Thursday, November 13, 2008

Immelt's Mistakes Come Home To Roost: GE Takes Government Money

Tuesday's Wall Street Journal described GE's capitulation to market forces by registering "to sell as much as $98 billion of CP (commercial paper) to the government."

The article even ends with the observation,

"Buying a large bank might be an option. But it might come with assets GE wouldn't want and could force change in GE's overall corporate structure- perhaps even requiring the finance business to be spun off."


As I have written most recently in this blog here and here, Immelt brought GE to this impasse by foolishly retaining the unwieldy, value-destroying diversified conglomerate structure. In the latter piece, I wrote,

"There are several businesses in GE's portfolio that would not, on their own, suffer so badly as GE's financial units. But, thanks to Immelt's insistence on keeping these units needlessly shackled to each other, shareholders don't get to select which they wish to own, and which they do not.

It's likely that, somewhere in GE's business portfolio, there are units which have not lost 40% of their value in the past 12 months.

Thanks to Immelt's poor stewardship and lack of leadership of GE, his shareholders won't get to know which those are, and benefit from their performance."

Look at the nearby price chart for GE and the S&P500 Index for the past three months.

Even with two of the worst months in the S&P's history, Immelt's GE still managed to fall by even more. And not just a little, but a full 10 percentage points, or 33% more than the index.

That's the penalty Immelt has imposed on his shareholders in order to retain an outdated, useless conglomeration of unrelated businesses under the GE moniker.

Now, things have become so dire that Immelt must go, hat in hand, to the US government in order to sell commercial paper to fund its financial services unit.

GM is nearly dead. GE, the other once-mighty US industrial firm, is reduced to government intervention in order to fund itself.

Nice going, Jeff. Any chance, given how much damage you've inflicted on your shareholders this year, that you'll forego any bonus for 2008?

Shareholders, don't hold your collective breaths.


Anonymous said...

Immelt has done so badly during his tenure, that GE might as well be dead. It's taken years, several thousand employees to make GE what it is, only for 1 moron to destroy it all.

O'Reilly gets a lot of flack from investors and some employees about bad mouthing Immelt. Most employees know that Immelt deserves every bit of it. Immelt's the reason GE is as low as it's gone in years, not O'Reilly.

Rumor is now that an announcement will be made by Thanksgiving about the Appliances Unit being sold. Most of the Consumer & Industrial Division should be absorbed back into GE. Though Lighting & Industrial plan on closing 33 plants over the next three years, thanks to Michael Petras, VP of Lighting & Industrial. Will GE have any customers left?

GE is a TOTAL mess. Immelt probably went to the Government so he could give all the white collar boneheads their bonuses. While the blue collars are in the dark about their future at GE, and if there's any money left from their stocks to retire on.

Anonymous said...

Agreed. Immelt must go.

C Neul said...

Thank you both for your comments.

I, of course, agree with both of you.


Anonymous said...

Immelts ineptness get him $5.8 million in bonuses, but doesn't do anything to earn it. Yet investors and GE employees are always in the dark. Yet he continues to be in charge another day. Thomas Edison has to be ashamed.