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Business Week reports that John Rice, who will head General Electric Co.'s (NYSE: GE) new Technology Infrastructure unit and is a corporate Vice Chairman, is sounding very CEO-like in his description of GE's recent reorganization -- which I discussed here.
Rice offered a more cogent explanation of the reorganization than what I have read so far. The key points:
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Transparency - BusinessWeek quotes Rice as saying, "It's an easier way for investors to view us and understand what we do." I don't agree with him because it will make it more difficult for investors to compare current performance with previous years' results for at least a year. That's because it will be difficult to compare four units to the previous six.
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Common sales force - Rice also suggested that the reorganization will streamline the sales of some products. For example, the new GE Energy Infrastructure, which includes energy, oil and gas, makes products that are frequently sold together. This makes sense to me -- as long as GE trains and motivates its sales force to sell them together.
- Cost reductions - In April, CEO Jeff Immelt said that GE would achieve a cost reduction target of $3 billion rather than the previously announced $2 billion goal. Rice suggested that the reorganization would enable GE to achieve this higher target. In the absence of further details, I remain curious and skeptical.
With GE stock down 30% from where it was when Immelt took over, Rice's statement got me thinking that he was well-positioned to become GE's next CEO. He is running one of GE's most successful businesses and his vice chairman title suggests that the board knows him.
For the sake of GE shareholders, let's admit that -- unlike Jack Welch -- Immelt has not earned a 20-year run as CEO. I think it's fair to give someone else a chance. And Rice looks like a strong candidate.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns GE shares.
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Reader Comments (Page 1 of 1)
7-29-2008 @ 10:30AM
Bruce E Warnock said...
We are GE shareholders and look back in dismay to the year 2000 and GE at $60. Immelt has long outlived his welcome and it is time for new blood at the top.
The Board of Directors should take this opportunity to separate the positions of Chairman and CEO, so at least the new CEO will have a "boss" to answer to. This is also long overdue.
GE is a great company, the last of the original DOW 30, and it deserves much better management.
7-29-2008 @ 11:39AM
gumbo koontz said...
Dont go so easy on the unions... UAW destroyed GM. GE is heavily unionized and is dragging GE all day and night. Look at Caterpillar once heaviy unionized now it is doing splendidly thanks to formere CEO who faced down with the unions. and prevailed. The unions got to understand that shareholders owns the company not the management..
7-29-2008 @ 12:38PM
Bill Rothschild said...
I agree that GE's most recent re-organization is designed to make the company more understandable, but it doesn't reduce the complexity of the company. Daily, I read about another "deal" involving GE. I ranges from joint ventures to acquire Weatherchannel, willingness to allow middle eastern sovereign funds to acquire major share of company , partnerships in all major developing markets and so on.
Immelt has now reorganized several times in the past few years, but it has not made the company any more efficient and adaptable.
Overall, I still think that the GO BIG/ GO GLOBAL, Portfolio management strategy is not working and Immelt and his team should focus on operating the businesses they have and stop being deal makers.
Bill Rothschild, author of the most insightful view of GE's successes and failures, THE SECRET TO GE's SUCCESS... now in six languages...
PS I disagree with the other commentary about unions and GE. GE was able to neutralize unions starting in the 1950's and never gave away the shop or management rights as GM and other once major companies.
7-31-2008 @ 8:32AM
wrlundholm said...
Common sales forces don't work. I ran three of them for big companies. The larger business units do OK under them. The smaller business units (And most of the time they are very profitable) do poorly. They get lost in the suffel. Sales forces organized by customer groups do much better, but leave the smaller business units alone to continue their growth. If they cannot grow, sell them.
7-31-2008 @ 3:40PM
jhay said...
Sir, I can only hope your prominition is correct that Jeff is on is way out. This change should have been taken along time ago by the board. He has done nothing to improve the company and has refused to take the markets positive comments that they felt would turn the stock around. Give him his millions like the financial wizards that have created the current market dilema and let him go.
9-11-2008 @ 1:36AM
papagorg said...
i worked for penske logistics,in evendale,oh hauling engines worth millions of dollars for 15.40 an hour.in november of 2006,we were informed that we lost the contract to RYDER which is penske's top competitor.the scuttlebutt is that they have damaged a lot of product.the ironic part of the story is that penske is a subsidiary of ge and we were only getting 60% of the going union wage.the janitors at ge made more than us and thats a fact.we just did our jobs at ge's request.