This book continues the story of General Electric in the period after that covered by The Man Who Broke Capitalism, thus presenting an opportunity to validate if Jack Welch really was the bad guy while also learning more about where Welchism took General Electric in the longer term. This book is very readable, with nice short chapters — for example it introduces Welch as a character, but does not dwell on his time at General Electric more than is necessary.
Immelt’s time as CEO got off to a rocky start, with the 911 attacks occurring on just his second day in the job. GE was financially exposed to these events, both as an insurer of some of the destroyed buildings, but also as a major manufacturer of aerospace equipment whose grounding reduced demand.
My second day as chairman, a plane I lease, flying with engines I built, crashed into a building I insure, and it was covered with a network I own”
Then of course came Enron. While the book asserts that GE’s behaviour lacked Enron’s criminality, GE was certainly creative and opaque with its accounting and would have to clean up its act under the new stricter post-Enron accounting standards introduced with Sarbanes-Oxley. That is, Welch exited just in time to not have to deal with the mess made on his watch.
Then to continue the fun there was the 2009 sub-prime mortgage crisis, a market in which GE had been a big player. Unfortunately for GE, it was “not a bank” (a thing they had previously boasted about), and therefore it took much longer to be rescued by the US Federal Government than traditional banks did. This, coupled with eventual fines for accounting fraud tarnished GE’s reputation as a solid stable industrial player instead of a high risk financial engineering organization.
On the other hand, Immelt was responsible for his own messes — accounting at GE Power that claimed revenue from future service contracts as profit now, a terrible investment in oil and gas equipment manufacturing as the oil market declined, a completely bonkers merger with a French power company, and a general unwillingness to listen to the advice of others.
Overall I’d say that while Immelt was unlucky, he was also complicit in the process that put GE into its perilous state, and then too arrogant to see the approaching freight train when things got really bad. It certainly didn’t help that he made it very clear over his tenure that delivering bad news to the CEO was a poor career move. Immelt was also GE CEO for 16 years, which should have been plenty of time to correct any historical misdeeds and stabilize the company.
So what of Welsh? Clearly he built a company that was just waiting to fail — but Immelt certainly didn’t do much to correct the ship before it ran aground.
Business & Economics
Mariner Books
May 4, 2021
368
How could General Electric--perhaps America's most iconic corporation--suffer such a swift and sudden fall from grace? This is the definitive history of General Electric's epic decline, as told by the two Wall Street Journal reporters who covered its fall. Since its founding in 1892, GE has been more than just a corporation. For generations, it was job security, a solidly safe investment, and an elite business education for top managers. GE electrified America, powering everything from lightbulbs to turbines, and became fully integrated into the American societal mindset as few companies ever had. And after two decades of leadership under legendary CEO Jack Welch, GE entered the twenty-first century as America's most valuable corporation. Yet, fewer than two decades later, the GE of old was gone. ​Lights Out examines how Welch's handpicked successor, Jeff Immelt, tried to fix flaws in Welch's profit machine, while stumbling headlong into mistakes of his own. In the end, GE's traditional win-at-all-costs driven culture seemed to lose its direction, which ultimately caused the company's decline on both a personal and organizational scale. Lights Out details how one of America's all-time great companies has been reduced to a cautionary tale for our times.