Welch takes shot at Immelt over GE miss
General Electric (GE) chief Jeff Immelt is under attack from a surprising source. His predecessor as CEO of the conglomerate, Jack Welch, said on CNBC Wednesday morning that Immelt “has a credibility issue” after GE’s recent earnings miss. Immelt had promised as recently as last month that GE would hit its full-year earnings target of $2.42 a share, but he was forced to recant Friday after the company’s first-quarter profits fell short of targets. Part of the problem was that the company failed to raise as much money as expected through financial asset sales. GE shares tumbled 13% Friday in the wake of the shortfall, which was GE’s first in three years, though they rose fractionally Wednesday.
“Here’s the screw-up: you made a promise that you’d deliver this and you miss three weeks later,” Welch said on CNBC, Bloomberg reported. Welch, who mastered the dark secrets of earnings management during his long run atop GE, added that he doesn’t expect to see another earnings miss. “I would be shocked beyond belief,” he said on the GE-owned network, “and I’d get a gun out and shoot him if he doesn’t make what he promised now.”
The only CEO that should have been shot at GE is Jack Welch, the first day he started work in the company. Welch took over a great company and made money when everyone made money. When things got tough his smoke and mirrors nonsense did nothing but destroy an american instituion.
Accounting for insurance companies’ earnings will forever be a mystery, regardless of whose standards and practices are followed, as the core element in such measurement is the reserve for loss account. The accounting for reserves is, and always has been, purely subjective. The often-worshipped king of financial manipulation, Jack Welch, relied on the subjective nature of insurance accounting to create the illusion that GE was an insturment for managed growth. Aside from the normal manipulation of reserves to suit the needs of the chart he wanted to project, he went into and out of specific lines of insurance business based on their potential to allow for such subjective valuations.
I watched this interview in its entirety and can tell you that Welch did NOT indicate anything of the sort regarding Immelt. I don’t know where this writer or the NYT writer received their information but it certainly was not from this interview.
Welch said, “promise 12% then deliver 12%. Never miss, ever.” What is this, managed earnings? We are going into the biggest slowdown since 1991. I doubt GE will perform. Is this Immelt’s fault? Not really. I m one who does not trust most earnings reports. When Welch comes out and acts like her does and says what he says, I have even less confidence in the truth of earnings. Earnings will be what they are. You cannot make something that is not! You cannot manipulate to create the outcome you want!
This, fortunately for Jack, is the litmus test of “leader” vs “manager” the manager always lags and reacts. Jack had the biz cycle on his side, and agree that due to his lack (total) of leadership, he would be facing the same issues now confronting Jeff.
Agree with the need to split GE up. Much window dressing… and I hope mostly legal, in GE finance has covered a wealth of sins. With bank, broken, short of splitting up and selling (Plastics was a good indicator), this stock needs the fork check. Shorting this and HON probably good actions for whats ahead
Mr Immelt does not even know what the people in his own household are doing. . When asked “Mr Immelt, do you recycle?” he answers “I don’t personally, someone in my home may, I’m not sure..” If Immelt does not know what his family is doing, how can he keep track of a corporation? As far as Jack Welch… Well he stole his business philosophy from Charles Coffin, look him up. Mr Coffin invented modern business, however he was a very humble man and Jack wasn’t. None of this excuses Immelt. We must not forget this… GE didn’t lose money, they just didn’t make what they wanted to. Maybe they should not project earnings… instead they should build stuff, the right way, and let shareholders project the value of their corporation. This is the way it is supposed to work, isn’t it? Mr Welch did cut jobs… he cut the corporate FAT from the top levels (a good thing) Immelt has brought the FAT back three fold. There are things that people just don’t know and shouldn’t comment on. I could issue a dissertation a mile long but will not. Bottom line: Jack is right, Immelt sucks and Charles Coffin is dead. What do we do? ANSWER: Get out the broom and clean house! The share holders through a vote on their share statements are permitted to vote out any board member they like including CEO. Quit crying and do something!
I am not sure how this kind of “news” gets so much attention. Jack WAS a great CEO that “grew” GE. He is the “former” leader. He picked Jeff to lead. The company is still growing in revenue and profit. A couple of thoughts:
1. Our current stock market does NOT reward solid growth and size. With the derivitives, options, etc, money is made with trades and stock change up or down.
2. Wealth on wall street is totally independent of stock value growth. It must be made iradic and traded to earn profits for the “market”.
3. Jeff is highly capable. Missing a “guidance” that close to reporting is very strange. Makes you wonder what else Jeff was working on; or worying about.
