Jack Welch on Jeff Immelt
Apr. 11 was a freaky Friday for shareholders of General Electric (GE), the $321 billion (market cap) conglomerate and bellwether for the U.S. economy. After reporting first-quarter earnings per share (BusinessWeek.com, 4/11/08) that missed analysts' forecast (coming in at 44¢, vs. the 51¢ estimate) and fell from the same period a year ago, GE shares tumbled nearly 13%, to 32.05, on Apr. 11, their biggest one-day decline since September 11. The drop erased nearly $47 billion from the company's value, and sent the Standard & Poor's 500-stock index and Dow Jones industrial average down 2% that day.
The news certainly rattled investors, who are increasingly worried about how long and deep the recession will be. The news also irked Jack Welch, the former CEO of GE who handpicked current CEO Jeff Immelt as his successor. On Apr. 16, Welch criticized Immelt on CNBC Business News (which is owned by GE) for making promises about GE's earnings growth that he couldn't keep.
"Here's the screwup: You made a promise that you'd deliver this and you missed three weeks later," Welch said. "Jeff has a credibility issue. He's getting his ass kicked. He apologized." He then said Immelt wouldn't make the same mistake again and that GE's financial model is not broken. A day later, Welch clarified his remarks:
"This week, in an effort to put GE's first-quarter earnings miss in context, I really stepped in it. Much to my shock and horror, remarks I made on CNBC's Squawk Box about the performance of GE CEO Jeff Immelt were interpreted to mean the exact opposite of what I intended. Nothing is worse than having a predecessor perceived as commenting negatively on a successor, particularly when the successor is doing a terrific job in a difficult environment. I want to set the record straight. Jeff is an outstanding CEO, and the GE financial model is as attractive as ever. I will endeavor in retirement not to step in it again."