[Motley Fool] General Electric (NYSE:GE) is in the middle of a massive corporate overhaul. Investors worried about its ability to navigate that evolution successfully have pushed its share prices down some 70% from their 2016 highs to levels not seen since the Great Recession.This is a special situation stock with huge upside potential if the turnaround effort works. But putting that "special situation" tag on GE changes the investment equation in a big way. Yes, it could be a millionaire maker stock, but only if you're willing to take on the risk that it could also flame out. Here's what you need to think about before you jump aboard here.
An iconic leader who left a mess behind him
The troubles currently facing GE can really be traced back to Jack Welch -- an assertion that to some people probably sounds like heresy. Welch was a powerful presence in the business world, often hailed as one of the greatest managers of all time. However, it was under his watch that GE allowed its finance arm to expand beyond its core purpose.
Like many industrial companies, GE has an in-house finance business that provides credit to customers so they can afford the often-huge costs of the industrial products GE makes. This is a good business practice, and not odd at all. However, the often-huge profits generated by the finance division led GE to expand its footprint into other areas, like home mortgages. When the Great Recession hit, the company's survival was threatened by the losses from its finance division. Jeff Immelt, Welch's successor, was in charge by that point, and he was forced to cut GE's dividend, take massive write offs, sell assets, and accept a government bailout.
Immelt did manage to keep GE going, however, and started to steer it in a new direction focused entirely on the industrial space. That said, his efforts, which included a couple of large acquisitions, didn't produce the results that the board was hoping to see, and they replaced him in mid-2017 with insider John Flannery. The new CEO announced write offs, asset sales, and a dividend cut, explaining to investors that things were worse than his predecessor had been letting on.
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