For the latest company profile on General Electric , visit our corporate malfeasance wiki, Crocodyl.org .
Global Fortune 500 position: 11
Ownership status: Publicly traded
Number of employees worldwide: 315,000
Chief executive officer: Jeff Immelt
Corporate accountability
Accountability overview:
Enronomics
In their 2002 report, ""Titans of the Enron Economy: The 10 Habits of Highly Defective Corporations," United for a Fair Economy
gave
a "special Lifetime Achievement Award" to
General Electric "for scoring
the highest average rank across all 10 bad habits, the only company to
outrank second-place Enron. GE exceeds Enron’s score by an astonishing
45%."
Defense Contracting Fraud
On July 23, 1992, GE pled guilty in federal court to civil and
criminal charges of defrauding the Pentagon and agreed to pay $69
million to the U.S. government in fines — one of the largest defense
contracting fines ever. The company said in a statement that it took
responsibility for the actions of a former marketing employee who,
along with an Israeli Air Force General, diverted Pentagon funds to
their own bank accounts and to fund Israeli military programs not
authorized by the United States. Under the settlement with the Justice
Department over violations of the Foreign Corrupt Practices Act, GE
paid $59.5 million in civil fraud claims and $9.5 million in criminal
fines.
GE’s civil and criminal transgressions stemming from the Israeli
military program are by no means isolated. GE is a repeat offender when
it comes to Defense Department fraud. The company has repeatedly
violated the False Claims Act — a measure originally proposed by
Lincoln to protect federal coffers. When the Project on Government
Oversight surveyed defense contractors, it found that General Electric
was responsible for 15 instances of fraudulent activity in just a four
year period (1990-1994) — more than any other defense contractor.
On August 10, 1995 the U.S. Department of Justice
announced
(# 95-438) that GE would pay $7.1 million to settle a contract fraud
suit initiated by Ian Johnson, an engineer at GE's Aircraft Engines
plant in Evendale, Ohio in 1993. Johnson had alleged that GE "sold
several thousand jet engines to the military that did not comply with
military electrical bonding and electromagnetic interference testing
requirements," according to DoJ. (Subsequently, the Air Force tested
the engines and found them to be safe.) Johnson filed the suit on
behalf of the United States under the qui tam provisions of the False
Claims Act.
On January 10, 1997, the U.S. Department of Justice
announced
(# 97-012) that GE would pay $950,000 to settle allegations that it
fraudulently misrepresented that it had conducted certain test
procedures on circuit boards for hundreds of aircraft engine controls
when in fact the tests were not conducted.
GE paid $5.87 million
(along with Martin Marietta) to settle a qui tam suit associated with
improper sales of radar systems to Egypt.
GE paid fines between 1990 and 1994 ranging from a $20,000 criminal
fine to a $24.6 million civil fine for a variety of defense contracting
frauds, including: misrepresentation, money laundering, defective
pricing (2 incidents), cost mischarging (3 incidents), false claims,
product substitution, conspiracy/conversion of classified documents,
procurement fraud and mail fraud.
On July 22, 1992, GE "... [pled] guilty to diverting some $26.5 million
from the U.S. foreign military aid program used to finance General
Electric's sale of F-16 jet engines and support equipment to Israel ."
(United States v General Electric, Docket #90-CV-792, US DC SD OH,
Cincinnati) (See:
Defense Contracting: Contractor Claims for Legal Costs Associated with Stockholder Lawsuits, GAO/NSIAD-95-66
(July 1995) GE was convicted on February 3, 1990 in U.S. District Court
in Philadelphia of defrauding the government out of $10 million for a
battlefield computer system. GE pled guilty on May 19, 1985 to charges
of fraud and falsifying 108 claims on a missile contract. GE was
convicted of defrauding the Air Force out of $800,000 on the Minuteman
Missile Project.
GE was convicted of bribing the Puerto Rico Water Resources Authority.
Violations of Securities Laws
On September 24, 2004, the SEC
announced
(# 2004-135) that it had settled charges against GE for failing to
fully disclose in proxy statements issued between 1997-2002 all of the
retirement benefits granted to former CEO Jack Welch.
Labor:
History of GE Labor Relations
Radical groups like the Industrial Workers of the World won converts
at
General Electric during the First World War and staged a major
strike at the company in 1918. This upsurge of militancy was
short-lived, however. During the 1920s GE, like many other companies at
the time, indirectly discouraged independent unionization (there was a
company union) by engaging in a form of welfare capitalism. At the same
time, GE president Gerard Swope met secretly with the head of the
American Federation of Labor and said the company would accept being
organized as long as it was on an industry rather than a craft basis.
The craft-oriented AFL was not ready for such an idea.
When the Depression hit, GE instituted work-sharing plans and made
loans to its employees. Yet this was not enough. The 1930s saw the rise
of widespread industrial unionism in the electrical equipment business,
especially after the creation of the United Electrical and Radio
Workers Union (UE) in 1936. That same year GE consented to a request
from the UE for a representation election at some of the company's main
facilities. The UE won the vote and before long had much of the company
organized.
