You are here

General Electric loses place in elite Dow Jones Industrial Average

New York

GENERAL Electric Co has lost its spot in the Dow Jones Industrial Average after more than a century in the blue chip stock index, a new blow to a company that once towered over the American business landscape but is now struggling to retain its standing as an industrial powerhouse.

S&P Dow Jones Indices said on Tuesday that GE, an original member of the Dow when it was formed by Charles Dow in 1896 and a continuous member since 1907, will be replaced in the 30-component stock average by drug store chain Walgreens Boots Alliance Inc prior to the start of trading on June 26.

GE's stock slipped 1.5 per cent in after-hours trading following the announcement, while Walgreens jumped 3 per cent.

A decade and a half ago, GE was the world's most valuable public company. But it foundered in several key industrial markets in recent years, and a diversion into financial services steered it into the eye of the global financial crisis in 2008.

It now ranks as the sixth smallest member of the Dow by market value and carries the index's lowest stock price, making it the least influential component of the price-weighted average.

Faced with weak profits and calls to be broken up, the 126-year-old company is aggressively cutting costs, selling businesses and trying to strengthen its balance sheet under new managers and a new board.

Its stock has fallen nearly 80 per cent from highs in 2000.

Last month, chief executive John Flannery warned that GE may not be able to pay its 2019 dividend.

"It was at one time perhaps one of the quintessential US companies, and like others that have been taken out of the Dow, it's a reflection that they're no longer seen in that light," said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

The shifting sands of the Dow are testament to the various companies that were unassailable household names for decades before becoming the victims of an evolving economy. Some simply disappeared, while others found new life even if they did not reclaim their prior economic influence. They include Eastman Kodak, Sears Roebuck, International Paper, Goodyear, Bethlehem Steel, Westinghouse, General Motors Co and Chrysler.

Co-founded by inventor Thomas Edison, GE was the largest US company by stock market value starting in 1993, with brief interruptions from Microsoft Inc until Exxon Mobil Corp overtook it in 2005.

With the addition of Walgreens, the Dow will better reflect the role of consumers and healthcare in the US economy, S&P Dow Jones Indices said in a statement.

While analysts had anticipated GE's exit from the Dow because of its falling share price, it is a blow to the company to lose its status as the only original member of the iconic index. GE did leave the Dow after the index was founded in 1896 but rejoined in 1907 and has been a constant member since then, according to S&P Dow Jones Indices.

Changes to the Dow are made on an as-needed basis and selection is not governed by quantitative rules, according to published methodology for the index. REUTERS