Friday, June 23, 2017

1811 The Last American Conglomerate

ITT, Gulf + Western, Time-Warner, Lowes theaters/tobacco, Ling-Temco.

These are school conglomerates that either have vanished or exist only as anorexics of their former selves.  There’s only one real publicly traded conglomerate still standing.

Oh, yeah.  You can make the case for Berkshire Hathaway as a conglomerate or Liberty Media or maybe even Con-cast.  But these are more narrowly focused or more investors than managers.

GE is a real honest and true mega corporation with its tungsten filaments in practically everything.

It doesn’t have the star quality it had under retired chairman Neutron Jack Welch, the hottest stock pumper of the late 20th century.  The stock price has fallen from the upper middle 60s to the upper 20s. In a booming stock market.

The ride down began when Welch came up with the astonishing conclusion that “We’re not a conglomerate.  We’re an information company.” (That may not be an exact quote, but it’s close.)

The hydra that is Wall Street looked itself in the heads and said “Yo, Jack! Are you kidding? What about the jet engines and the financial services, the plastics, the medical equipment, the large and small appliances and the lightbulbs?”  And that IS an exact quote.  

Jeff Immelt took the helm.  He has to wear reflective clothing when he walks around headquarters in Fairfield because otherwise, no one would notice him.

Other than he’s moving the front office to Massachusetts and now has said he would step down as chairman after a mere 16 years he could well be the Invisible Man.

Trouble in River City?  Hard to tell.  This creaky old outfit, the last remaining original member of the Dow Jones Industrial Average, isn’t going to go away because Immelt leaves as CEO in a few weeks and as chairman in December. But neither is it going to return to bringing “good things to life,” as their ads once said.

It’s hard to measure the impact of management in a company as hide bound as this one.  But apparently the Hydra Head crowd likes the change. The stock closed slightly higher on the day of the announcement.

The new guy, John Flannery, now head of the medical equipment division will have the same autonomy as Immelt and Welch.  Absolute Maximum Leader.

But don’t expect him to reclaim some of the spun off divisions.  GE Capital is not coming back.  They’re not going to pry NBC out of the cold dead hand of Comcast.  And they haven’t made a nuclear reactor in a dog’s age.

Light bulb making will not move back to Schenectady.  They won’t resume building radios.

For old time’s sake let’s hope Flannery gets record setting crowds at his inauguration.  Or admits he didn’t if he doesn’t.

-“I was chairman for two days. airplane with my engines hit a building I insured, was covered by a network I owned and I still have to increase earnings by 11%.” - Jeff Immelt on what it’s like to head GE.

-“...Weak managers destroy jobs.” - Jack Welch

I’m Wes Richards. My opinions are my own but you’re welcome to them. ®
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