Welch was nothing but a trader of assets. He rightfully cut waste and bureaucracy at GE. However: his policy of being # 1 or #2 in a business or selling it illuminates the fact that he did not know how to compete to stay on top. Businesses like Locomotives, Aircraft engines and nuclear power have high barriers to entry and offer a monopolistic opportunity to stay on top. If he is that visionary and capable why did he keep selling businesses and not make them winners. He introduced Six Sigma and Lean techniques 40 years after the Japanese embraced similar practices. Its relatively easy to cut and chop but a lot more challenging to grow organically. The Commercial Finance debacle was an explosion waiting to happen. In a mature market they could grow only by buying other companies and would subsequently see their acquired client base shrink. The only way GE can become nimble and customer focused is by breaking up into smaller entities.
Can anyone tell me how to get to Sesame Street? I’m lost.
1/18/08: “We have built the company to outperform in this environment,” CEO Jeff Immelt said. “We have strengthened the portfolio for growth, restructured to lower our cost, maintained our Triple A credit rating and stayed true to our risk management principles.”
Right on, Norma! You ladies sell your stock.
P.S. - The ay-holz removing comments from this forum sa-huck.
Hey, who pulled Bubba’s comment about the retired ladies investment club? He was correct. Immelt should be shaking in his boots with the power that those ho-ly ladies hold.
Bubba, that’s not funny. We retired ladies hold at least 100 shares of GE. We’re going to vote our minds (although we lost them) at the next shareholder meeting.
Hey, Immelt! Watch out! The ladies retirement investment clubs are selling all their stock. That spells the end. Ha, ha!
The little man (Welch)is a fraud and a shameless self-promoter…the difference between Welch and Immelt is that everyone “in the know” on the street knows the Welch was the biggest “book cooker” in business history…Immelt is running a conglomerate in a tough economy and decided not to overpay for an 11th hour acquisition too smooth the books…bravo for his courage and integrity.
It appears that Mr. Welch and his inborn shantytown morality,coincides well with the Hollywood slobs he so adores. Someone responsible at GE needs to send Welch’s NBC and Immelt(great actor)down the road.
Actually, GE decided to end business with Iran starting in 2005 but declined to end contracts in force until they ran out. The last of these ends June 2008. These final contracts were primarily with US sponsored humanitarian aid to Iran
Jack Welch was a genius, then put Immelt as his successor. Stocks took a hit and never recovered. 3 weeks before results, everything was fine, only to find out that there was a large miss. It doesn’t matter if either of them are preecks, it’s about the money. Last time I checked, GE was still the biggest company ever.
Can’t realize GE’s true value until the Company is split up.
Yes, Immelt should be immolated for making a stupid statement like that 3 weeks before GE’s earnings announcement, and Jack was well within his rights to make the comment.
However, I take issue with people’s suggestion that a CEO’s code of ethics has nothing to do with his performance as CEO, or that such comments “don’t belong here”. Time and time again, we see that unethical personal behavior translates into risky business behavior. This has nothing to do with morality — it’s just a simple fact that there are countless CEO’s with massive egos and narcissistic, borderline-sociopathic personalities, who manage their businesses with the same I-want-it-so-I-get-it, win-at-any-cost mentality with which they address their personal lives. This opens up organizations run by such individuals to tremendous risk (operational, financial, brand, and otherwise). If a CEO isn’t willing to honor a lifelong committment of fidelity to his wife, why should I expect him to honor a committment to run his company by generally accepted accounting principles? When was the last time you heard of an accounting scandal at Berkshire Hathaway HQ? I didn’t think so.
And while I believe Jack Welch was a high-performing CEO, I also believe that the period of his tenure — when the U.S. economy was on one of the biggest benders in its history - made it a lot easier for him to perform well.
i’m not a huge immelt fan, but at least get your facts straight Norma from jacksonville. As of earlier this week GE discontinued all business in Iran.
It is Welch, not Welsh, you morons. GE Finance, a business Welch built and grew is a black box thhat is now blowing up. More bad news will be coming, and it is the fault of both the current and former CEO’s.
As a former GE employee that invested in GE stock. Jeff Immelt has done nothing to bolster inverstor confidence. The stock still languishes at about 65% of its value 7 years after becoming CEO. He has no cerdibilty with anyone. I wish I could dump all I own but at this point I just have to wait and see.
This is great… I am actually glad too see the mighty GE taking a hit. Immelt is a shmuck that is ruining a otherwise great Company.
Immelt has to go!!! I am selling all GE stock as well as all my lady friends in our various clubs.We will notify people we know to not buy GE products because of him doing business with Iran. GE , cut him loose and stop trading with our enemy. Norma Reed, for all the girls in my retirement clubs.
The guy has been gone for seven years. Calling this “the Welch aftermath” is a little like blaming Bill Clinton for the current state of the US economy. From a shareholder point of view, I don’t care if the guy womanized, smoked crack or molested puppies. He made big money for me. Under Immelt, the stock has been useless.
Welch also was the GE head during the boom boom 90’s. 10$ oil, super strong bull market, a monkey could have hit its numbers then. Maybe all the cheating on his family has caused hi to get squirrley.
