First, some basic facts about the CEO who has lead GE
down into the gulley of problems. The data here is straight from ge.com as you can see by the link provided.
Immelt is the ninth chairman of GE, a post he has held since September 7, 2001.
Mr. Immelt has
held several global leadership positions since coming to GE in 1982, including
roles in GE’s Plastics, Appliance, and Healthcare businesses. In 1989 he became
an officer of GE and joined the GE Capital Board in 1997. A couple years later,
in 2000, Mr. Immelt was appointed president and chief executive officer.
Mr. Immelt has
been named one of the “World’s Best CEOs” three times by Barron’s,
and since he began serving as chief executive officer, GE has been named
“America’s Most Admired Company” in a poll conducted by Fortune
magazine and one of “The World’s Most Respected Companies” in polls
by Barron’s and the Financial Times.
Mr. Immelt is
the chair of President Obama’s Council on Jobs and Competitiveness. He is also
a member of The Business Council.
Mr. Immelt earned a B.A. degree in
applied mathematics from Dartmouth College in 1978 and an M.B.A. from Harvard
University in 1982. He and his wife have one daughter.
First off, all of that seems to say he is doing a stellar
job at running the company. Why not look
at what he has accomplished recently and in actuality?
GE to pay no taxes in 2010:
This article also shows how Immelt uses lobbying and funds from that to prevent himself from paying taxes. This worked very well for 2010 obviously. Due to friendliness with the Obama administration, Obama Picked Jeffrey Immelt, GE CEO, To Run New Jobs-Focused Panel As GE Sends Jobs Overseas, Pays Little In Taxes. There is the crony in him sticking out. Seems he loves to play lip service to performance, and sales and in truth just sucks up to politicians to get tax
So what are the goals of GE under Immalt? The main purpose of his business model appears to be green energy in just about any form. GE for years has been involved in power and the usage of power with its products all the way from nuclear reactors down to consumer devices such as stoves, dishwashers, etc.
So knowing that, lets look at the performance in a nutshell of GE along with pay of Immelt:
Note: the average company stock (for fortune 500) made
10% profit in this time period whereas GE stock lost 40% of its value under
Immelt. I think this is important in
showing how ineffectual he was as a leader.
Why did GE fair so poorly? Will
get to that in a moment…
More information on his lack of leadership skills:
An interview with him on jobs going overseas: (He denies
Obviously, he denies jobs going overseas, but the truth
is that during his tenure, GE has been losing jobs at a phenomenal rate here in
the US (where most of its people used to be employed) and most of it is going
“As the administration
struggles to prod businesses to create jobs at home, GE has been busy sending
them abroad. Since Immelt took over in 2001, GE has shed 34,000 jobs in the
U.S., according to its most recent annual filing with the Securities and Exchange
Commission. But it’s added 25,000 jobs overseas.”
So knowing that, how is
it possible that GE is doing so poorly in the market?
The analysis I read awhile back seemed to point to a lack of understanding of what made GE great to
begin with. Back when Immelt took over in 2001, the company was known as an American company that provides great
products which work well and the company was also well-known for its excellent
customer care. Since then, its products have slid every year as costs were cut in R&D in their main businesses, and
they went and poured money into green technology. None of the green technology as of yet has
paid off in any meaningful way. So this money went down a rat hole so to speak.
In addition, they cut costs in their customer care by off-shoring it,
and as such they suffered for this as well. Now more of its jobs are overseas then here in the states, and its
products are no longer the “Great” products that they were 10 years ago since
the R&D into their most lucrative products was stopped.
So in order to become a green company, Immelt stripped the company of its greatness, shipped jobs
overseas, and turned a great company into nothing but a crony mouthpiece for
green politicians everywhere. Such a tragic waste…
The failure of this model can also be seen in the performance thus far of GE over the last 10 years. This performance for those of you who invest in GE should be taken as a grain of salt. With the recent incandescent ban coming up and not looking to pass:
The Government will basically be funneling taxpayer money into GE to subsidize toxic lightbulbs. This will be a basic cash infusion for GE as they can then focus on other green technologies which under Immelt is what the company is after in the first place.
The reason I use the term “toxic lightbulbs” earlier is that the new CFL lightbulbs which are slated to become the new lightbulb of choice are getting heavy Government subsidies to make them competive with other sources of light which can range from LCD to other alternative lighting schemes including fluorescent lights.
I only mention the other sources of lights since CFL lightbulbs work in *most light sockets, but not all. Some fixtures nad indeed some lamps do not work correctly with CFL and as such have issues such as flickering that require the fixtures or lamps to be replaced which means its possible that with the ban on incandescent lights, that other light sources should possibly be subsidized more so since these lights are toxic as well containing mercury. Disposal is a hassle for both the consumer and for other companies and to top this off, breaking a lightbulb of this type results in toxic fumes and mercury which has no place in the home in the first place.
This entire concept stinks of cronyism to a large extent. The people are not represented well at all with this entire boondangle, and further boondangles which include wind turbines as mentioned earlier by GE.
The problem with this business model comes down to one very distinct issue: it is depended on Government subsidies. Stop the subsidies, and GE loses real money. Stop the ban on normal lightbulbs, and once again GE loses large sums of money. How GE is being run now is that its core business is being dismantled and left to rot while GE focuses on green initiatives which in 5 years time could become worthless in which case GE becomes just another failed company that used to be great.
Its all depended on the future of other green technologies and future subsidies. Without this, the crony corporation of GE will fail and will fail very badly. Another post on wind power will put that into perspective as far as subsidies go, but for the most part rest assured that unless GE returns to giving the consumer what they want versus green lobbyists, the company will fail at some point due to change in Government. That is an inevitable fact and is the main problem with crony corporations. Without central aid and without central laws to protect them, they can not compete on a level playing field and as such fail. Instead of innovating, they simply eat up from the Government trough.
The future may tell us more on this subject, but for now, rest assured that GE is not a company to count on.