Immelts Shuffles Deck Chairs On The S.S. GE

Yesterday's Wall Street Journal contained a priceless piece of comedy in the form of an article on GE's CEO, Jeff Immelt, shuffling deck chairs- er, organizations- at the company he currently mismanages.

According to the article, GE announced, two weeks ago, that it was reorganizing itself into four groups, instead of the six it had before.

Prominent in the reorganization is Immelt's about-face on GE Capital. Taken apart when he became CEO in late 2001, ostensibly for issues of transparency, the unit is being reconstituted. The business of finance accounted for 41% of the firm's second quarter revenue and about half of its earnings, according to the Journal piece.

Being absorbed into other units by the reorganization is health-care, while the industrial-products group, a relatively small contributor to sales and earnings, will be spun off or sold.

The most hilarious line in the article is a quote from Russell Wilkerson, a GE spokesman. He told the Journal that the old structure gave Immelt,

" 'a direct line of sight' into the various finance businesses and unfiltered contact with their leaders."

Nearby is a five-year, Yahoo-sourced chart of GE's and the S&P500 Index's price performance. Note how GE has actually lost market value during the past five years.

So much for Jeff's 'direct line of sight' into anything at the company he has mis-led for nearly seven years.

Of course, reorganization, like patriotism, is the last vestige of a corporate scoundrel. Internal comparisons are blurred for years, and excuses to investors and observers become based on 'the new way of operating.'

Let me put it more directly. If a simple reorganization is the only thing that Immelt needed to do for the past seven years to avoid his wanton destruction of value for GE shareholders, why did he wait so long?

If it isn't, what should make investors believe anything will change now? GE is so large that it simply defies belief to think that Immelt can personally add value to any business in the diversified conglomerate.

His record, instead, is one of clear and absolute shareholder value destruction. At least with the planned separation of the industrial units, the inept CEO of GE is finally on the right track- breaking up the conglomerate into its natural, standalone units.