The Man Who Broke Capitalism by David Gelles

The Man Who Broke Capitalism by David Gelles

Author:David Gelles
Language: eng
Format: epub
Publisher: Simon & Schuster
Published: 2022-05-30T00:00:00+00:00


“You could feel his presence”

When Immelt decided to double down on Welchism in the wake of 9/11, it was, on one hand, a perfectly logical decision. Immelt didn’t want to be the one to break GE’s long string of remarkable quarterly returns, and thanks to the magic of GE Capital he was able to sustain the success, even with the economy in shambles. But by forgoing the opportunity to reset the company, Immelt ultimately was setting himself up for failure, effectively promising Wall Street that earnings would continue to rise indefinitely, just as they had under Welch. Pulling that off would prove to be impossible, especially with regulators scrutinizing GE and analysts wary of the company following the critique by Bill Gross, the outspoken bond investor. But Immelt was going to try, and to do so, he would lean on Welch’s favored tactics of downsizing, dealmaking, and financialization in the years ahead.

In 2003 alone, ignoring Gross’s critique that GE’s growth was fueled by unending dealmaking, Immelt spent roughly $30 billion on acquisitions. GE bought the film and TV unit of the French media conglomerate Vivendi, a Finnish medical device company, and a British life sciences company. Those deals followed the $5.4 billion acquisition of a commercial lending business in the Netherlands. GE was buying up everything from medical technology to media assets in an unending quest to grow the bottom line at the expense of all else. The years that followed included more profligate spending, as Immelt signed off on deals for data management companies, environmental software makers, and more.

The acquisitions rarely paid off. In the aftermath of 9/11, GE bet big on security technology firms, buying two explosive detection companies for $1 billion. The businesses never grew much, however, and in 2009, Immelt offloaded majority interests in the firms for a significant loss. Those were rounding errors at a company the size of GE, but they were emblematic of Immelt’s seemingly poor acquisition skills. He was often too early or too late to an emerging trend, frequently paid too much, and seemed incapable of changing his mind once he was set on a target. Welch’s warning to Langone on the eve of his retirement—that Immelt was an irresponsible dealmaker—appeared to be spot on.

As Immelt diversified into any number of new industries, he had less and less regard for several businesses that were once pillars of GE—plastics, appliances, and lighting. The plastics business was sold off to Saudi Basic Industries, a Riyadh-based chemicals company, for $11.6 billion. It was a good price, more than most analysts expected the business would fetch. Yet it also took GE further away from its industrial roots. Some years later, Immelt sold the appliances business to a Chinese company, Haier, for $5.4 billion. As part of the deal, he licensed out the GE name. The result was a feature of globalization that Welch probably never saw coming: American workers now came and went from Appliance Park in Louisville still making products affixed with the GE



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