Immelt's Defense At The GE Annual Meeting

It's amazing how long Immelt is able to continue fooling his shareholders and board, isn't it?


The guy just makes Ronald Reagan's 'teflon President' image look like a piker by comparison.


On Thursday, the Wall Street Journal published and article entitled "CEO Defends GE'S Strategy Again."

According to the Journal,

General Electric Co. Chief Executive Jeff Immelt mounted a spirited defense of the conglomerate's business model, just two weeks after presiding over disappointing earnings that prompted the biggest one-day selloff in its shares in 20 years.

Speaking during the company's annual meeting, Mr. Immelt said both he and GE deserved the "tough criticism" they have received in the wake of the stumble. But he was adamant that GE is on the right path.

The executive has spent much of the past two weeks defending his management and rebuffing calls for a radical overhaul of far-flung business operations.......he described himself as "a complete believer in our company and our strategy."

Not everyone in the audience at the meeting in Erie, Pa., agreed with that conclusion. "Maybe it's time for a change" at the company's helm, said Gary Postlewaite, an Erie resident and GE employee who attended the meeting. "Maybe it's time to let somebody else have a shot."

Mr. Immelt took pains to dispel the notion that his confidence in the business model means he is standing pat. He said he has been an advocate of shedding underperforming business units and adding new ones deemed to have promise.

He noted that GE has exited businesses with $50 billion of annual revenue over the past few years, including the sale of its plastics division and insurance operations. He also said it is serious about cost-cutting, and he announced that it has increased its estimate for 2008 expense reductions to $3 billion, from $2 billion.

GE has blamed its first-quarter earnings -- in which net income fell 5.8% to $4.3 billion, well short of expectations -- largely on the credit crisis. Mr. Immelt said GE will look to reduce its exposure to some of the most volatile parts of the financial-services sector."

As I wrote in this recent post comparing the better-performing United Technologies with GE,

"So, as long as twenty years ago, UT began to pull back from the sprawl created by Harry Gray's reign. It now epitomizes the notion of a large, multi-business company focused on common customers and technologies throughout its units.

The company's name seems to now aptly describe it.

Contrast this with GE's more sprawling, less-related businesses: appliances, aviation, consumer electronics, electrical products, consumer & business finance, healthcare, lighting, media, oil & gas, rail, security, and water.

All conglomerates are not alike. The most diversified, financially-oriented US conglomerates of forty-plus years ago are long gone. Of the two remaining entities of this type, it's clear that the more focused, less-diversified one, UT, has handily and steadily outperformed its more famous counterpart, GE."

So it's ironic that Immelt is proud of his rapid shuffling of businesses, as if merely buying and selling the right ones will magically propel the company to consistently superior total returns.

In contrast, UT has held pretty much the same portfolio of businesses for twenty years, but improved productivity and generated new products and services within them.

Immelt truly just does not get it. And at something in the neighborhood of $20MM total compensation per year for over six years, that's a very expensive shame for GE's board members and shareholders.