In 2021, General Electric split into three distinct businesses focused on aviation, healthcare and energy, redefining its destiny. GE’s dramatic split allowed it to unlock a wealth of value for its owners by shedding its cumbersome conglomerate structure. GE improved its financial openness and operational focus by allowing each division to simplify its processes and refine its strategies, which attracted the market. Investors were quick to see the benefits as each newly created company could now respond to investor preferences and industry-specific objectives, thereby improving performance and shareholder value.

Could Boeing take a similar path and unlock latent investor value?

A brief overview of the dissolution of GE

In a company whose different business sectors had become increasingly difficult to manage, the decision to dismantle the companies was not only driven by operational considerations but also by a strategic decision aimed at maximizing shareholder value. The split allowed each division to focus on its core competencies, drive innovation in its own sector and unlock value buried under a large conglomerate structure.

For GE, it was obvious. Separating high-growth sectors like aviation and healthcare from the slower-growing energy sector would allow the company to present a clearer and focused value proposition to investors. The market responded favorably and a more focused, more efficient and more simplified business benefited its shareholders.

Boeing’s current challenges

Like General Electric before its split, Boeing has faced several major financial and operational challenges that have raised doubts about its current organizational structure. From the high-profile 737 MAX disaster to global supply chain disruptions to the aftermath of the COVID-19 outbreak, Boeing’s problems have not only damaged its once-perfect reputation, but have also seriously affected its share price. These losses have investors wondering: Is Boeing’s vast conglomerate structure now a problem rather than a strength? .

Boeing has put a lot of effort into recovery, including improving safety procedures and fixing supply chain inefficiencies, but the sheer difficulty of managing such a large portfolio of businesses, from commercial aircraft to From defense to space to global services, it has become a central concern. Changing cash flows in these sectors have only intensified the debate over whether Boeing’s current structure limits them. Under these circumstances, shareholders are increasingly wondering: Could a split like GE’s provide the focus and agility Boeing needs to bounce back and thrive?

Breaking up Boeing could reveal latent wealth by allowing its key sectors to operate independently, freed from the operational weight of the larger conglomerate.just as the separation of GE allowed its divisions to streamline their operations and better meet the interests of investors.

What are Boeing’s divisions?

Boeing has three main divisions:

1. Designed, built and sold by Boeing, Commercial Airplanes (BCA) is their largest division. Some of the popular models covered include the 737, 777, and 787. This segment helps leasing companies and airlines around the world.
2. Defense, Space and Security (BDS) focuses on military aircraft, satellites, space exploration and other government initiatives. It covers things like unmanned systems, missile defense systems, and military aircraft.
3. Global Services (BGS) provides its commercial and military customers with after-sales services, including maintenance, upgrades, repairs and logistics support. It serves a wide range of Boeing products used around the world.

Finally, Boeing Capital Corporation (BCC) is a smaller division engaged in financing plans to support the company’s commercial and defense products. It mainly controls financial risks for users of Boeing products.

Why a Boeing breakup might make sense

1. Boeing’s current structure combines its commercial aircraft segment with defense, space and global services, each with unique development potential and risk profile. By separating these divisions, each could operate with more focus and attract investors with different agendas. While defense and space may attract those seeking more consistent, government-backed contracts, commercial aviation could attract growing investors. Each unit would be able to manage its own capital allocation, simplify decision-making and increase operational efficiency.
2. Following the 737 MAX problem, Boeing was fired for both its corporate culture and leadership style. A separation could produce a more focused management team for each division, fostering greater accountability and alignment with the needs of their own markets. Boeing could produce more specialized executives who grasp the intricacies of each sector by relieving management of the need to oversee multiple lines of business.
3. A split could also help Boeing’s separate divisions be more resilient in the face of industry-specific downturns. Depending on things like fuel prices, travel demand, and geopolitical stability, the aviation industry is somewhat cyclical. Conversely, defense contracts sometimes provide more consistent, long-term revenue streams. Separating these divisions allows investors to gain exposure to the selected risk profile unrelated to the performance of the overall company.

Why could Boeing resist a breakup?

Even though a split could theoretically unlock value, there are important reasons why Boeing might be hesitant to pursue such a strategy. Ant Split should look at them carefully.

With its combination of commercial, defense and space divisions, Boeing’s current structure provides a unique synergy that drives innovation in several areas. For defense initiatives as well as commercial aircraft, for example, developments in aerospace technology, including materials and engineering, could be used. Through this cooperation between divisions, Boeing remains competitive in both markets. A possible split could weaken these synergies, thereby limiting Boeing’s ability to exploit advancements across its portfolio, thereby affecting overall technical progress.

Furthermore, Boeing’s defense division is rather anchored in American national security. Main suppliers of military equipment, defense aircraft and services; any split could raise legal and political questions about safeguarding national defense capacity and key technologies. Obtaining large defense contracts depends mainly on Boeing’s size and experience; thus, a separation could compromise its position in this important area, influencing defense capacity as well as the awarding of contracts.

A breakup would not, however, take place without great difficulties. Any partition of Boeing’s business divisions would be far more difficult than a separation like GE’s given its global operations, extensive legal and contractual responsibilities and significant debt structure. Additionally, it is unclear how investors would react to a separation of assets and whether the split would ultimately increase or reduce shareholder value.

If Boeing can overcome these challenges through regulatory oversight, careful planning, and strategic business division, a spinoff would allow the company to focus on its core areas and increase operational efficiency, even in the face of these ups and downs. . Simplifying its business strategy can help Boeing generate more value for its owners, providing a better path to development and recovery. The success of such a plan, however, would depend on Boeing’s ability to manage the inherent complexity and safeguard its national security interests while maintaining its leadership role in the commercial and military sectors.

Will Boeing go the way of GE?

In conclusion, although Boeing has not indicated any formal separation plans, the idea is worth exploring. Like GE, Boeing grapples with the complexity of managing diverse divisions, each presenting distinct challenges and opportunities. If executives begin to view the current structure as an obstacle to value creation, a strategic split could become a serious consideration. However, given Boeing’s crucial role in national security and the technological synergies between its divisions, a split would be far more complex than GE’s.

For investors, it is crucial to closely follow developments at Boeing, as any structural changes could bring both opportunities and risks. The possibility of a breakup remains speculative, but history has shown that bold moves can sometimes generate significant value. Although it is not certain that Boeing will choose this path, it is a possibility to consider for its future growth and value creation. They might be forced to do so, as GE ultimately was.

The author owns Boeing stock

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