Friday, October 16, 2009

General Electric; Jeff Immelt: FAIL (GE)

I've been asked why I am so negative on GE. The short answer:
The wealth destruction that this company has visited on it's shareholders is simply breathtaking.
On the day Jeff Immelt took over as CEO, September 10, 2001, the stock closed at a split adjusted $30.13. In early pre-market trade this morning it is changing hands at $16.31.

That is a compounded rate of just under negative eight percent per year.

Is it any wonder that GE has decided their future lies in lobbying the government to mandate their products? From light bulbs, where they and Phillips basically wrote the law that will ban incandescent lamps, in the process shutting down all U.S. manufacturing and shipping the jobs to China, to lobbying for the $300 million "Cash for Refrigerators" that starts later this month, to lobbying to stall the cleanup of the Hudson of their PCB waste, to lobbying for the hog-trough of giveaways that is cap-and-trade, these folks epitomize Immelt's statement:
It's never been a free market; it's never gonna be a free market. That's just the way it is....
Here's OpenSecrets on GE's lobbying expenditures:

Client Profile: Summary, 2008
Major Political Contributor

A special interest's lobbying activity may go up or down over time, depending on how much attention the federal government is giving their issues. Particularly active clients often retain multiple lobbying firms, each with a team of lobbyists, to press their case for them.

Please note this is just their direct payments. GE is a member of dozens of trade groups that also spend millions and millions.

Not that this is anything new. Back in the 1920's, during the build-out of the nation's electricity system, GE used every dirty trick in the book to crush municipality-owned sytems in favor of for profits.

I was fortunate to not own this stock for the last decade. In the late '90's a very wealthy and very smart investor said to me:
"GE's phoney-baloney earnings smoothing is going to have to end, it's approaching the level of a joke, in addition to violating the '33 act".
I sold that week.

Anyhoo, by now you know that earnings fell 44% on a 20% decline in revenues. Here's a story from Apil 2008, AP via MSNBC (!):
Former General Electric Co. chief executive Jack Welch said Wednesday that he would “get a gun out and shoot” his successor, Jeffrey Immelt, if he allowed GE to miss earnings targets again.

“I’d be shocked beyond belief, and I’d get a gun out and shoot him if he doesn’t make what he promised now,” Welch said on CNBC, a cable station owned by GE. “Just deliver the earnings. Tell them you’re going to grow 12 percent and deliver 12 percent.”

( is a joint venture of Microsoft and NBC Universal, which is a GE company.)...MORE