Thursday, December 16, 2010

The Latest On GE & Its Failed CEO Immelt

The Wall Street Journal featured GE's Tuesday outlook in its Ahead of the Tape column earlier this week.

Paul Glader wrote of the company's failed CEO Jeff Immelt,

"And investors are cautious about his ability to reorient the company given questionable acquisitions in areas such as homeland security, commercial real estate and subprime mortgages during his first 10 years as chief executive."

Isn't it stunning to realize that GE's board has allowed Immelt to destroy shareholder value for so long without lifting a finger to punish or replace Immelt? The nearby price chart for GE and the S&P500 Index since 1960 illustrates how atrociously bad Immelt's performance has been.

He assumed command of the firm from Jack Welch in September, 2001. Simply by observing the distance that GE's blue line was above the index's green one at that time, compared with now, one sees how much of the firm's cumulative value built over 40 years has been eliminated through Immelt's incompetence.

Glader gives a few faint compliments to Immelt in an intervening paragraph, then closes with this cautionary note,

"Still, Mr. Immelt has a long road to travel to convince investors there is more value for them in holding GE's stable of disparate businesses than directly investing in growth markets themselves."

If you read my prior posts concerning Immelt's dismal performance, under that the Immelt label, you'll see how he's already reaped so many tens of millions in cash, plus the usual options, that Immelt really no longer can be assumed to rely on current or future GE compensation for his financial needs. He's now in it mostly to salvage his reputation, if that's even now possible.

Just viewing the magnitude of Immelt's disastrous tenure at GE, and the company's board's complacency, no investor should feel safe owning GE for anything other than a timing play. In my prior posts, I've argued that GE need no longer exist as an entity, being primarily the last of a once-common breed of conglomerates which no longer have a viable financial raison d'etre in a world of ultra-low equity trading costs.

As a long run equity investment, it's been among the worst an investor could choose since Immelt took over as CEO.

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