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Test time for GE and Jeff Immelt.
The past few weeks have been very trying times for GE and Jeff Immelt.
- The most shocking time was when Jeff, after having said that 10% earnings growth was "in the bag" and then missing his promises was one of the worse times since Jeff has taken over.
- This embarrassment was compounded when his friend, mentor and predecessor went on global video to say he was shocked and that it happened again he would get a gun and shoot him ( this was shocking because it showed that Jack Welch was out of toon with the times and out of the company network)
- Then there were stockholder suits, the investigation of the SEC and finally admission that one of his acquistions,when he was the CEO of Healthcare had just resummed production after 20 months.
- Even worse was the Forbes article on the CEOs who failed to earn their money for stockholders.
In short, it appears that Jeff's "seven year honeymoon" has come to an adbrubt end and that his creditability and ability to lead and increase SHAREHOLDER VALUE are much in jeapody.
Unfortunately I think that Jeff is now witnessing the downside of his GO BIG, GO GLOBAL and Dreaming Approach to leading one of the most remarkable and successful company for over 127 years.
I personally continue to maintain my investment in GE and believe that the company will address its mistakes and ADAPT to external changes and its past mistakes.
Stay tuned…Bill Rothschild, author of The Secret to GE's Success which anticipated the problems of Immelt's GO BIG strategies, visit www.strategyleader.com for a continuing assessment of GE and other major companies…
Thursday, April 17, 2008
GEWatcher 12- "Welch violated one of the GE key success factors- Leave and get out of the way"
It has been an amazing GE week...for people like me who are alumni and investors.
In my book, The Secret to GE's Success, I emphasize that among GE success factors, has been their ability to make their numbers and never over promise...
But on Friday, April 18, 2008... Jeff Immelt had to apologize because GE was unable to meet the income targets that he had just two weeks before said were "in the bag". Even worse he missed badly and had to blame more than one business unit for the miss. This caused a major sell off of the ENTIRE DOW since the most reliable company missed and everyone thought that things were bad and getting worse.
To make matters worse Jack Welch, the GE legend, went on CNBC (a GE owned cable network) and its competitor FOX NEWS... to say that Immelt's miss was irresponsible. This unprecedented action made things worse... and it was compounded when Jack..ate humble pie.. and said he was miss interpreted.
One of GE's great strengths in the past was that its CEO's retired and then disappeared. Unfortunately Jack has not disappeared and continues to promote himself. He has columns in Business Week, is a frequent guest on news programs, and even leads expensive, executive session.
This is what I wrote in my book:
"Leave and Get Out of the Way. This is another critical piece of GE’s leadership success. GE leaders have been required to leave when they retired and not permitted to hang around either as members of the board of directors or as advisers. This practice has enabled the new leader to take command without being second-guessed by his predecessor."
It is clear, that even if Jack Welch meant well, he appears to unable to leave GE behind and not continue to play the role of CEO. Unfortunately, he made the situation worse and has caused many to question Immelt's game plan and abilities. This is not positive.
I will continue to comment on the GE strategy and its ability to create and meet realistic expectations.
Welch said that Immelt can't surprise everyone again... I agree and Immelt and his team must be able to make the numbers with no excuses.
Bill Rothschild, author of The Secret to GE's Success and the most unique strategic thinking software and tutor available, StrategyLeader(tm). This software is available for a 10 day trial on www.strategyleader.com.
Tuesday, April 15, 2008
GE Surprised itself
High Expectations and Surprising Yourself
During my 25 year GE tenure and my subsequent 23 years as a consultant to major corporations, I stressed two leadership tenets
1. Set minimum expectations and always meet or even slightly exceed them. This demonstrates that you are credible and can always be counted on.
2. Never surprise your “key stakeholders”, especially customers and investors and most of all YOURSELF. This shows that you have done your homework and are prepared for uncertainty.
Last Friday, Jeff Immelt and his GE team violated both of these leaderships tenets.
In my recent book: The Secret to GE’s Success, I ended my 127 year strategic history of the company with concerns about Immelt’s ability to “meet high expectations and avoid surprises”.
