Immelt Legacy at Risk Pitching GE-Alstom Deal to FranceRichard Clough and Carol Hymowitz
French lawmakers were set to hear from the head of General Electric Co.’s local operations about the $17 billion bid for Alstom SA’s energy assets. Then Jeffrey Immelt flew in.
“I decided to come myself,” Immelt said yesterday as he made a rare appearance by a U.S. chief executive officer before France’s National Assembly. He cast the offer as an alliance, said the Alstom brand “lives on” and assured the politicians that “with 10,000 employees across the country, some might even mistake GE for a large French company.”
The campaign in Paris continued today as Immelt met with President Francois Hollande and pledged to create 1,000 local jobs, a person familiar with the matter said. The 58-year-old CEO is working to overcome French resistance to the biggest deal in GE’s 122-year history, an acquisition that holds the potential to bolster not only GE’s sagging stock performance but also Immelt’s legacy.
“He’s completely frustrated,” said David Magee, who spent time with the executive when writing the 2009 book “Jeff Immelt and the New GE Way.” “He knows his legacy will be marked by that stock price. He wants that recognition and he wants it in one place: on Wall Street.”
On both sides of the Atlantic, Immelt preaches optimism about the deal for Alstom, which is based in the Paris suburb of Levallois-Perret. Even French Economy Minister Arnaud Montebourg began softening his opposition today after the Immelt-Hollande meeting, saying GE “brought better proposals to the table.”
Acquiring Alstom would accelerate Immelt’s plan to return Fairfield, Connecticut-based GE to its industrial roots and could be a chance to invigorate the shares, which are little changed since GE made an offer last month for the French maker of high-speed TGV trains and power equipment. GE didn’t make Immelt available for an interview.
A deal also could help Immelt step out of the shadow of much-lauded predecessor Jack Welch. For the better part of 13 years, Immelt has worked 100-hour weeks to expand sales and earnings to record levels. Investors have largely shunned the stock, which has lost a third of its value since he took over.
“The market, I think, is starting to appreciate what he’s doing and I believe they will continue to appreciate him,” Nelson Peltz, the billionaire founding partner and CEO of New York-based Trian Fund Management LP who has known Immelt for a decade, said in an interview. “Jeff is a solid guy who’s trying to build the business the right way.”
It hasn’t been easy. French political leaders have said they favor a bid for Alstom from Munich-based Siemens AG, which has yet to submit a formal offer. Immelt also found himself following Siemens’s France chairman, Christophe de Maistre, in addressing the National Assembly yesterday.
Immelt’s appearance was “about as high-profile and high drama as it gets,” said Shannon O’Callaghan, a Nomura Holdings Inc. analyst in New York.
The CEO, a Harvard Business School graduate who has spent almost his entire career at GE, faced unexpected challenges when he took over four days before the 9/11 terror attacks in 2001. Exposed to both the insurance and aviation industries, GE watched its shares fall 11 percent in a day. After Welch steered GE through the go-go 1990s, Immelt inherited a rapidly falling stock and had to contend with two recessions and a subsequently weak global economy.
Some on Wall Street say he poorly played the tough hand he was dealt. Immelt has been faulted for overpaying for acquisitions, such as the $10.3 billion stock takeover of U.K.- based biotechnology company Amersham Plc, and selling other assets at the wrong time.
“Within his first six, seven, eight years as CEO, the portfolio changes he made, the businesses bought and sold, were not as strategic as I would have liked,” said Jack De Gan, principal and chief investment officer of Harbor Advisory Corp., a Portsmouth, New Hampshire-based firm that owns about 100,000 GE shares.
Immelt’s relationship with investors deteriorated when GE unexpectedly missed earnings in 2008 despite assurances from the CEO, and then when he cut the dividend for the first time since the Great Depression after he pledged he wouldn’t.
GE’s total return, at less than 1 percent, is the worst of the 58 stocks that have been in the S&P 500 Industrials Index since 2001, according to data compiled this month by Bloomberg. The shares rose 0.3 percent to $26.66 at the close in New York.
Immelt suffers from sometimes unfair comparisons with his predecessor. While Welch’s image lost some of its sheen after GE Capital left the parent company exposed to the vicissitudes of the financial crisis, the former CEO is still seen as an iconic corporate leader.
“That wasn’t an easy act to follow no matter who you were,” said William Conaty, GE’s former head of human resources who was involved in the succession planning process when Welch stepped down. Immelt is “clearly his own man -- he and Jack stylistically are 180 degrees apart.”
After GE missed earnings in 2008, Welch went on CNBC and vowed to “get out a gun and shoot” Immelt if it happened again. While Immelt usually avoids talking negatively about Welch, his frustrations boiled over at a reception convened for journalists and others by the Financial Times in 2009. Immelt told the gathering, “a German shepherd could have run GE” in the 1990s and performed well.
Closing the Alstom deal would show that Immelt has the wherewithal to outdo his predecessor by scoring a major acquisition in Europe, where economic nationalism runs deep. In 2001, Welch’s plan to acquire Honeywell International Inc. for $53 billion collapsed because he ignored European warnings that concessions were necessary to get the deal done.
Immelt has taken a different tack. Since being approached by Alstom CEO Patrick Kron in February, the GE chief has met early and often with Hollande and other French leaders, saying he expects a net increase in local industrial jobs. French officials have pushed back, with Montebourg previously calling the offer unacceptable and expressing a preference for a Siemens bid.
Given Immelt’s conciliatory gestures, a failure of the Alstom acquisition probably would be laid at the feet of French politicians and not GE, said O’Callaghan, the Nomura analyst. “I don’t think anyone would fault him for walking away.”
Immelt has said GE’s experience negotiating transactions in Europe gives him confidence the company can close the deal.
GE’s local chief is Clara Gaymard, who began her career in 1982 in the office of Jacques Chirac, the Paris mayor and future French president. Gaymard was the originally scheduled speaker for GE before Immelt flew back across the ocean to make the case for the Alstom deal.
It helps that Immelt is “very gifted at selling,” said Jeffrey Crowe, a venture capital executive who has known Immelt since they pledged Phi Delta Alpha at Dartmouth College. “Any CEO has to be able to sell -- sell a vision, sell their employees, sell customers, sell partners, sell governments.”