Case Study About General Electric
CASE 22
Jeff Immelt and the Reinventing of General Electric[1]
On April 25, 2012 Jeff Immelt, chairman and CEO of the General Electric Company, presided over the company’s annual shareholders' meeting in Detroit, Michigan. As representatives of the “99 Percent Movement” protesting GE’s low rate of corporate tax were ushered from the hall, and GE’s board members and corporate officers took their seats, Immelt reflected on his eleven years as head of GE.
Immelt knew that taking over from Jack Welch—”living legend” and “best manager of the 20th century”—would be a difficult challenge. Little did he know just how tough his job would be.
Four days after Immelt took over the chairman's suite, two hijacked airliners crashed into New York's World Trade Center, setting off a train of events that would profoundly affect GE's business environment. A month later, Enron's collapse precipitated a crisis of confidence over corporate governance, financial reporting, and business ethics. The mounting controversy over financial statement manipulation and executive compensation soon engulfed GE—which was forced to restate earnings and reveal the details of Welch’s staggeringly generous retirement package. Then came the financial crisis of 2008-9—a major blow to GE since its financial services arm, GE Capital, was one of America's biggest financial services businesses and for two decades had been GE's primary growth engine. It was now seen as “ticking time bomb” of bad debts requiring asset writedowns. In 2008, GE downgraded its earnings forecasts, cut its dividend, suspended its share buyback program, and sought a $3 billion equity injection from Warren Buffett. In the following March, S&P cut GE’s credit rating from AAA to AA+.
Yet, throughout this eleven year period of turbulence, Immelt had systematically put in place a long-term transformation strategy for GE. This strategy had involved reconfiguring GE’s business portfolio around two core businesses,
Jeff Immelt and the Reinventing of General Electric[1]
On April 25, 2012 Jeff Immelt, chairman and CEO of the General Electric Company, presided over the company’s annual shareholders' meeting in Detroit, Michigan. As representatives of the “99 Percent Movement” protesting GE’s low rate of corporate tax were ushered from the hall, and GE’s board members and corporate officers took their seats, Immelt reflected on his eleven years as head of GE.
Immelt knew that taking over from Jack Welch—”living legend” and “best manager of the 20th century”—would be a difficult challenge. Little did he know just how tough his job would be.
Four days after Immelt took over the chairman's suite, two hijacked airliners crashed into New York's World Trade Center, setting off a train of events that would profoundly affect GE's business environment. A month later, Enron's collapse precipitated a crisis of confidence over corporate governance, financial reporting, and business ethics. The mounting controversy over financial statement manipulation and executive compensation soon engulfed GE—which was forced to restate earnings and reveal the details of Welch’s staggeringly generous retirement package. Then came the financial crisis of 2008-9—a major blow to GE since its financial services arm, GE Capital, was one of America's biggest financial services businesses and for two decades had been GE's primary growth engine. It was now seen as “ticking time bomb” of bad debts requiring asset writedowns. In 2008, GE downgraded its earnings forecasts, cut its dividend, suspended its share buyback program, and sought a $3 billion equity injection from Warren Buffett. In the following March, S&P cut GE’s credit rating from AAA to AA+.
Yet, throughout this eleven year period of turbulence, Immelt had systematically put in place a long-term transformation strategy for GE. This strategy had involved reconfiguring GE’s business portfolio around two core businesses,