I cited four concerns:
"Ability to “Go Big”, which was the theme of the 2005 annual report. In this area, I applauded his “missionary zeal”, but didn’t believe that he could grow organically, at a 8% compounded rate, because of the size and complexity of the company ( adding $14 billion of revenues each year and even a higher rate of earnings can’t be achieved forever… it is simply the “law of BIG numbers”).
“Selling Solutions Globally” - highlighted the complexity of selling to developing nations, like China and India, who are not willing to “repatriate earnings and even nationalize companies” if they are too profitable and big.
“It Always Takes Longer Than You Think”, focused on how difficult it is to get large, infrastructure orders and maintain strong competitive positions.
“Maintaining a Strong and Deep Bench” focused on GE’s willingness to invest in people and even allocate a month of the CEO’s time to evaluating key people. When you have over 300,000 employees with a wide variety of cultures, religions and skills, this is almost impossible. GE has been and continues to be the prime source of executive and professional talent by headhunters and companies who have a “just in time” staffing philosophy.
Chief Executive Article. In June, 2007, I published an article in Chief Executive magazine, entitled: “Decision Time for Buffett and Immelt”, in which I contrasted the “GO BIG” simple approach of Warren Buffett with the complex approach GE’s Immelt. In this article, I stress three actions for Immelt to consider: Make the company less complex.
Continue to Prune the Portfolio.
Create “tracking stocks”- that would allow investors to invest in sectors of the company, while allowing GE to remain in control and one company.
Blogs on Amazon and Google. Since November, 2007, I have been writing a series of blogs, entitled GEWatchers, to keep my readers and clients up to date on what Immelt and his team are doing strategically and how their actions compare to what made GE successful in the past. These are indexed on this site, along with blogs on other major topics.
Bill Rothschild author of five key books on strategic leadership.
Wednesday, April 9, 2008
"Past is Uncertain As the Present & Future"!!!
Today's business press is full of articles and quotes about what caused the current economic mess. Greenspan, who was on the job for 18 years (which is too long for anyone), is defending his actions and says that he did what was right given the information he had. Others disagree and blame him for the current situation. John Reed, former Citicorp CEO has stated that the merger of Citicorp and Travellers was a mistake, while Sandy Weil his successor says it was a good move.
Obviously each of these individuals have their own view of what happened, which may be right or wrong, but it is really perception that is the foundation of even history. I am an avid read of American history and am amazed when I read different biographies about revolutionary heroes, which is popular today. The story of Jefferson, Washington, Adams, Burr all supposedly deal with the same "facts" about what happened, but they all have a different bias.
Unfortunately in the United States today, we focus only on what is happening today and don't learn from the past. We keep making the same mistakes, but it gets worse, because the actions of leaders today impact the entire world and not just one country.
Further we have created "news and commentary" networks and publications, that are so interested in getting the "headline first" that they often ignore the facts. In addition, the major organizations and companies tend to employ "spin doctors" to only show their good side and ignore their failures and weaknesses.
We can only learn from the past if we recognize that there were good and poor decisions and actions. However, we need to examine whether what worked or failed in the past, will work or fail today. This should be an integral part of all educational institutions and company training courses.
I believe that all of companies and institutions should take the time to examine their history and share it with the world. This means being willing to give all sides and then using these insights to improve the organizations. But it must be remembered that "the past is as uncertain as the present and future" and that it is okay to have different perceptions and conclusions.
When I developed the GE strategic planning workshops and seminars at Crotonville in the 1970's, I hired consultants and professors to study GE's past strategies and identify what they did well and not so well. One of the consultants came back after a month study and told me " in GE the past was as uncertain as the present and the future". I laughed and asked what he meant. He said that he interviewed dozens of executives and they all had a different perception of GE's past. This was a lesson I never forgot.
In the original GE Strategic Planning workshops, a four-hour "strategic history of the company" module was included, that covered both GE's successes, failures and even questionable management actions, such as "the great electrical conspiracy" and participation in cartels.
