Since Donald Trump’s election in November 2016, during a stock market boom in which the Dow is up 41 percent, GE has lost 46 percent of its value, or $120 billion. A few months after Immelt retired as chief executive last summer, the company shocked Wall Street by announcing earnings that were barely half of analysts’ already lowered estimates. Soon after, GE said it would halve its once-sacrosanct stock dividend because it was short on cash. It also said it would sell or spin off $20 billion in businesses, including its lightbulb division. (The appliance business was sold to the Chinese manufacturer Haier Group in 2016, along with a license to use the GE brand.)
Then in January came news of a $6.2 billion charge related to costs incurred more than a decade ago by GE’s financial-services business, an announcement that triggered a U.S. Securities and Exchange Commission investigation. GE’s new CEO, John Flannery, has grimly promised that “all options are on the table,” including the once-unthinkable option of dismembering the company entirely.
And yet, little of this has to do with the stuff GE makes. Its jet engines still dominate the global market. Its turbines, whether in gas, coal, or nuclear power plants, still provide a third of the world’s electricity. Its CT scanners and MRI machines are still the state of the art. So what happened?
Immelt also publicly pledged to return GE to its industrial roots (with a new concern for environmental impact) and reversed the deep cuts Welch had made to research and development. Still, under Immelt GE Capital only grew. Its profits quadrupled as it gobbled up credit card companies, subprime lenders, and commercial real estate. These weren’t businesses GE had much experience in, but the company had long taught its young executives that they could manage anything.
The 2008 financial crisis revealed this not to be the case.
The company engaged in risky speculation in the finance field far away from its core competencies, while embracing progressive values in its fabled industrial divisions.
In other words, they got woke and went broke.
Related (From Ed): Speaking of the stupid management, back in 2007, then CEO Jeff Immelt was flying around with his emergency backup spare private jet when GE still owned MSNBC and NBC, which frequently hectored (and still does) its viewers on global warming. Including this infamous moment in 2007, when a GE-owned company advised its viewers to turn off their GE-made light bulbs, while the klieg lights were blazing at Philadelphia’s Lincoln Financial Stadium: