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The Immelt Revolution

The Immelt Revolution. 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

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The Immelt Revolution

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  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? 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. Immelt’s Narratives • Repositioning the portfolio and diversification • From a process oriented company to creativity and fundamentals • Emphasizes organic growth rather than deals, divesture (Necessity after Welch’s 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 ?

  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 S&P500 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 M&A 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?

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