These sessions were a major success and I ultimately continued to lead these sessions, both inside and outside of GE. It is the foundation of my new book" The Secret to GE's Success", which also used these insights, as well as what I have learned from own experience and study, to evaluate GE today and the current leadership and strategies.
History is a critical element is learning and in developing sound business and public strategies. I believe that all companies and institutions would take the time to learn from its own past successes and failures and not just study "other company or organizations case studies". The real learning takes place when it is relevant to the students, employees and managers and it is a critical part of creating sound, viable and successful strategies and execution plans.
In short, know your self first and then learn from others.
Bill Rothschild, author of "The Secret to GE's Success"-which enables readers to learn from the successes and failures of an American Icon Company and put these lessons to work for themselves.
Friday, April 4, 2008
GEWatcher 10- Losing the Nuclear Power Race?
It is clear that one of the most significant ways that the United States and rest of the world will become more petroleum independent is by adding nuclear reactors.
Unfortunately, for GE it appears that Toshiba, who purchased the Westinghouse Nuclear business from British Nuclear Fuels in the fall of 2006 for $4.2 billion", appears to be in the leadership position.
The Wall Street Journal's April 4, 2008 edition reported: " that Toshiba will build four nuclear power plants in the US valued at a combined 1.4 trillion yen". "Since moving under Toshiba's umbrella, the U.S. company has received a total of a trillion yen in orders to build nuclear plants in China."
Nuclear is a key part of the United States energy policy and it is anticipated that there will be 30 new reactors planned over the next 20 years.
In my book: "The Secret to GE's Success" (pages 236- 237), I pointed out the GE lost the deal to purchase the Westinghouse PWR technology, which accounts for over 75% of the total global nuclear plants installed, because it refused to raise it bid and allowed Toshiba to win the prized Westinghouse nuclear business. I asserted that this was a mistake and that it was unclear whether the GE Hitachi combination would be successful in winning its fair share of the nuclear orders worldwide. So far, it appears that my prognosis was correct and that Toshiba is winning the order race.
In my book, I also point out that a successful nuclear strategy requires solving the nuclear waste problems and standardizing the type of reactors used in the United States. Both Japan and France have elected to use nuclear as a means of solving their energy problems, but they also have a complete system and standardized units. The United States does not.
Another surprise is that GE has not done better in China, where it has made significant investments in the Olympics, opening plants and offices and even moved one of its Research centers to Dalian. It appears to me that GE should have been able to get at least some of the nuclear orders in China.
Saturday, March 29, 2008
GEWatcher9 "Strategic Portfolio Management Continues"
One of the major reasons, that Jack Welch was so successful was that he had the strategic instincts to know what he liked and made deals that focused on his priorities. Nothing and no one was sacred and Welch didn't let fondness for any one business stand in his way in making tough strategic decisions.
I believe that his ability to acquire RCA at a bargain price and then package RCA's strong consumer electronics brand and businesses with the weaker GE brand and make a strategic deal with Thomson of France, was one of this defining moments.
WIN/WIN. Welch got the Thompson Medical Systems business, which he loved, and got rid of the consumer electronics business, which he hated. While Thompson enhanced its world wide consumer electronics business. Both were happy!
Jeff Immelt and his team have taken similar steps in the Consumer and Commercial Financial arenas. Recognizing the vulnerability of the consumer financial markets and their declining margins, Immelt had done the following:
- "GE yesterday agreed to sell its corporate charge card unit to American Express Co. for $1.1 billion. It also agreed to swap GE Money units in Germany and the U.K. to Spain's Banco Santander SA in exchange for Italian commercial lender Interbanca, which is valued at 1 billion euros ($1.58 billion)."
