The Only Surprise At GE Was That Anyone Was Surprised

Author: Adam Hartung / Source: Forbes

General Electric announced quarterly results this week, and and they were pretty bad. Profits were nowhere near expectations, and the company lowered expectations for the year. Cash flow was also disappointing, not even strong enough to cover the dividend. Now analysts are really negative on company prospects, and most expect the dividend to be cut.

Meanwhile the new CEO, John Flannery, is admitting to horrible results as he removes most of the previous CEO’s top execs in a leadership housecleaning. He is promising to cut costs dramatically, and sell off an additional $20billion of businesses in order to restore a higher level cash flow. And according to the AP, Flannery will make faster progress toward “returning GE to its industrial roots.”

In other words, CEO Flannery continues the strategy of making GE smaller, and a less hospitable workplace, that his predecessor Immelt started implementing 16 years ago. That’s the strategy that has seen GE lose ~45% of its value since Immelt took the top job, and lose over 60% of its value since peaking at $60 in 2000. So far, GE just keeps shrinking in size, and value, and leadership gives no indication it has a plan to grow GE revenues and profits in future markets building on major market trends.

What’s most surprising is that people seem surprised by the horrible current performance, and surprised that GE is in such terrible condition. All the way back in December, 2010 this column highlighted CEO of the year, and CEO of the decade, selections, and in doing so pointed out that GE’s Immelt was on nobody’s list. Even though his predecessor, Jack Welch, was widely lauded.

Immelt inherited one of America’s strongest, fastest growing and most valuable companies. But in the first few years of his leadership the company completely failed to maintain Welch’s gains, and under Immelt’s mismanagement…

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