Power loss compounded by problems of succession

America’s most iconic corporation General Electric suffered a swift and sudden fall from grace for top managers.

GE’s reputation with investors rested on the preternaturally smooth earnings growth, buttressed by the financial operations of GE Capital, which Welch had expanded.  Welch’s tough managerial approach, including ruthless pruning of underperformers  earned him the nickname he hated “Neutron Jack”. By the time his departure, the group relied on a spread of activities running from NBC, the broadcaster, via fridges to the manufacture of aircraft engines and vast power turbines.

GE electrified America, powering everything from light bulbs to turbines and  became fully integrated into the American societal mindset as few companies ever had.  After two decades of leadership under legendary CEO Jack Welch, GE entered the twenty-first century as America’s most valuable corporation. But fewer than two decades later, the GE of old was gone.  Light Out examines how Welch’s handpicked successor, Jeff  Immelt, tried to fix flaws in Welch’s profit machine, while stumbling headlong into mistakes of his own. In the end GE’s traditional win-at-all-costs driven culture seemed to lose its directions, which ultimately caused the company’s decline on both a personal and organisational scale.

Immelt then had to cope with the shocks of the 9/11 terror attacks and the 2008 financial crisis.

After Immelt’s departure  GE spat out  his chosen successor, John Flannery , when he spent barely a year in post,  and dropped out of  the historic Dow Jones Industrial Average. For the first time GE which prided itself on building and training top managers had to appoint an outsider as CEO: Lawrence Culp, successful ex-CEO of small industrial group Danaher. He was trying to extricate GE from structural and financial distress, triggered with grim appropriateness by costly liabilities contained in the “unwanted detritus in the basement of GE Capital”, which Immelt was unable to clear.

GE directors must take some blame for not challenging him sooner or more aggressively. He also mis-hit with an ill-structured aznd overpriced deal for France’s Alstom and mistimed expansion into oil and gas services before energy prices slumped.

“The knock on Immelt was that he chased trends, arrived too late, and paid handsomely. His attempt to turn the group into a 124-year-old start-up ” as one laudatory Bloomberg Business week cover story described it- and to market it as such- looks lame in retrospect.

The past 20 years have shown that corporate virtue is sometimes built on fragile foundations.

The newly appointed Flannery addresses senior GE Managers in 2017 about the scale of the problems he has uncovered. He handed over to Jeff  Bornstein, who had taken over from Immelt as CEO.

Lights Out: Pride, Delusion, and the Fall of General Electric by Thomas Gryta and Ted Mann, Houghton Mifflin Harcourt $28, 368 pages.