GE Money, as it was exiting WMC last year, agreed to buy part of UniCredit SpA's Bank BPH unit in Poland for 625 million euros ($893 million). In September, GE Money said it would invest $200 million in India by 2011. The sale of the corporate payment services unit to American Express should result in a gain of $200 million to $300 million, or 2 cents to 3 cents a share, and is included in GE's first- quarter forecast of 50 cents to 53 cents a share, Lehman Brothers analyst Robert Cornell, Goldman Sachs analyst Deane Dray and JP Morgan Analyst Stephen Tusa wrote in a notes yesterday and today.
- It's not an exit from consumer finance, it's part of a really deliberate strategy that comes from a pretty clear agreement with Jeff,'' Cary, 48, said yesterday. GE Money competes with the commercial-finance division for capital to be invested in higher-return areas." (http://www.bloomberg.com/ March 28, 2008)
Sound Strategic Portfolio Management.
I applaud these moves, since I have never been a strong advocate of the GE Consumer business and have believed that GE's strengths were in the commercial and industrial financial arenas, where it can combine its technical, market and financial skills to gain a competitive advantage.
This is sound strategic thinking portfolio management and is consistent with GE's past successes. It clearly demonstrates that Immelt and his team are continuing to assess their portfolio and willing to make strategic, longer term decisions and is not wed to any one business, even if it has been successful in the past. The divestiture of the "once beloved GE Plastics" was another example of this willingness to move ahead and not protect "fond" memories.
As a GE investor and alumni, I hope that this type of selectivity and portfolio management will enable the company to increase its disappointing stock performance.
Bill Rothschild, CEO Rothschild Strategies Unlimited, LLC (specialists in helping clients enhance their strategic thinking and decision making skills) and author of global bestseller: The Secret to GE's Success".
Strategy is what you do and not what you say
Many companies develop elaborate strategies describing what they plan to do and then do something different. This has a very negative impact on creating realistic expectations and guiding the key stakeholders.
GE seems to be falling into this situation.
Organic Growth-
Immelt has stated that he wants to grow the company organically and not just through acquisitions and yet it was reported, in a recent edition of the Financial Times, that GE made 2311 deals, worth $382 billion, in 2007. Is this consistent with the stated "organic growth"?
Financial Services
GE became highly dependent on its financial services portfolios and Immelt has stated that the company would focus more on technology based business and less on financial services. Yet it continues to pick up more financial assets. This week they purchased the Merrill Lynch Capital assets which added $10 billion in assets and $5 billion in commitments to the GE Capital Commercial Finance's base of $260 billion. This is most likely a deal they couldn't refuse, but it still adds financial assets.
Further, it is interesting to note that the combination of GE Money and GE Commercial accounts for 30.6% of the first nine months 2007 overall company revenues and 36% of earnings. Both of these have increased over the first nine months of 2006, when the combination accounted for 28.% of 2006 revenues and 33% of earnings.
It is clear that GE is still highly focused on making deals and being a financial services company, though it has asserted something different.
It is vital that words and actions be consistent. When they are not it adds confusion and can be detrimental. This may be another reason that GE has had such a difficult time increasing its stock prices.
GE's Back to the Future
In my book: The Secret to GE's Success, I describe how Jeff Immelt and his team have reverted back to some of GE's successful past strategies. GE's investing in and operating generation plants was one of the early Edison strategies (pages 5-6). The Edison GE company, the predecessor of the current company, built and operated power plants. Later when it merged with Thomson Houston to form the current company, it invested heavily in Utilities to enable these emerging companies to gain a competitive position. When the company became over extended and almost went into bankruptcy, it helped create the Electric Bond and Share company (EBASCO) to provide financing and still maintain a control over its customers.
Now that the electrical generation and distribution business is unregulated it makes sense to invest in these highly profitable and growing companies. Being the owner and operator of generation plants makes strategic sense and clearly is a major opportunity for GE globally.
One of the best ways to create new ideas and ventures is to search the past and see if what worked or didn't work in the past might work in the present and future, especially when the market, customers, competitors and regulations have changed.
GE Watchers UPDATE (1)
A continuing part of my website http://www.strategyleader.com/ and this blog is to discuss what GE is doing today and how it relates to their past successes and failures, as described in my book: The Secret to GE's Success. I plan to discuss leadership, adaptability, talent, influencing and networks LATIN, which I have concluded summarizes the keys to any organizations success.
