Along with dealing with a struggling reinsurance unit that forced General Electric to take billions in write-offs, a power turbine business poised to collapse and an overvalued stock, CEO Jeffrey Immelt had the misfortune to move into the corner office just four days before the Sept. 11 attacks altered the political landscape and the outlook for core GE franchises like jet engines and aircraft leasing.
A cooler, humbler and more reserved chief executive than his legendry predecessor Jack Welch, Immelt readily acknowledges that the past several years have not been easy.
"We've had to re-earn the respect of investors," he said. But that's what happens "when you write off $3-billion on reinsurance, sell stuff, buy things and the earnings growth rate is 11 percent and it should be 15 percent."
Even so, the clock is ticking. There is growing pressure on Immelt to do something - anything - to get GE's stock moving after six years of stagnation. Despite a 15 percent rally over the past two months, GE shares are down 30 percent from their Welch-era peak. And in April, analyst Jeffrey Sprague of Citigroup Investment Research stunned Wall Street by calling for a breakup of the company, urging Immelt to sell off NBC Universal, as well as the consumer finance and real estate units.
Sprague's call was the equivalent of breaking china in GE's executive dining room, and the company's top brass took it as a sign that Wall Street was running out of patience. Although NBC looks safe until after the broadcast of the Summer Olympics next year, Immelt is vowing to be "tough-minded and investor-friendly" in evaluating GE's myriad holdings, while swearing off big acquisitions for the rest of this year.
No one expects Immelt, 51, to be forced out of the top job, but the longer the stock stays underwater the greater the likelihood that he will have to take the kind of drastic action that analysts like Sprague are urging.
All of which is reasonable: corporations hire CEOs to make prescient and hard choices. But Immelt faces a more complex challenge than his predecessors. Whereas Welch took over a company vulnerable to foreign competition and hamstrung by a bloated work force (and cut so many jobs that he earned the unwelcome sobriquet Neutron Jack), Immelt took over a giant that had been successful but wasn't growing as fast as smaller, more agile companies - and that had a number of financial and operational time bombs in its portfolio.
"Five years ago, we had troubled franchises and no liquidity," Immelt says. "Think about being in the aircraft leasing and aircraft engine business on September 12."
To reinvigorate the corporate behemoth that is GE, Immelt has made more than $75-billion worth of acquisitions in sectors like energy, aviation, water treatment and health care while selling off the division where he and Welch began their careers, GE Plastics, for $11.6-billion in May. The result, says Immelt, "is that the company in every way is different than it was in 2001."