Strategic Observations  



I continue to be shocked that Immelt left suddenly!

However Monday, June 12, 2017 WSJ reported three sobering numbers that helps explain why Jeff Immelt retired unexpectedly:

  • Since 2001, when Immelt took over (one day after 9/11) GE’s stock value DECLINED 27% while the Dow overall INCREASED 121%
  • “Operating cash flow” from the industrial business was negative $1.6 billion in the first quarter”. Many investors expected surprise and concern.
  • GE missed 10 of 13 past quarterly revenue and earnings promises.

            Unfortunately I am not really sure what GE’s long-term strategy really is. Historically GE was know as a consumer and financial services conglomerate giant, but these businesses have been sold and no longer part of the portfolio.

            Over the 16 years Immelt promoted the company as an “eco-imagination company”, but no one really knew what this was. He has recently made it the “the digital industrial” company, but again it is not clear what this really is.

            When I wrote my book “The Secret to GE’s Success” (which I originally entitled “Breaking the GE Code”), I pointed out that I really didn’t know Jeff Immelt and had no personal insights about his strategies, but after assessing his strategies and actions, I concluded: “I am not convinced that Immelt and his team will be able to grow GE organically at unprecedented rates by innovation and globalization or continue to have a deep, strong and talented bench as they have had in the past”. In short I thought he would fail.

            But I believed that since Jeff had learned the GE strategic management and leadership system he would be able to adapt his strategies to improve shareholder value and grow the company profitably, as his predecessors had done.

            I believed that he had to reduce the company’s dependence on financial services and improve its position in related markets and industries. Therefore I maintained my investment position and didn’t panic even when the stock dropped to $6 a share after the 2008 collapse.

            John Flannery appears to be the best internal candidate for the job and clearly has a very complex and difficult job to make the company a consistent and predictable revenue and earnings growth company. He is starting with the right step with an “urgent and in-depth Portfolio analysis”.

            His major problem is that he was involved in many of the major strategic decisions, like purchasing Alstrom, selling of Major Appliance, liquidating GE Capital and others. So it will be difficult for him to objectively assess whether these were for the best long-term interest of the company and will achieve what was expected.

            I am still a GE fan and HOPE to continue to maintain my investment and that Flannery will change the trajectory and improve shareholder value.

            I wish him well!!!!