Leadership- GE's senior management continue to tell the world that their strategy is working and that they should invest. Unfortunately the stock has not responded and there appears to be continuing concerns about whether "GO BIG/ GO GLOBAL" is working.
Adaptability-
"The February 25, 2008 issue of FORBES has an article: "Cranking Up the Volume- one reason medical costs are getting out of control: GE employs too many good salesmen".
The article describes how GE encouraged its customers to invest in more, highly sophisticated, capital intensive and expensive MRIs and other diagnostic equipment and prescribe that patients use the equipment frequently. Unfortunately the INSURANCE companies and Medicare are challenging the need for doing these tests as often.
One of the customers: summarized the situation " we really do face a crisis". GE has been forced to reduce prices, provide more services and as a result GE's Healthcare's profits dipped 4% in 2007. Immelt, who led this business and used its success as a means of gaining his current CEO position, described 2008 as a "turnaround year". It is clear that Healthcare which was one of GE's "stars" is not climbing to new heights and in fact may be a "falling star".
GE Money MOVING to London... The February 8, 2008 edition of the Financial Times reported that GE MONEY'S Consumer finance division is moving its headquarters from Connecticut to London.
The current president of the business unit, David Nissen, who has 27 years of GE service and has led the business unit for 15 years will retire early. He is only 56. It was pointed out that the move to London makes sense since three-quarters of the profits come from overseas.
This unit took a $1 billion hit because of its sub-prime gambles and is in the process of selling off all or part of its credit card business. GE continues to BET ON THE GLOBAL opportunities and increasingly is becoming less of US company.... I think the real issue is whether this business unit will ever regain its luster and profitability or should be a candidate for divestiture.
Talent- There is a class action suit being filed by women who claim they were discriminated against. This is ironic since Immelt is a member of Catalyst, a women's advocacy group and has significantly increased the number of women in key management positions.
Overall, Immelt and his team continue to believe that they are on the right track and it is just a matter of time before it will yield positive results for its key stakeholders, especially stockholders.... stay tuned as the story unfolds...
It is clear that my perceptions and those of the Immelt team are far apart and that GE has decided to become a WORLD, not a US company.... I believe this is a mistake for the long term.
Monday, December 10, 2007
Time for GE to adapt and change its "GO BIG" mentality.
"Will GE Light a New Path?" This was the headline of the December 10, 2007, Wall Street Journal column: breakingviews.com/ FINANCIAL INSIGHTS... the authors recommended that GE "reduce its sprawl and enable its investors to invest in a purer play venture by spinning off NBC and merging it with Vivendi,20% owner of NBC.
This idea is similar to my recommendations in the June, 2007 Chief Executive Magazine article. This is what I wrote:
(GE needs to) Reduce Complexity
· Make It Simpler. Make the company less complex. This can be achieved by focusing more on products and services than solutions, as well as reducing the risk by participating in lower risk global areas. This strategy is not exciting, but it could build more investor confidence and increase the stock price.
· Continue to Prune the Portfolio. Continue the traditional GE portfolio management approach perfected by Welch. In this case, the company asserts that nothing is sacred and all businesses are potential divestiture or harvest candidates. Immelt has already done this. He divested the insurance and reinsurance businesses and was even willing to take losses. He sold the advanced materials business (man-made diamonds, silicones) to a private equity firm.
In January of this year, Immelt announced that the company’s plastics business is now on the block. It could yield $12 billion from a Saudi firm—a major financial windfall for the company, similar to the Welch RCA deal.
I think that broadcasting and even additional parts of the traditional GE lines, like major appliances and lighting, could be divested. These moves would permit the company to focus on its major solutions, technology business, while maintaining its strong financial services operations. This portfolio approach may build more confidence among investors, since they recognize that the primary goal of the company is to continue to increase the bottom line.
What if neither works? In this case, I think we need to adopt the new company motto “Imagination at Work” and look for a more creative approach that may initiate the next stage of the company.
