Immelt, Jeffrey R.

views updated

Immelt, Jeffrey R.

(1956-)
General Electric

Overview

On September 7, 2001, Jeffrey R. Immelt became the chair and chief executive officer of General Electric (GE), following in the footsteps of Jack Welch, who served in the position for the previous 20 years. Welch, so highly admired for his leadership and business skills that he is nearly a legend in his own time, could be a hard act to follow. Immelt is certain that he is up for the challenge.

Personal Life

Immelt was born on February 19, 1956, in Cincinnati, Ohio, where he grew up with his parents, Joseph and Donna Immelt, and his older brother Steve. His father spent 38 years working in GE's Aircraft Engines division, retiring as a mid–level manager; his mother was a school teacher. Showing athletic ability as a youth, Immelt participated in numerous sports and enjoyed an ongoing competition with his brother, who later became an attorney.

Upon graduating from high school, Immelt enrolled in Dartmouth College, where his natural leadership abilities became apparent. During his years at Dartmouth, he played offensive tackle on the college football team, and he was elected president of his fraternity, Phi Delta Alpha. During summer breaks, Immelt worked at a Ford Motor plant in Cincinnati. He graduated from Dartmouth in 1978 with a bachelor of science degree in applied mathematics and worked briefly for Proctor & Gamble in the brand management department before deciding to continue his education. He enrolled in Harvard's graduate school and completed his MBA in 1982.

In 1983, while living in Dallas, Texas, Immelt met Andrea Allen, a GE customer service representative. The two became close, continuing their relationship even after Andrea moved to Chicago. The couple married in 1986, and the following year their daughter, Sarah, was born, since which time Andrea has been a full–time homemaker.

Career Details

Upon his graduation from Harvard, Immelt, like his father before him, became a GE employee. In 1982 26–year–old Immelt was hired as internal marketing consultant at GE's corporate office in Fairfield, Connecticut. The following year he moved to Dallas to become the district sales manager of GE Plastics. In 1989 he left GE Plastics to become the vice president of consumer service of GE Appliances. Three years later he returned to GE Plastics to become the vice president and general manager of the $3 billion division that maintained 5,000 employees. In 1997 he was promoted once again, becoming the CEO of GE's Medical Systems division, located in Waukesha, Wisconsin. Upon his promotion, GE's Chairman Jack Welch said, "Jeff Immelt is a dynamic, entrepreneurial business leader. We are very excited about the growth prospects for GE Medical Systems, and Jeff is the perfect person to maximize this global opportunity." Immelt maintained this position until being selected as GE's CEO in 2000.

During Immelt's career with GE, prior to being appointed as CEO, he had developed a reputation for excellent leadership and management skills. While at GE Appliances in 1989, he successfully worked through a large recall of refrigerator compressors, delivering motivational speeches to his harried workers on the factory floor in Louisville from atop a forklift. And, true to Welch's prediction, during the time in which Immelt headed GE Medical Systems, sales rose 75 percent and, by many measures, the $7 billion division became the world's most successful imaging company. Immelt discovered that customers wanted more than the line of scanners GE offered, and he set about acquiring 60 smaller companies that offered a broad range of products. Ultrasound, digital x–ray machines, and software all became a part of GE Medical System's product line. The numerous innovations introduced under Immelt include the first digital mammogram system and the LightSpeed CT, a CAT scan machine capable of cutting the diagnosis of trauma patients to just seconds, rather that the minutes required by earlier systems.

As Immelt moved up the corporate ladder, he earned increasing respect and admiration from GE employees and from corporate executives, including Welch. Despite his numerous achievements, Immelt was not always successful in all his endeavors. In 1994 Immelt had difficulties while running half of GE Plastics, missing the division's goals by $50 million due to rising material costs. Immelt recalled the tough period in an interview with Business Week: "I didn't move fast enough to get prices up. It was a wacky time with inflation. I knew what I had to do, and I didn't get it done. . . . At the end of the year, we had this management meeting in Boca [Raton]. I'm trying to hide from Jack for three days. He grabs me from behind. He said, 'Jeff, I want you to know, you had one of the worst jobs in the company. I think you are great. I love you. You're going to get this thing right. If you don't, you'e going to have to go.' That was great. . . . The beauty of GE is consequence. . . . Effort is encour aged, but results are what count. He wasn't telling me anything I didn't know." Ultimately, Immelt solved his problems in GE Plastics, later noting that the experience made him a better manager and a more valuable employee because he learned that he could deal successfully with difficult situations.

Chronology: Jeffrey R. Immelt

1956: Born.

1982: Hired as an internal marketing consultant at General Electric (GE).

1983: Promoted to district manager of GE Plastics.

1989: Became vice president of consumer services for GE Appliances.

1992: Appointed vice president and general manager of GE Plastics.

1997: Promoted to chief executive officer of GE's Medical Systems division.

2000: Assumed position as GE's chief executive officer.

2001: GE topped Fortune's list of Most Admired Companies for fourth consecutive year.

On November 27, 2000, GE announced that Immelt had been named GE's president and chairman–elect. Not only had Immelt attained the highest rung on the GE corporate ladder, he had been given command of the world's most admired company and was set to replace Welch, one of the world's most admired executives. Welch became chair and CEO of GE in 1981, at the age of 45—the same age as Immelt when he took over in 2001. Welch made big changes at GE, including selling the housewares business, one of the company's founding divisions, and dramatically altering the GE organizational structure. Firing more than 100,000 employees earned him the nickname Neutron Jack. Building a reputation as one of the best in the business, Welch showed impressive results. During his 20–year tenure, GE's stock rose 3,098 percent, and the company's growth rate averaged 18.9 percent (compared to 896 percent and 12.2 percent industry wide). According to Andy Serwer of Fortune, "Welch could be the Michael Jordan of management—the best who's ever played."