Comments about Jack’s personal life are a little silly in this forum…
GE did miss and Jeff did over promise…
Welsh should go to the beach and talk to the rocks there…maybe they’ll listen to him. He has/had the people skills of a lightswitch…better he STAY retired and out of the spotlight
The interview wasn’t that bad, I saw it too. And Welsh is right, as CEO of GE, you don’t speak out of your ass, which is exactly what Immelt did.
Its one thing to miss a quarter, its another to say just three weeks prior that everything is fine. However, I forgive Immelt further as he actually bought a few million dollars worth of shares just a month ago. So he really did think everything was fine, meaning he simply didn’t know or expect what ended up happening.
While that’s not perhaps the best either, its better than thinking he actually mislead shareholders.
Welch saying Immelt has a credibility issue is ludicrous. Welch the womanizer, who cheated on more than one spouse, does not have the moral authority to be critical of anyone.
Jack, go back to planning your next female conquest.
It’s gratifying to see that I’m not the only one who is sick and tired of the short-minded quarterly mindset in corporate America. I’m a staunch capitalist and have no problem with profits-even what some may perceive as obscene profits-but I’m really tired of seeing those profits extracted at the expense of the very people who produced them!
I am a GE employee and I LOVE Jack Welch. He made a lot of money and so did I. You got to love a 70 year old man who is still fiesty enough to say what he did and cause the contoversy that will ensue!
I used to work for GE and Jack Welch in the 80s. When he said or did something, you could “make book” on it. I just received the GE annual report. last week For Jeff Immelt to make this kind of change from it is awful. The “market” doesn’t like surprises like this and neither do I. He needs to find out why he was mislead and fix it. GE is too big a conglomerate and too important to the market to make this kind of mistake.
Whether you like Immelt or Welsh, the point Welsh was making is that Immelt’s credibility has been hurt by the fact that he said he would meet earnings and then only three weeks later admitted that the company did not. There is very little chance that the company missed earnings due to those three weeks, so why should we believe the next guidance from Immelt in terms of profits? Don’t promise if you cannot perform.
Part of the problem for Immelt, is the policies instituted by Jack Welch, while a boom to GE during the Welch years have become a noose around GE’s neck in the Welch aftermath.
Plan and simple, Immelt is not a Welch, and you don’t miss like that after promising only 3 weeks before that you’d meet your earnings target, but I will say this; he hand picked Immelt!
Another “I can’t stop gorging myself on shareholder perks, despite being PAID hundreds of millions of dollars.” CEO parasitic blowhard. Why does Businessweek even have this clown? He espouses no wisdom, nor truth.
Jack Welch is an asshoile but he is a corporate legend.
Jack Welch could not have dealt with this credit market volatility either and would have missed earnings estimates also. He should keep his mouth shut after all the expenses GE shareholders paid for him over the years. Go away Jack and stay away.
GE made a large profit outside the U.S. The only reason GE went down so much was because of its financial holdings. Thus indicative of a general US slowdown/recession.
Really? You’d take Immelt over Welch as CEO of GE? You must not remember the Welch years like I do or you don’t own the stock for the purpose of making a profit like I do. GE has been a dog for five years and counting.
I saw the interview and it wasn’t as bad as it is made out to be. What is really ironic to me is that Jack Welch made some disparaging remarks agains the media over-hyping the GE MISS. Where is that story??
Mr Welch should stay retired and keep quiet and let Imelt do his own thing. I have had some of GE’s household appliances in when Welch was in, and they were lousy.
If anything I equate Welch and his management style with cheap. And I agree with ED, it is managers like him who have helped make the US what it is today: cheap and disposable.
If you want to put people high on the list of priorities, then companies need to be able to create new jobs and higher quality ones at that. Only profitable companies can do that, so profit must come first. Mr. Welch has expressed a valid point.
Times have changed since Welch managed by cutting employess, playing games with Pesion funds and various other manuvers to keep earnings steady. Immelt is doing good job and one quater is not life time. John cardwell, Murrysville , Pa
Jack Welch is an egotistical idiot! Profits before people is what is keeping this country down and people like him are poor role models for our youth. If anyone needs shooting, I suggest Welch turn the gun in the other direction. What a jerk!
GE has other issues that are driving public opinion of the company. It has avowedly moved very left politically with NBC and affiliates MSNBC and CNBC and that is hurting. Also there is mounting evidence that it is doing business with Iran under old contracts, to be sure, and there is a movement afoot to boycott GE products in the US because of it. Immelt has these issues as well credibility to deal with.
Mr. Welch dosen’t miss a chance to get his name in the public eye. He retired and should stay that way. As a stockholder, I feel much better with Mr. Immelt at the helm than Mr. Welch.
It is true what Welch said, but it was not as overtly negative as you state in your ‘pick a quote and create a story’ article.
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Genius…he was CEO from 1981 to 2001…not just during the late 90’s upswing. The company increased in market value from $14B to $410B during his tenure.