How Jeffrey Immelt’s ‘Success Theater’ Masked the Rot at GE

A culture that disdained bad news contributed to overoptimistic forecasts and botched strategies

Jeffrey Immelt, the longtime boss at General Electric Co. , was a polished presenter who held court each year at a waterfront resort off Sarasota, Fla., where industrial executives and Wall Street listened for his outlook on the conglomerate.

“This is a strong, very strong company,” Mr. Immelt said at the event last May.

.. GE’s precipitous fall, following years of treading water while the overall economy grew, was exacerbated, some insiders say, by what they call “success theater.”

Immelt and his top deputies projected an optimism about GE’s business and its future that didn’t always match the reality of its operations or its markets

.. “The history of GE is to selectively only provide positive information,” said Deutsche Bank analyst John Inch, who has a “sell” rating on the stock. “There is a credibility gap between what they say and the reality of what is to come.”

.. “GE itself has never been a culture where people can say, ‘I can’t.’

.. GE once had the highest market value of any U.S. corporation. Its alumni have gone on to run companies such as Boeing and Chrysler.

.. Few knew just how badly ailing the American icon was. Even GE’s board didn’t realize the depth of problems in the biggest division, GE Power, until months after directors had replaced Mr. Immelt

.. A spokesman for the former CEO pointed to his decision to purchase $8 million worth of GE shares in 2016 and 2017. That included 100,000 shares in mid-May at a price roughly twice today’s.

.. But Mr. Immelt didn’t like hearing bad news, said several executives who worked with him, and didn’t like delivering bad news, either. He wanted people to make their sales and financial targets and thought he could make the numbers, too, they said.

.. Over the past three years, GE spent more than $29 billion on share repurchases, at an average price of almost $30, twice the current level. That included billions of dollars spent less than a year before GE suddenly found itself strapped for cash last fall.

.. Trian Fund Management LP, which invested $2.5 billion in GE in 2015, wanted it to buy back even more stock. The activist investor urged the company to borrow $20 billion for repurchases (which it didn’t do), based on a belief that the profits Mr. Immelt was promising would send the stock soaring when they arrived.

.. Instead, at Mr. Immelt’s retirement in August the stock was below its level when he took over 16 years earlier. Including dividends, GE gained 8% with Mr. Immelt at the helm, while the S&P 500 rose 214%. Since he stepped down, the stock has lost about 43%, erasing almost $94 billion in market value

.. Instead of $2 a share GE now projects $1 to $1.07.

.. Several directors discussed in November whether the entire board should be fired

.. Jack Welch, delivered steady profit growth and sent shares soaring in the 1980s and ’90s by striking deals and aggressively slashing costs and jobs. Mr. Welch also built up a huge lending business called GE Capital that for years generated outsize profits—but nearly sank the company during the financial crisis on Mr. Immelt’s watch.

.. Results were strong at two of GE’s big units, aviation and health care (medical equipment).

.. Acquiring companies that help drillers pump and transport fuel, he had GE spend more than $14 billion over 10 years, most of it based on higher oil prices than today’s.

.. Mr. Immelt’s optimism was part of the problem, according to some people close to the situation. They said he told the board that management had identified risks in the power business, yet downplayed them. The probability and risk were way off, one said.

.. Lisa Davis, the U.S. chief of Siemens, said the German company’s executives “have seen this decline coming for the last several years.” So Siemens had reduced its capacity in its power business, she said, while GE bought more.

.. According to former executives, the upgrades meant lower service fees for customers, in exchange for one-time upgrade costs, meaning that future sales were being pulled forward.

In fun-house mirrors of Trump White House, disarray can look like victory

President Trump’s week ended with the sudden departure of a speechwriter who had been accused of brutally attacking his wife, the president’s defense of another staffer who allegedly assaulted two ex-wives

..  The president learned at a very early age that what humiliates, damages, even destroys others can actually strengthen his image and therefore his bottom line.

.. The White House lets it be known that Kelly is in the doghouse. Yet the president himself goes out of his way to speak publicly in defense of the ousted aide, without so much as a nod toward what the women have suffered.

1) Always double down on your position.

Trump has regularly argued in favor of men on his side who’ve been accused of bad behavior against women, whether that was

  • Senate candidate Roy Moore of Alabama;
  • Fox News figures Roger Ailes and Bill O’Reilly; last week’s case du jour,
  • Rob Porter; or
  • Trump himself. He weathered the “Access Hollywood” tape that many of his aides thought would sink his campaign, and he successfully batted away
  • allegations from more than a dozen women that he was guilty of sexual misconduct toward them.

Saturday morning, the president tripled down. “Peoples lives are being shattered and destroyed by a mere allegation,” he tweeted. “There is no recovery for someone falsely accused — life and career are gone. Is there no such thing any longer as Due Process?”

2) The president must always be the focus of attention. Aides who get too big for their britches won’t be around for long.

.. Whether or not Kelly leaves, he has been knocked down several notches, especially in the public’s view. He’s been shown who’s boss, in case he had harbored any doubts.

Trump, contrary to the caricature he fostered on his reality TV show, “The Apprentice,” rarely excommunicates close aides forever. They almost all remain in his orbit even if he has publicly humiliated them or sent them off for a long vacation.

.. But they must always learn that those who attempt to grab some of the limelight will be dealt with.