In February 2001, Fortune announced that GE had topped its Most Admired Companies list for the fourth year in a row: "Tireless innovation. Robust financials. The ability to lure and keep the smartest people. According to more than 4,000 businesspeople Fortune surveyed late last year, no company in the nation demonstrates such enviable qualities better than General Electric." At the end of 2000, GE's books showed $130 billion in revenue, earnings of $12.7 billion, and market capitalization close to $350 billion, making it the world's largest company. With 12 different divisions, the company produces a wide array of products, including aircraft engines, locomotive and other transportation equipment, electric distribution, nuclear reactors, plastics, kitchen and laundry appliances, lighting, and medical imaging equipment. GE Capital Services is one of the largest financial services in the United States. The National Broadcasting Network (NBC) is also owned by GE.

The decision to name Immelt the new leader of GE began in 1994 when Welch and the GE board of directors began the formal process of evaluating possible replacements after Welch retired. Each year since 1981, the board would place in an envelope the undisclosed name of the person who would replace Welch in the case of his unexpected death. However, by 1994 they were ready to step up the process. To start, Welch offered 24 possible candidates for his successor. By December 1997, the number was cut to eight, and in June 2000 the final list was cut to three remaining contenders: Immelt; James McNerney, the highly respected head of GE's aircraft engine division; and Robert Nardelli, an executive in GE's electric utilities division. The process was shrouded in secrecy; the candidates were never officially told they were being considered, although most of the company had a fair idea from the rumor mill who was in the running.

Immelt had been hailed as the front runner during most of the process, and although neither Welch nor directors will say exactly why, most analysts believe that one reason was that Immelt was 10 years younger than the other two finalists. He was also the popular choice among GE employees. Finally, on the day before Thanksgiving in 2000, Welch called a teleconference of the directors, and Immelt was officially and unanimously voted in. Determined not to let word leak out to the press or the company until the formal announcement the next Monday, Welch took extraordinary measures. After calling Immelt with the good news on Friday, Immelt and his family flew on a chartered jet (not the GE corporate jet) to meet with Welch in Palm Beach. Afraid to be seen in a restaurant celebrating, on Saturday the two families enjoyed a catered meal, but for added secrecy, it was not provided by the regular GE caterer. On Sunday, Welch boarded his jet and instructed his pilots, who thought they'd be flying to New York, to take him to Cincinnati and then to Albany, where he personally delivered the news to McNerney and Nardelli that they had not been selected. When the official announcement was made on Monday, the news had not been leaked.

Immediately after his selection, Immelt joined the board of GE and the corporate executive office. Initially, Welch was set to retire at the beginning of 2001; however, shortly after the decision was announced, GE began negotiations to acquire Honeywell, a $43 billion deal. As a result, Welch decided to postpone his retirement until January 2002 so that he could oversee the acquisition process. Although Welch was still officially in charge during 2001, he turned over many important responsibilities to Immelt, effectively giving him time to ease into the new role. On July 3, 2001, the European Commission blocked GE from purchasing Honeywell; nine days later, Welch announced that he would move his retirement date up to September 7, 2001. Despite an appeals process, on October 2, 2001, GE officially ended negotiations with Honeywell. Welch and Immelt were duly disappointed; however, some within the company who believed Honeywell was not a wise purchase expressed relief at the dissolution of the deal. On September 7, 2001, Immelt moved into Welch's recently vacated executive office and began his new job as leader of the world's largest company.

Social and Economic Impact

On September 11, just four days after Immelt officially became GE's CEO, terrorists attacked the World Trade Center and the Pentagon. With profits already falling due to a weak economy, the terrorist attacks further rocked the financial profit rates at GE. The New York Stock Exchange closed for the rest of the week; when it reopened, investors began unloading GE stock, causing stock prices to drop more than 20 percent to $30 a share. Despite the uncertainty of the time, GE stock rebounded quickly, coming back up to $35.50 a share by September 25. Nonetheless, GE is not out of the woods, and Immelt readily admits that the path before him may be difficult. Even before September 11, NBC earnings fell 15 percent in the second quarter, compared to the second quarter of 2000. Likewise, GE's lighting and appliance divisions fell off 18 percent and 22 percent, respectively, in the same time period. NBC was subjected to further risk of revenue loss of an estimated $50 million as advertising sales decreased in the slow economy.

GE Aircraft Engines had been a bright spot before September 11, posting an earnings increase of 10 percent in the second quarter of 2000. However, after the terrorist attacks, the airline industry became burdened by a lack of business, causing GE to announce the layoff of some 4,000 employees. The division's losses are expected to total $100 million in 2001 and could rise as high as 200 million in 2002. Also, GE's reinsurance unit, which insured part of the World Trade Center and the hijacked airplanes, posted a $400 million loss. Despite the setbacks, Immelt is holding GE on a steady path. Appliances, Plastics, Medical Systems, and GE Capital continue to post an acceptable profit and are expected to make up for profit loss in the other divisions.

Many analysts are waiting to see if Immelt can live up to his predecessor. So far, he has managed to maintain a good relationship with investors. After 20 years of Welch's robust, no–holds–barred approach, Immelt's quieter demeanor and easy sense of humor will be a change for those inside and outside the company. Immelt told Business Week, "My style is that I look at every business from the outside in. My framework is very much the customer and outside market. I'm decisive. I'm accountable. I have good discipline. I believe in people . . . . I love change. I love trying new things. I really bring to the job a complete growth headset. I've had great experiences in technology and globalization, running sales forces and doing acquisitions, and I bring all those things to the job."