GE Has Come a Long Way From Edison’s Lab

The century-old General Electric Co.--which grew out of the laboratory of Thomas Alva Edison in the 1880s to become one of America’s original industrial giants--approaches the end of 1985 as one of the world’s largest, most diversified and cash-rich corporations.

The consumer products and defense firm announced Wednesday a definitive merger agreement with RCA Corp. in a cash deal valued at $6.28 billion. GE said it would pay $66.50 a share for RCA common stock. Analysts called the merger a bargain for GE and an opportunity for RCA to avoid a hostile takeover. Like GE, RCA manufactures defense products and a wide range of consumer electronic products.

The diversified GE makes refrigerators and factory robots, light bulbs and jet engines, diesel locomotives and advanced CAT scan X-ray devices; it generates electricity for cities with power plants and capital for venture loans through its credit division, and it is the nation’s fourth-largest defense contractor and ninth-largest industrial firm.

In 1984, Fairfield, Conn.-based GE posted sales of $27.9 billion, a record figure for the company although growth rates have been flat for three years. The earnings rate, over the same period, climbed steadily under what Standards & Poor’s analysts characterized as “the company’s superior management and product leadership.”

For more than a year, meanwhile, speculation about how GE might spend its growing cash reserves has been the sport of Wall Street.

Speculation about GE’s anticipated acquisition plans recently prompted rumors, for example, that the company might be the “white knight” to buy CBS when the television network resisted the takeover bid of Ted Turner. And, unfounded reports two months ago that GE was considering a possible merger with Litton Industries spurred an $11-per-share jump in the Beverly Hills-based company’s stock.

Sold Coal Mining Properties

Since becoming chairman in 1981, GE’s John F. Welch Jr. has presided over a reorganization that included divestiture last year of coal mining properties in Utah and its line of small household appliances, which it sold to Black & Decker for $300 million. A dozen of the company’s 217 plants have been closed, and more closures are planned.

Such moves have helped GE’s bottom line. Earnings have increased each year since Welch moved into the top job. Last year they hit a record $2.28 billion, up from $2 billion in 1983, and represented an 8.2% net income on sales for the year.

All has not been well, however, for the company that grew out of Edison’s light bulb invention--the company originally called Edison General Electric Co., a consolidation of many of Edison’s enterprises, including electric power generation and distribution systems.

Earlier this year, the company pleaded guilty to defrauding the government of $800,000 on a Minuteman missile project and was fined the maximum $1.04 million on top of an order to repay the $800,000. Also, a GE space systems division executive was convicted in July of lying to a grand jury investigating that case.

GE was briefly suspended from bidding on Pentagon contracts in the aftermath of the controversy. However, a federal judge who imposed the fine said that the nation is dependent on GE’s defense contracts “just like a newborn baby is dependent upon its mother.”

Also last year, it was disclosed that GE paid no federal income taxes from 1981 to 1983. And, in 1984, it paid only $185 million despite revenue exceeding $27 billion.

Welch defended GE’s tax position, saying its favorable tax bills were due to the company’s ambitious capital -spending program. In a letter to then-Treasury Secretary Donald T. Regan, he said: “The most disturbing aspect of the debate is the characterization of capital formation as loopholes.”