Let’s imagine that:
· GE gives the investor an opportunity to invest in selective sectors of the company and not just in the total company portfolio. In this scenario, GE decides to offer stock in its key areas/sectors. For instance, it creates separate stock offerings in GE Healthcare, GE Infrastructure, GE Money, GE NBC/Universal, GE Commercial Financing and other key components of the company. These would replicate the current building blocks of the company. So investors could invest in either the total company or selective parts of the company. This is not unrealistic since many companies have done this and have been successful in doing so. Of course, this will require more evaluation.
· GE is major stockholder of new companies. The GE Corporation would continue. The company would only sell a part of the new companies and retain majority control over the businesses. I would recommend that GE retain 75 percent of the companies and sell the other 25 percent on the open market.
· GE would focus on maintaining GE traditional success factors. Under this new scenario, the GE corporate staff would be significantly reduced and focused on a few key areas. For instance, the company would continue to work on succession plans for the key management positions in the company and especially the next CEO. The corporate staff would monitor external changes and help the subsidiaries anticipate and respond to change, as well as change the portfolio as required. It would continue to have company-wide training at all levels, take stands on political issues as needed and continue the strong financial, strategic and manpower networks that have contributed to its past success.
The anticipated results could be very positive to all of the key stakeholders. The stock should rise overall, the investor will have more options and the company will continue to retain its AAA rating and have a strong and deep bench.
Maybe it is time for GE to consider both the WSJ idea and mine.
If they did it would reconfirm my belief that one of the GE's success factors has been its willingness to change its mind and adapt to reality.
GE is still highly ADAPTABLE... the NBC/ Universal story.
In my book, "The Secret to GE's Success", I emphasize that one of the five reasons that GE has been able to grow and prosper over its 127 years is that it has been adaptable. I emphasize that "nothing and no one is sacred". This was clearly demonstrated when GE sold its Plastics business, which was the home of Welch and Immelt.
In the Financial Times, January 21, 2008 edition there is another illustration of the company's adaptable strategies. This focuses on the "turnaround" of NBC Universal. Jeff Zucker, CEO of NBC Universal, describes how the company is taking advantage of the writers strike to "end long-term production contracts worth millions of dollars and is planning to go further by cutting the pilot season." He points out that NBC Universal has become "cable network" and the cable operations "now contributes more than half the earnings". The company is moving to acquire more "non-US" cable operations.
Adapting to reality has been a major strength of GE, but it also confuses the investor and other key stakeholders and re-enforces the view that the company is just another conglomerate and is in the buying and selling of assets business.
My personal belief is that the NBC Universal business needs to be continually reviewed and that it still isn't certain whether it has been really turnaround ed. Further there appears to be a highly political issue, since many believe that the organization is too liberal and therefore putting itself in the Presidential election spot light, which could negatively impact GE as a whole.
So far, it is difficult to see what NBC/Universal's real competitive advantage is. Clearly, it has not been able to develop highly creative shows and its cable programming is nothing unique.
GE Update... July, 2007
"Slim Down, Forgo Large Buys"..this was the headline in the July 14-15 edition of the Wall Street Journal. It appears that Jeff is moving to reduce its dependence on financial services and forgo some of his "go big" strategies.
Three investment analysts applauded the move...Scott Davis of Morgan Stanley said: "GE's decision to get back to basics...seems to be just what the doctor ordered." Robert McCarthy of Bank America said: GE's woes at health care and WMC are "emblematic of the downside of managing a complex, diverse portfolio" and that "GE was right to cut its losses' by abandoning Abbott and WWC", and "stick to its knitting"
These comments are consistent with the concerns I expressed in my book, pages 250-251 and in my most recent Chief Executive article, "Decision Time for Immelt and Buffett".
I think it is very positive since it appears that GE's proven ability and willingness to adapt and admit mistakes is still strong in the company.
