Tuesday, February 21, 2012

Jeff Immelt and the Reinventing of GE, 2009

The following is a case review of Case 23 taken from Robert M. Grant's Book: Contemporary Strategic Analysis. (7th Ed. John Wiley and Sons 2010.)
Immelt Currently sits on the White House Council on Jobs and Competitiveness
GE CEO Jeff Immelt
  1. For more on Jeff Immelt, see this case review: Bartlett-Mclean GE's Jeff Immelt
  2. Conglomerates faced criticism from theorists.
    1. Refocused:
      1. Textron
      2. General Mills
      3. TRW
      4. BTR
    2. Broken up:
      1. ITT
      2. Hanson
      3. Vivendi-Universial
      4. Tyco
  3. GE growth strategy pre-Jeff Immelt
    1. acquire major businesses, expand them through internationalization and GE's strong management principles
  4. Late 2000: Immelt chosen as Jack Welch's successor
  5. R&D average $5 billion per year ($50 over the decade preceding the case)
  6. September 7th, 2001: Immelt became CEO
    1. 4 days after becoming CEO, 9/11 occurred!! 
    2. 1 month later, Enron collapsed
    3. financial statement manipulation scandal erupted shortly after
    4. specifically, consolidated industrial and GE financial statements were criticized
  7. October, 2001: GE acquires Telemundo
  8. March 2002: Bill Gross of IPCO fund management 
  9. September 2002: Jack Welch' s pay package scandal 
  10. 2002 GE Annual Report 
  11. August, 2003: GE acquires Transamerica Finance
  12. October, 2003: 
    1. GE acquires Instrumentarium (Finnish medical systems company)
    2. GE acquires Amercham plc. 
  13. 2004: 
    1. GE acquires Dillards credit card
    2. GE sells 60% stake in GECIS
    3. GE sells life and mortgage insurance business at Genworth Financial
    4. GE aquires InVision
  14. 2005: 
    1. GE acquires Bombardier financial assets 
    2. Immelt reduces org. structure to 6 businesses 
  15. 2006: 
    1. GE Energy infrastructure 16.8% of GE's consolidated revenue
    2. GE achieves 3 years of achieved targest for revenue and profit under Jeff Immelt's leadership
    3. GE acquires IDX, a medical software firm
    4. GE sells advanced materials division
    5. GE Water & Process Technologies acquires Zenon Environmental Systems for $758 million
    6. GE sells Insurance solutions, Life insurance 
    7. Federal Pension Protection Act passed. 
      • Took effect in 2008, tighter accounting rules gave employers seven years to fully fund their retirement plans and required them to use a specified, market-based rate of return to compute liabilities instead of a company estimate.
    8.  GE promulgated 6-part Growth Process Model
  16. 2007: 
    1. GE Energy infrastructure 17.8% of GE's consolidated revenue
    2. GE Capital provides 42% of GE's Profits 
    3. GE acquires Smiths Aerospace
    4. GE acquires Vetco Gray (oil and gas)
    5. GE Plastics sold to SABIC for US$11.7 billion
    6. GE acquires Oxygen Media (Cable TV channel)
  17. 2008:
    1. GE earnings guidance from Immelt missed target of $0.50, $0.53
    2. actual $0.44!!
    3. GE acquires Vital Signs
    4. GE acquires Hydril Pressure (oil and gas)
    5. GE acquires Merrill Lynch Capital, CitiCapital, Bank BPH 
    6. GE incurred mandated environmental remediation expenses equaling US $0.3 billion 
    7. Immelt reduces 6 main businesses to 5.
  18. September 25th, 2008: Immelt suspends GE stock buyback program. Reaffirmed that GE had no need for outside capital.
  19. October 1st, 2008: Immelt makes an agreement with Warren Buffet for $3 Billion cash
  20. 2008-2009: Lehman shock and financial crisis
    1. subprime mortgages
    2. global credit scarcity
  21. Case Date: April 22nd, 2009
    1. Jeff Immelt preparing annual shareholders meeting
    2. CFO Keith Sherrin focused on short term financing
    3. CEO Jeff Immelt focused on long term corporate strategy- reduce reliance on GE Capital
      1. Portfolio Management: "Build strong businesses." GE's 4 major businesses
        1. Energy Infrastructure 16.6%, 17.8% and 21.1% consolidated revenue
          1. SmartGrid
        2. Technology Infrastructure
        3. GE Capital-> shrink this by exiting product lines
          1. build strong links with GE leasing (aircraft primarily?)
          2. Long term asset stability?
          3. Clay Christensen: "The major growth engine at GE has been GE Capital..."
        4. NBC Universal 
          1. Hulu online streaming
      2. Divest 
        1. insurance, reinsurance
        2. plastics and silicones
      3. Enter new industries 
        1. Energy generation
          1. renewable
            1. Ecoimagination
          2. oil & gas 
          3. coal
          4. batteries
            1. hybrid locomotives: sodium battery for trains
        2. water 
        3. healthcare IT
          1. brain imaging
        4. avionics
        5. cable
      4. "Invest in services and globalization"
      5. Identify areas for opportunity
        1. infrastructure projects in:
          1. US, Canada
          2. China
          3. Brazil
          4. UK, France and Germany
          5. Middle East
      6. Competitiveness
      7. Commitment to People 
        1. refine GE's organization culture to be more customer focused
        2. incentivize customer focus
    4. $12 a share GE stock price after a brief dip to $6. Down from $53
  22. 2009: GE Leaves FDIC TLGP Program
  23. May 19th, 2011: Immelt announces $12 Billion stock buyback
2009 GE Capital Investor's Presentation
GE Investor Presentation
Posted by E.B. Holmes at 11:51 AM

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