Opposing view: New CEO destroyed GE he inherited

When Jack Welch turned the keys of the General Electric Co. over to Jeff Immelt in 2001, GE was a well-run and greatly admired profit machine, stocked with exceptional management talent and innovative practices.

Over the next 16 years, while Immelt held the top job, he completely demolished the House that Jack Built. Curiously, some now ask, what blame, if any, does Welch share in the disaster?

The only mistake Welch made was in picking the weakest of three potential successors. It is, surely, the biggest management error of Welch’s career.

Much has already been made of the more than $175 billion of acquisitions made by Immelt, none of which hit the jackpot, many of which were disasters. Imagine buying one of the country’s largest subprime mortgage companies in 2004, or acquiring a coal-fired, steam turbine business for more than $12 billion in 2015 when it was clear you were buying dying technology.

It was Immelt, too, who bought back more than $100 billion of GE shares at a cost that was well above current stock prices. And it was Immelt who kept paying shareholders’ dividends when GE could no longer afford them.

Within Welch’s GE, there was an accepted belief that GE Capital, the company’s highly successful financial arm, should never exceed 40 percent of GE’s profits or revenues. This was thought to be a delicate balance, the ideal level to enhance the industrial businesses and to retain the company’s once pristine Triple-A credit rating. Undaunted, Immelt grew it to 55 percent of the company’s portfolio, just at the onset of the Great Recession, ignoring this longheld belief. It didn’t work all that well.

Immelt was more of an outside CEO, eager to play public statesman in Washington, advising President Barack Obama, giving speeches and collecting awards, and not enough like Jack Welch, who was a roll-up-your-sleeves CEO who reveled in operational details, asked the hard questions, cultivated deep engagement with his leadership team, and never suffered fools gladly.

Former Businessweek editor and writer John A. Byrne co-wrote “Jack: Straight from the Gut” with Jack Welch.