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The Immelt Revolution

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Title: Slide 1 Author: Jussi Last modified by: Woosik Created Date: 10/7/2007 7:14:05 PM Document presentation format: On-screen Show Other titles – PowerPoint PPT presentation

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Title: The Immelt Revolution


1
The Immelt Revolution
2
Who is Jeff Immelt?
  • Joined GE Plastic in 1982 (MBA from Harvard
    University)
  • Various global leadership positions over year
    career in GE
  • - GE Electronics, GE Medicals, International
    Marketing
  • Elected as CEO to begin tenure in September 2001
  • Different personality from J. Welch
  • Easygoing, friendly, natural charisma (lead by
    example)
  • cf. Jack Welch Brash, Impetuous, abrasive,
    feisty (dictatorship)

3
Jeff, breakthrough in the CEO Factory?
CEO Process Implementation
Long Term Planning CEO Candidacy Programme for an emergency, 1994
CEO Candidates 24 survived Management Development and Compensation Committee
Appraisal on Personality and ability(1-2 yrs) 8 Board members collective interviews
Management Ability Test (3-4 yrs) Job rotation in divisions - One of final three candidates - designate backup
Decision Merit (TO/Profits) check and CEO interview - young, expansive thinking
Time consumed 6 years 5 months
1. Tracing Young Turks - Scanning high -
potential cases
2. Global Mgt Capability - Leadership,
Strategy - Human Resource
3. Crisis Capability - Adversity - Venture, New
Area
4. CEO Candidate - CEO School - Competency
5. CEO Cultivation Team - Professional
Support - Mentor by J. Welch
4
Immelts Narratives
  • Repositioning the portfolio and diversification
  • From a process oriented company to creativity and
    fundamentals
  • Emphasizes organic growth rather than deals,
    divesture (Necessity after Welchs era)
  • Innovation Management
  • Imagination Breakthroughs for sustainable
    growth
  • New Ethical policy (Core Value) and its
    connection to personnel
  • - 8 Values and 4 Actions (Integrity)
  • Changing the culture
  • Outsiders to high rank positions
  • Diversifying the top ranks
  • New executive compensation

5
What are differences ?
Jack Welch Jeff Immelt
Paradigm Efficiency Oriented - Strong business and down-sizing Effectiveness Oriented - Growth engines for the future
Methodology 6 Sigma - Quality and costs Imagination, Breakthrough Project
Target Market EU, USA (developed) New markets, products, and businesses - Focusing new emerging market
Portfolio Cash Generator - finance, Service Infrastructure business, health, environmental business - contents, bio, security
Organization Culture Systematic management and through implementation - finance oriented Creativity and ideas for innovation - Marketing Oriented - One world
Core value in the era Built to Last, 1994 Mgt Challenge for the 21st Century, 1999
6
GE Performance Under Immelt
7
2001-2004 Performance
  • Sound Growth
  • Sales Increase 17
  • Net Profit 32
  • EPS Growth 27
  • But Declining ROE

8
Market view
  • Relative to the SP500 Composite, General
    Electric Co has moderate value characteristics
  • Its appeal is likely to be to income oriented
    investors.
  • Has not outperformed the market in recent years

9
Why GE under Immelt has not impressed the stock
market?
  • Business Strategy
  • Change from the growth by MA to organic growth
    and competitive advantage by internal innovation
  • Investors are alarmed by the growth of GE's
    finance business
  • Finance companies have lower P/E multiples and
    thin margins
  • Exposure to interest rates
  • Quality of its earnings will not enjoy low tax
    rate and low loan-loss provisions in the future
  • Investors trust dented by accounting of
    derivative transactions
  • Jitters in the global and emerging markets could
    slow GE growth
  • Reluctancy to sell unattractive units (MBC
    Universal)

10
Why GE under Immelt has not impressed the stock
market?
  • CEO Discount and no CEO Brand
  • Investors value simplicity
  • - Immelt has diversified the portfolio
  • Stock Markets like charismatic leaders
  • Immelt has not made its brand as GE CEO
  • Legacy of Welch
  • Change of Core Values
  • GE suffered from accounting scandals (Enron), 911
    incident (Airline Industry), etc.
  • From Comparative advantage, down-sizing, super
    MNC to win-win growth, business ethics
    responsibility

11
How could GE stock make a comeback? Our Story.
  • Enhance investor relations
  • Simplify the business
  • Eliminating uncertainties related to key
    businesses
  • High growth expectations in Infrastructure,
    Aviation, Energy, and Oil Gas (late-cycle
    businesses)
  • Attractive valuation for large cap defensive
    stocks

12
How could GE stock make a comeback? Our Story.
  • Increasing shareholder value through
  • Margin expansion in the company's industrial
    business
  • Sustainable global growth
  • Containing interest rate risk in financial
    industry
  • Reshaping the company
  • Spinning off selected units

13
Thank you!
  • Questions?

14
References
  • (http//www.businessweek.com/investor/content/jul2
    007/pi20070713_081745.htm?chansearch)
  • http//www.businessweek.com/bwdaily/dnflash/conten
    t/may2007/db20070521_719144.htm?chansearch
  • http//www.businessweek.com/bwdaily/dnflash/conten
    t/apr2007/db20070413_214298.htm?chansearch

15
Sources
  • http//www.businessweek.com/magazine/content/05_13
    /b3926088_mz056.htm
  • http//www.businessweek.com/bwdaily/dnflash/sep200
    1/nf2001095_519.htm?chansearch
  • http//online.wsj.com/ad/article/rbs_related6_1.ht
    ml
  • http//money.cnn.com/2006/02/01/news/companies/plu
    ggedin_fortune/index.htm
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