Jeffery Immelt to Create Jobs for Obama

February/05/2011 16:04PM
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GE has employed two CEO’s since 1980, Jack Welch and Jeffery Immelt. If you were forced to pick one of the two to get this country back on track financially, which would you pick? Here’s some background to help with your choice.   

Through the 1980s, Welch worked to streamline GE. In 1981 he made a speech in New York City called “Growing fast in a slow-growth economy”.[4] This is often acknowledged as the “dawn” of the obsession with shareholder value. Later, in an interview with the Financial Times on the Global financial crisis of 2008–2009, Welch said, “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products.”[5] Many top CEOs have distanced themselves from Welch stating that Welch would not have made such a comment while still the CEO of GE. Employees, customers and products are enablers, while shareholder value creation gives a publicly traded company a license to operate.

He also pushed the managers of the businesses he kept to become more productive. Welch worked to eradicate perceived inefficiency by trimming inventories and dismantling the bureaucracy that had almost led him to leave GE in the past. He shut down factories, reduced payrolls and cut lackluster old-line units.[6] Welch’s public philosophy was that a company should be either #1 or #2 in a particular industry, or else leave it completely. Welch’s strategy was later adopted by other CEOs across corporate America.

Each year, Welch would fire the bottom 10% of his managers. He earned a reputation for brutal candor in his meetings with executives. He would push his managers to perform, but he would reward those in the top 20% with bonuses and stock options. He also expanded the broadness of the stock options program at GE from just top executives to nearly one third of all employees. Welch is also known for destroying the nine-layer management hierarchy and bringing a sense of informality to the company.

During the early 1980s he was dubbed “Neutron Jack” (in reference to the neutron bomb) for eliminating employees while leaving buildings intact. In Jack: Straight From The Gut, Welch states that GE had 411,000 employees at the end of 1980, and 299,000 at the end of 1985. Of the 112,000 who left the payroll, 37,000 were in sold businesses, and 81,000 were reduced in continuing businesses. In return, GE had increased its market capital tremendously.

In 1986, GE acquired NBC, which was located in Rockefeller Center; Welch subsequently took up an office in the GE Building at 30 Rockefeller Plaza. During the 1990s, Welch shifted GE business from manufacturing to financial services through numerous acquisitions.

Welch adopted Motorola’s Six Sigma quality program in late 1995. In 1980, the year before Welch became CEO, GE recorded revenues of roughly $26.8 billion. In 2000, the year before he left, the revenues increased to nearly $130 billion. When Jack Welch left GE, the company had gone from a market value of $14 billion to one of more than $410 billion at the end of 2004, making it the most valuable and largest company in the world.

At the time of his retirement, Welch received a salary of $4 million a year, followed by his controversial retirement plan of $8 million a year. In 1999 he was named “Manager of the Century” by Fortune magazine.[7]

There was a lengthy and well-publicized succession planning saga prior to his retirement between James McNerney, Robert Nardelli, and Jeffrey Immelt, with Immelt eventually selected to succeed him as Chairman and CEO. Nardelli became the CEO of Home Depot until his resignation in early 2007, and until recently, was the CEO of Chrysler, while McNerney became CEO of 3M until he left that post to serve in the same capacity at Boeing

Here’s an abbreviated performance for Jeffrey Immelt. Immelt was just named as President Obama’s head on a new Council on Jobs and Competitiveness. With 26 million Americans currently unemployed, this is an important position.

GE stock price in January 2001 with Immelt at the helm was $33.79. In February of 2009 the stock price hit $8.11. Billions in stockholder value were lost. On Jan 3, 2011, the stock price was $20.14. As the article on Welch(above) shows, Welch put a lot of emphasis on GE Credit. Immelt paid a price for that, but he did not see the train coming. Without help from your tax dollars, GE might have failed.

Immelt has a much different model than Welch. He sees the government as a partner in GE’s future. With Obama’s State of the Union Message, he indicated he is truly Immelt’s business partner. Investing in infrastructure, green energy, and ObamaCare, he hits all of Immelt’s bets on the future. Trains, in the form of locomotives is a big GE business. Wind is even bigger. Solar is big, and medical is huge. Where do you think Immelt will steer the solution for getting America back to work? Is this conflict of interest?

More importantly, would you pick Immelt or Welch to do this job. One is perceived as the executive of his generation, and the one picked has almost destroyed everything Welch accomplished at GE. He has hung on by his fingernails as the CEO.

Nice work, Mr. President, you picked another loser and one that will try to make his bonus by investing our tax dollars in businesses that may need billions in additional tax subsidies to succeed. If they fail, and they will for lack of funding, Immelt will fail and none of the jobs will materialize.

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