GE's Weakness & Immelt's Defense

Well, it's GE earnings time again. And time for its inept CEO, Jeff Immelt, to bluster with excuses about his weak leadership of the ailing conglomerate.

I caught some of King Jeffrey I's interview with his own minions on GE-owned CNBC this morning. Salient among Jeff's various excuses was this gem, as closely paraphrased as I can recall,

'We made $4 billion last quarter. I'm not apologizing for that.'

My old boss at Chase Manhattan Bank, Gerry Weiss, then SVP of Corporate Planning, and a longtime GE senior planning officer, used to comment on the inertial earnings power of large companies.

At Chase, he noted, we made enormous profits just by being one of the three largest US commercial banks. In fact, he would frequently say,

"We make money in spite of ourselves."

But that line of reasoning, as Gerry also noted, is inherently flawed. It ignores returns on equity, market value, or even assets. It's a desperate play for the shock and awe of big numbers.

As the nearby 1- and 5-year price charts for GE and the S&P500Index indicate, shareholders have voted, via price, that Immelt's profit numbers are not acceptable. Over the past five years, GE's price has fallen at a faster rate than the S&P. In the past twelve months, GE's earnings have apparently continued to disappoint investors. Just this year, the company's stock price has declined faster than the price of the S&P.

GE had, as of last quarter's report, assets of $829B. On that basis, $4B of quarterly earnings doesn't seem all that awesome, does it?

For Immelt to resort to that is an indicator of just how desperate he is to somehow explain GE's sudden collapse under his mismanagement.