.. When erstwhile chief strategist Stephen K. Bannon made the cover of Time — for Trump still a vital marker of making it big, even as the magazine’s influence has severely waned — he was done for, at least for now.

.. He learned in the 1970s from his mentor Roy Cohn that when you face criticism, justified or not, “you tell them to go to hell and fight the thing,” as Cohn said.

.. Trump instead leaned hard on the accelerator, ratcheting up his rhetoric, pressing for a convention lineup that doubled down on appealing to his base — Willie Robertson of “Duck Dynasty,” the chief of Ultimate Fighting Championship, music by Southern, white classic rock acts.

.. In the 1980s, Trump not only didn’t push back when tabloid newspapers turned the collapse of his first marriage into a daily soap opera; Trump actively participated in the scripting of the drama, calling gossip writers, dishing out salacious morsels almost by the hour.

.. “The show is Trump,” he said then, “and it is sold-out performances everywhere.”

.. Trump had discovered in painting oneself as the rich celebrity ordinary Americans aspire to be.

Obama called it “the unfounded optimism of the average American — ‘I may not be Donald Trump now, but just you wait; if I don’t make it, my children will.’ ”

..  he recognized that bad behavior and the notoriety it generated didn’t undermine that image. For many people, it actually enhanced it.

.. visionary business leaders succeed “because they are narcissists who devote their talent with unrelenting focus to achieving their dreams, even if it’s sometimes at the expense of those around them.”

Jonah Goldberg: The ‘Last Straw’?

This is the moment when Trumpism hits the fan.

Of course, it has felt like this to one extent or another before:

  1. when Trump denigrated John McCain’s military service,
  2. when he compared Ben Carson to a pedophile,
  3. when he smeared Ted Cruz’s father,
  4. when the Access Hollywood tape came out, after the various idiotic tweets,
  5. after he fired Comey
  6. when he divulged intelligence sources and methods, etc.

.. Lingering on for three-plus more years as a failed president is a kind of survival. The question is, is this presidency salvageable?

.. A piece of straw alone is not a burden for a camel. But if you pile on one burden after another, you reach “the last straw.” This is one of the — if not the — most important dynamics in politics. If you go back and look at any number of “spontaneous” political outbursts, you’ll discover that the actual people doing the, uh, out-bursting are actually responding to a long list of grievances and that the precipitating event was only the last straw.

.. For instance, the Arab Spring was ignited by the abuse of a street vendor in Tunisia, but the kindling for the region-wide political conflagration to come had accumulated over decades.

.. I have always believed that the Trump presidency would end badly because I believe character is destiny. There is no reasonable or morally sound definition of good character that Donald Trump can meet. That’s why we learned nothing new about Donald Trump this week. He can’t change. Some good, decent, and smart people couldn’t or wouldn’t see this. But every day, more people see this.

Julius Krein, the founder of the pro-Trump egghead journal American Affairs, reached his tipping point this week:

Critics of the pro-Trump blog and then the nonprofit journal that I founded accused us of attempting to “understand Trump better than he understands himself.” I hoped that was the case. I saw the decline in this country — its weak economy and frayed social fabric — and I thought Mr. Trump’s willingness to move past partisan stalemates could begin a process of renewal. It is now clear that my optimism was unfounded. I can’t stand by this disgraceful administration any longer, and I would urge anyone who once supported him as I did to stop defending the 45th president.

.. Some of the smartest people I know voted for him, for defensible reasons. Krein and his fellow Trumpist intellectuals weren’t dumb, they were just wrong. And while I think the conservative movement would probably be in better shape if Hillary Clinton had won last November, I don’t think it’s nearly so obvious that America would be.

.. Is there a means by which the White House could entice all of the CEOs quitting these stupid councils and commissions to come back?

.. You might call it “Manichean Hegelianism.” In this binary formulation, the world is divided between the forces of Light and Darkness, Good and Evil — and evil cannot fight evil and good cannot fight good.

.. Let’s stipulate that Adolf Hitler was the most evil person ever. On the scale of evil, he scores 100 percent. Fine. What score should we ascribe to Stalin or Mao? Let’s say they score 90 percent.

Who gives a rat’s ass? Certainly not the millions they murdered. If you watched your wife get raped by prison guards in the Gulag and then die in the snow, how much solace would you take from the fact that Hitler was “worse” on some asinine abstract metric of evil? If you want to argue that no one was worse than Hitler, have at it. But if you’re going to then argue that because someone wasn’t as bad as Hitler — or because someone fought Hitler — that they are somehow absolved of their own evil deeds, then you’re a fool. To do so is to render complex moral and historical questions into a pass/fail system. Suddenly, “not as bad as Hitler” becomes a passing grade.

.. If you think racism is the most evil thing ever, you’re going to say the KKK is worse than antifa. That’s fine by me. But who cares? Is there a fainter praise imaginable than “He’s better than a Klansman?”

.. The simple truth is that history isn’t simple: The universe isn’t divided into the Forces of Goodness and the Forces of Evil. That divide runs through every human heart and, therefore, every human institution. Recognizing this fact is the first step toward humility and decency in politics and life. But we live in a tribal moment where people ascribe good and evil to vast swaths of humanity based upon the jerseys they wear. Sometimes, the jerseys do make the case. Wear a Klan hood or a swastika and I will judge the book by the cover. But just because you think you’re morally justified to punch a Nazi, don’t expect me to assume you’re one of the good guys.