinct operating units within the company was cut from more than 200 to 43.
Each new section operated in a particular market and was headed by a manager who reported to management just beneath the corporate policy board. The sections were classified into one of three categories–growth, stability, or no-growth–to facilitate divestment of unprofitable units. When this reorganization was complete, General Electric made what was at the time the largest corporate purchase ever. In December 1976 GE paid $2. 2 billion for Utah International, a major coal, copper, uranium, and iron miner and a producer of natural gas and oil. The company did 80 percent of its business in foreign countries. Within a year Utah International was contributing 18 percent of GE’s total earnings.
In the meantime, GE scientist Ivar Giaever was a corecipient of the 1973 Nobel Prize in Physics for his discoveries in the area of superconductive tunneling. Giaever became the second GE employee to be honored with a Nobel Prize. The divestiture of its computer business had left GE without any capacity for manufacturing integrated circuits and the high-technology products in which they are used. In 1975 a study of the company’s status concluded that GE, one of the first U. S. electrical companies, had fallen far behind in electronics. As a result, GE spent some $385 million to acquire Intersil, a semiconductor manufacturer; Calma, a producer of computer graphics equipment; and four software producers. The company also spent more than $100 million to expand its microelectronics facilities.
Other fields in which GE excelled were in trouble by the mid-1970s, most notably nuclear power. As plant construction costs skyrocketed and environmental concerns grew, the company’s nuclear power division began to lose money. GE’s management, however, was convinced that the problem was temporary and that sales would pick up in the future. When by 1980 General Electric had received no new orders for plants in five years, nuclear power began to look more and more like a prime candidate for divestment. GE eventually pulled out of all aspects of the nuclear power business except for providing service and fuel to existing plants and conducting research on nuclear energy.
Though General Electric’s growth was tremendous during the 1970s and earnings tripled between 1971 and 1981, the company’s stock performance was mediocre. GE had become so large and was involved in so many activities that some regarded its fortunes as capable only of following the fortunes of the country as a whole. GE’s economic problems were mirrored by its managerial reshuffling. When John F. (Jack) Welch, Jr. , became chairman and CEO in 1981, General Electric entered a period of radical change. Over the next several years, GE bought 338 businesses and product lines for $11. 1 billion and sold 232 for $5. 9 billion. But Welch’s first order of business was to return much of the control of the company to the periphery.
Although he decentralized management, he retained predecessor Reginald Jones’s system of classifying divisions according to their performance. His goal was to make GE number one or two in every field of operation. One branch of GE’s operations that came into its own during this period was the General Electric Credit Corporation, founded in 1943. Between 1979 and 1984, its assets doubled, to $16 billion, primarily because of expansion into such markets as the leasing and selling of heavy industrial goods, inventories, real estate, and insurance. In addition, the leasing operations provided the parent company with tax shelters from accelerated depreciation on equipment developed by GE and then leased by the credit corporation.
Factory automation became a major activity at GE during the early 1980s. GE’s acquisitions of Calma and Intersil were essential to this program. In addition, GE entered into an agreement with Japan’s Hitachi, Ltd. to manufacture and market Hitachi’s industrial robots in the United States. GE itself spent $300 million to robotize its locomotive plant in Erie, Pennsylvania. Two years later GE’s aircraft engine business also participated in an air force plant-modernization program and GE later manufactured the engines for the controversial B-1B bomber. In 1986 General Electric made several extremely important purchases. The largest–in fact, the largest for the company to that date–was the $6.
4 billion purchase of the Radio Corporation of American (RCA), the company GE had helped to found in 1919. RCA’s National Broadcasting Company (NBC), the leading U. S. television network, brought GE into the broadcasting business in full force. Although both RCA and GE were heavily involved in consumer electronics, the match was regarded by industry analysts as beneficial, because GE had been shifting from manufacturing into service and high technology. After the merger, almost 80 percent of GE’s earnings came from services and high technology, compared to 50 percent six years earlier. GE divested itself of RCA’s famous David Sarnoff Research Center, because GE’s labs made it redundant.
In 1987 GE also sold its own and RCA’s television manufacturing businesses to the French company Thomson in exchange for Thomson’s medical diagnostics business. GE justified the merger by citing the need for size to compete effectively with large Japanese conglomerates. Critics, however, claimed that GE was running from foreign competition by increasing its defense contracts (to almost 20 percent of its total business) and its service business, both of which were insulated from foreign competition. In 1986 GE also purchased the Employers Reinsurance Corporation, a financial services company, from Texaco, for $1. 1 billion, and an 80 percent interest in Kidder Peabody and Company, an investment banking firm, for $600 million, greatly broadening its financial services division.
Although Employer’s Reinsurance contributed steadily to GE’s bottom line following its purchase, Kidder Peabody lost $48 million in 1987, in part because of the settlement of insider trading charges. Kidder Peabody did come back in 1988 to contribute $46 million in earnings, but the acquisition still troubled some analysts. GE owned 100 percent of Kidder Peabody by 1990. General Electric’s operations were divided into three business groups in the early 1990s: technology, service, and manufacturing. Its manufacturing operations, traditionally the core of the company, accounted for roughly one-third of the company’s earnings. Still, GE continued to pour more than $1 billion annually into research and development of manufactured goods.
Much of that investment was directed at energy conservation–more efficient light bulbs, jet engines, and electrical power transmission methods, for example. In 1992 GE signaled its intent to step up overseas activity with the purchase of 50 percent of the European appliance business of Britain’s General Electric Company (GEC). The two companies also made agreements related to their medical, power systems, and electrical distribution businesses. Welch said that his aim was to make GE the nation’s largest company. To that end, General Electric continued to restructure its existing operations in an effort to become more competitive in all of its businesses. Most importantly, the company launched an aggressive campaign to become dominant in the growing financial services sector.
GE’s aggressive initiatives related to financial services reflected the fact that the service sector represented more than three-quarters of the U. S. economy going into the mid-1990s. Furthermore, several service industries, including financial, were growing rapidly. GE’s revenues from its giant NBC and GE Capital divisions, for example, rose more than 12 percent annually from about $14. 3 billion in 1988 to more than $25 billion in 1994. Encouraged by those gains, GE’s merger and acquisition activity intensified. For example, in 1994 the company offered a $2. 2 billion bid for Kemper Corp. , a diversified insurance and financial services company (it retracted the bid in 1995).
GE’s sales from services as a percentage of total revenues increased from 30 percent in 1988 to nearly 45 percent in 1994, and neared 60 percent by 1996. The troubled Kidder Peabody unit remained a drag on GE’s services operations, leading to the company’s late 1994 decision to liquidate the unit. As part of the liquidation, GE sold some Kidder Peabody assets and operations to Paine Webber Group Inc. for $657 million. In contrast to its service businesses, GE’s total manufacturing receipts remained stagnant at about $35 billion. Nevertheless, restructuring was paying off in the form of fat profit margins in many of its major product divisions. Importantly, GE made significant strides with its Airc