Recognizing Reality and Adapting... one of the major reasons for GE's Success is that its leadership has been willing to change and adapt to reality. The Norwalk, Connecticut, HOUR.. a small but increasing reporter of GE news reported on July10, 2007, that "GE, Hitachi begin joint nuclear business. GE will own 60% and Hitachi 40%...to compete in the growing but increasing complex nuclear energy market. This was discussed in my book on page 237...when I discussed GE's unwillingness to out bid Toshiba for the Westinghouse business...This is what I said: " GE missed the opportunity to get access to the PWR technology and a large installed base, as well as losing access to the China market. However, it should be noted that GE has a relationship with Hitachi, which as been a PWR supplier. This may be one of the reasons that GE decided not to increase its bid for Westinghouse, but it plans to use the combination of its own BWR and Hitachi's PWR to capture a significant share of the Chinese market."
GE Update.. June, 2007
Targeting India. Immelt visited New Delhi to make it clear that GE views India as a major growth opportunity and expected to increase its Infrastructure revenues. It is interesting to note that GE Money, which several investment analysts recommends to be divested or spun off, is the largest credit card lenders through a partnership with State Bank of India and plans to invest $ 2 billion in Indian real estate and $250 million in India's infrastructure and health care projects. This clearly demonstrates that GE continues to use its financial services and capital to lead the way in developing business in key countries of the world. I have witnessed a number of companies, including GE, try to create a strong position in India, but to date it has been very difficult since India remains a strongly socialized country.
Nothing is Sacred..even the business that created Jack Welch and was the first home of Jeff Immelt.. Plastics was sold to the highest bidder and "strengthened its mid east hand", the May 22, 2007 Wall Street Journal reported. Saudi Basic Industries paid $ 11.6 billion for the Plastics business, which had revenues of $6.6 billion but was under profit pressures because of the cost of petroleum. GE plans to use the money to purchase $8 billion of stock. GE is providing some of the financing for the purchase. The deal seems to be a WIN WIN for both organizations. GE gets out of a slow growing, declining profit business, improves relations with the Saudis and the Saudis get into a business that extends their petro chemical businesses into high tech materials.
Willingness to change. One of GE's success factors has been its ability to adapt and admit mistakes. Immelt is under pressure because the stock has not performed well.The WSJ article of May 9, 2007, entitled: " For GE, No lack of Ideas", by Kathryn Kranhold, describes the two different perspectives by key analysts and investors.Some believe that GE should divest its NBC and GE Money businesses. Others believe that diversity is key.
The May 12th WSJ continued the speculation about GE's divesting or restructuring NBC. One of the options discussed was the merger of NBC and Yahoo, which appears to be very synergistic. Other companies interested in acquiring NBC were Comcast, Liberty Media and ATT. Liberty Media just took control over Direct TV and is headed by John Malone, whose father, Chuck Malone was a GE vice president.
The real issue is whether Immelt and his team will be willing to change if and when it is needed. Stay tuned for my perspectives on this critical strategic issue.
Financial Services are still GE's major growth engine. Even though Immelt has continued to assert that he wants to move GE back into the technology leadership position... it is financial services (Welch's key driver) that accounts for the company's earnings growth. "Earnings at financial services, which include both commercial and consumer lending increased 13%. At GE's non financial units, profits fell 16%".
Immelt's stated key priorities for the company continue to be:
Infrastructure technology... " the company has more than $120 billion backlog...and $60 billion of infrastructure financing assets"...
Emerging Markets including China, India, Eastern Europe, Russia, Middle East, Africa, and Southeast Asia.... This accounts for $29 billion revenues in 2006 and could become $50 billion by 2010.
Environmental Solutions- "Our ecomagination initiative is designed to drive growth by creating innovative solutions to environmental challenges. This accounts for $12 billion moving to $20 billion by 2010".
Digital Connections. This includes digitalizing engines, turbines, locomotives, scanners, as well as digital services, on line loans and digital advertising.
Rebirth of the Appliance Lines????- GE is trying to establish an upscale brand, via Monogram which it established in 1987, but didn't make the appropriate commitments and so the brand never did what it was supposed to do..
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