Obama bailout recipient General Electric's slow demise

[Leroy N. Soetoro]

https://www.foxbusiness.com/markets/general-electrics-slow-
demise?intcmp=oborg_bl&intcmp=ob_article_sidebar_video

General Electric shares slipped to the lowest level since 2009, breaking
below the $10 level, after the company slashed its dividend to one cent
and disclosed that the Securities Exchange Commission (SEC) is expanding
its ongoing investigation into accounting practices to include a $22
billion goodwill charge the company took in the third quarter related to
acquisitions made in its power business.

Ticker Security Last Change %Chg
GE GENERAL ELECTRIC COMPANY 9.58 -0.52 -5.15%

The news comes weeks after General Electric ousted CEO John Flannery after
less than two years at the helm. Flannery, who replaced embattled former
CEO Jeff Immelt, was initially tasked with driving a turnaround that
failed to take hold.

Lawrence Culp Jr., who ran Danaher and sits on GE’s board, is now tasked
with saving GE which is proving to be a difficult task. GE shares have
lost over 45 percent during the past 12-months.

FOX Business takes a historical look at what went wrong at GE.


1. Jack Welch hand-picks Jeff Immelt as CEO

Neutron Jack Welch is going nuclear over GE meltdown Opens a New Window.
GE’s Dow yank is ‘heartbreaking’: Bob Nardelli Opens a New Window.
Jeff Immelt ‘destroyed’ General Electric: Ken Langone Opens a New Window.
In 2001, Jeff Immelt, who once ran GE's Medical Systems business, beat out
two of his colleagues for the coveted spot: Robert Nardelli, president and
CEO of GE Power Systems, who went on to lead Home Depot and James
McNerney, head of GE Aircraft Engines, who later led 3M and then Boeing.
As FOX Business reported in January, Welch is on fire over the state of
the company today, while Nardelli told FOX Business in June he is
"heartbroken" after GE was yanked from the Dow Jones Industrial Average.

2. Financial crisis hits GE, Buffett to the rescue

The financial crisis of 2008 rocked many CEOs, and Jeff Immelt was no
exception. GE Capital, the finance arm of the industrial giant, then
accounted for nearly 40% of company profits. As investors dumped banking
stocks en masse that October, GE was caught in the fray. Immelt struck a
deal with billionaire Warren Buffett's Berkshire Hathaway which invested
$3 billion in the company, essentially extending it a lifeline. At the
time, Buffett also offered his emotional support. "GE is the symbol of
American business to the world. I have been a friend and admirer of GE and
its leaders for decades. They have strong global brands and businesses
with which I am quite familiar. I am confident that GE will continue to be
successful in the years to come," said Buffett in a statement.

3. Immelt moves to diversify the conglomerate

During his 16-year tenure as CEO, Immelt diversified the industrial
company. For example, GE whittled down its finance arm, GE Capital, to
become a simpler enterprise. It also sold its appliance unit to Chinese
manufacturer Haier for $5.6 billion. At the same time Immelt was pushing
into areas such as the 'Internet of Things' and he also took a stake in
oil giant Baker Hughes, as oil prices stagnated. His strategy irked
longtime investors who feared GE was becoming too complicated. Even after
Immelt's resignation in June 2017, the strategy continues to dog the
company. "We see no quick fix to GE's problems as years of financial
engineering, complex reporting and mis-aligned incentives are coming to
bear," wrote Goldman Sachs analyst Joe Ritchie in October 2017.

4. Nelton Peltz's Trian pushes for change

Activisit Nelson Peltz was growing antsy over GE and in March 2017 FOX
Business was the first to report that CEO Jeff Immelt's job was in
trouble. Peltz and his team were turning up the heat on Immelt for missing
key performance metrics, this as the stock was consistently
underperforming the broader market for years. By June, Immelt had
resigned, promising a smooth handoff to incoming CEO John Flannery.
However, the company was about to enter one of its most rocky periods in
its 125-year history.

5. GE insider John Flannery named CEO, later ousted in 2018

GE CEO Jeffrey Immelt passes the reins to John Flannery

GE insider John Flannery, who led a turnaround at GE Healthcare, became
the company's 11th CEO following the resignation of Jeff Immelt in June
2017. He officially took the helm that August. Despite the familial
changing of the guard, Flannery was inheriting a basket of issues,
including whether or not the company's generous dividend could be saved.
On the July earnings call, Immelt's last, CFO Jeff Bornstein addressed the
elephant in the room. "John and I are reviewing our capital allocation
plan for the year. Dividend remains our priority," he said. Investors were
skeptical -- and rightfully so -- as the dividend got slashed that fall by
50%.

On October 1, 2018, Flannery was booted, effective immediately, and was
replaced by former Danaher CEO Lawrence Culp, who is also a GE board
member. Culp won praise from several investors after the announcement.

6. GE slashes dividend, crushes widow & orphan investor base

In efforts to conserve capital, GE cut its dividend in half last November,
an upshot of a broad review of the company under new CEO John Flannery. At
the company's investor day, Flannery promised to "Simplify + concentrate
on GE of the future" as outlined in the company presentation.

GE slashes quarterly dividend Opens a New Window.
General Electric to officially exit Dow Jones Industrial Average Opens a
New Window.
GE's big board likely to get smaller Opens a New Window.

Still, investors signaled they won't wait around. Once coined the stock
for widows and orphans, firms such as Morgan Stanley began removing GE
from investment portfolios. GE also came under fire for having the second-
largest corporate board among S&P 500 components, as reported by FOX
Business. The board also came under fire for being alseep at the wheel. On
October 30 2018, the company yet again slashed its dividend to one cent.

What Amazon, Google, Facebook can learn from GE's demise

7. Dow boots GE after 110+ years
Bye-Bye GE....In June, the team at S&P Dow Jones Indices removed the
industrial icon from the Dow Jones Industrial Average after over 110+
years. “General Electric was an original member of the DJIA in 1896 and a
member continuously since 1907,” said Dave Blitzer, managing director and
chairman of the index committee.“Since then the U.S. economy has changed:
consumer, finance, health care and technology companies are more prominent
today and the relative importance of industrial companies is less.” GE was
replaced by Walgreens Boots Alliance.

Ticker Security Last Change %Chg
WBA WALGREENS BOOTS ALLIANCE INC. 79.90 +0.13 +0.16%
GE GENERAL ELECTRIC COMPANY 9.58 -0.52 -5.15%

*This story was updated on 10/30/18
Suzanne O'Halloran is Managing Editor of FOXBusiness.com and is a graduate
of Boston College. Follow her on Twitter @suzohalloran


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