My first job out of university was with GE and i'm grateful for the experience. It was my favorite working experience by far - great managers, colleagues and opportunities. So it's terribly sad for me to see the stock price fall by two-thirds, seeing it kicked out of the Dow and a potential break-up of the conglomerate.
As with every company, there are a lot of things wrong at GE. Things like office politics, mindless re-organizations, deadweight at the top, etc. These aren't going to bring down the company though. Here are, in my opinion, the two biggest problems at GE that pose a threat to its existence:
I'm not sure who had Jeff Immelt's ear during his tenure, but GE was prone to making acquisitions or getting rid of businesses just as the tide was about to turn. If you're always buying high and selling low, eventually you'll be bankrupt.
Alstom, Vetco, Healthcare IT and there are countless other failed acquisitions that just don't make any sense give the price paid. Selling GE capital which made up 50% of revenues and replacing it with a money losing business like Alstom left many heads scratching.
They said it was to get a higher P/E ratio for the stock, something that industrial businesses have compared to financial firms. When GE resorts to this sort of financial engineering instead of the type that builds engines and turbines, you know they've lost the plot.
It's no secret that GE is run by the Finance department. They even have an 'elite' bunch of consultants called CAS that advises on the sale of businesses, operational matters in addition to auditing work. The problem when you run a business by Finance is that you make short term cuts in the hope of making your numbers instead of thinking how to grow the business.
Cuts to the office-pantry, air-conditioning, headcount freezes all damage morale but the amount they save is minimal. You also avoid things like system integration and improvement, always relying on patches like interns to do data input, data manipulation instead.
The solution to GE's problems have been made out to be more complicated than they actually are in the financial press. I think that's because hedge funds / investment banks can smell blood and want to force a break-up of the company.
In truth, it comes down to a few simple steps:
My friends who are still in the company all know this. Somehow the message never reaches the top and they seem to keep doing what's worst for the company.