After the war the UE pushed for substantial wage improvements but in
the new Cold War climate it found itself under attack because of
charges of Communist Party influence in the union. The UE was raided by
others unions, and, after ceasing to pay dues to the CIO, the UE was
expelled from that organization. In place of the UE the CIO chartered a
new union called the International Union of Electrical, Radio, and
Machine Workers (IUE). The UE lost members to the IUE and was a target
of McCarthyism in the 1950s.
Eventually the UE and the IUE realized they needed to cooperate to
be able to confront companies like GE effectively. This was especially
important because in the 1950s the company adopted a labor relations
policy known as Boulwarism. This approach, named after labor relations
director Lemuel R. Boulware, involved making a supposedly reasonable
proposal and adamantly sticking to it rather than engaging in back and
forth negotiations. In other words, the company's initial offer was its
final offer.
The UE and IU began to cooperate in the 1960s, and after a series of
strikes in the latter part of that decade, they managed to get the
company to soften its hard line in labor relations. (A National Labor
Relations Board ruling that Boulwarism was an unfair labor practice
also helped.) Whatever progress was made was largely lost in the 1980s
as chief executive Jack Welch ruthlessly set out to eliminate jobs as
part of his restructuring of the company. Numerous unionized plants
were shut down, with the work transferred to non-union facilities in
the South or low-wage havens such as Mexico. Although GE was far from
unprofitable, the company began to demand wage and benefit concessions
or work-rule changes from those unionized workers who were not
terminated. GE workers began to make up some lost ground in national
contracts negotiated in mid-1991. The wage increases were modest, but
workers got major improvements in medical benefits.
Welch applied his same labor-squeeze policy at NBC after GE
purchased the network in 1985. Management demanded major concessions
from the National Association of Broadcast Employees and Technicians in
the 1987 contract talks, prompting a walkout by 2,800 members of the
union. After 17 weeks NABET, whose striking members were quickly
replaced by NBC, called off the strike without winning a single major
concession from the company. NBC, on the other hand, won the right to
hire temps to fill jobs previously done by regular staff members. The
network went on to eliminate hundreds of jobs and to introduce the use
of robot cameras in some of its shows.
GE also has a less than sterling labor record abroad. In 1988 the
International Metalworkers' Federation held a convention of delegates
from GE factories in 23 countries. Reports delivered at the gathering
showed that the company was depressing wages and weakening unions just
about everywhere. Some of the strongest antiunion postures were taken
by GE in Brazil and Colombia.
GE’s business model can be considered a global system of
management by stress , with the company viewing stress and the fear of job loss as the magic formula for productivity and efficiency.
Retirees
say the company has used accounting gimmicks and other means to reduce their pensions.
According to
Multinational Monitor
magazine, the Occupational Safety and Health Administration (OSHA)
cited GE for at least 858 violations of OSHA rules from 1990 through
March 2001. From 1994 to 1999, OSHA cited GE for at least 98 “serious”
violations. OSHA issues “serious” citations to companies for conditions
posing “a substantial probability that death or serious physical harm
could result.”
Employment Discrimination
A black worker at GE’s Burkville, Alabama plant filed a suit
claiming that
General Electric officials fostered a racially hostile
environment. GE reached settlements with two ex-GE employees employed
at the plant. The workers claimed they were subjected to Ku Klux Klan
symbols, swastikas and a hangman’s noose at the plant.
In 1991 GE was assessed over $ 590,000 in association with a
disability claim for its refusal to reasonably accommodate a machinist
with a back injury. A jury awarded $1.2 million in damages, which the
district court reduced to $300,000 in accordance with the statutory cap
on ADA damages. The machinist was also awarded $141,110 in front pay
and $150,837 in attorney’s fees, according to the
ADA newsletter .
For current information about GE workers, also see the
Coordinated Bargaining Committee at GE (a coalition of 13 unions) and the
UE for more information.
Environment and product safety:
Persistent concerns about
PCB contamination of the Hudson River
from two GE manufacturing plants in Hudson Falls and Fort Edward have
caused EPA to study the issue on a continuous basis since the site was
listed on the nation’s Superfund priority site list in the early 1980s.
Finally, on December 6, 2000, after 16 years of studies, proposals and
more studies, EPA announced a 5-year plan to dredge 2.65 million cubic
yards of PCB-contaminated sediment along a 40-mile stretch of the
river. The cost of EPA’s proposal to GE: $460 million. The high cost of
the cleanup has led company officials to mount one of the biggest
public relations campaigns ever waged around a toxic waste site.
Although EPA and the company
signed a Record of Decision agreement in 2002 and
numerous cleanup agreements after that, remediation is still not scheduled to begin until at least 2009. (For more information also see
Clean Up GE )
Until reaching an agreement with EPA, GE denied the problem,
sometimes with outright distortions of the truth. At an April 22, 1998
shareholder meeting, GE CEO Jack Welch claimed: “PCBs do not pose
adverse health risks.” Testifying in Albany on July 9, 1998, EPA
Administrator Carol Browner stated: “GE tells us this contamination is
not a problem. GE would have people of the Hudson River believe, and I
quote: ‘living in a PCB-laden area is not dangerous.’ But the science
tells us the opposite is true ... And concern about PCBs goes beyond
cancer ... The science has spoken: PCBs are a serious threat...”
PCBs from GE have also contaminated the
Housatonic River in Connecticut, as well as in or near the
Coosa River Basin in Georgia (
traced to GE's Rome, Georgia plant).
On May 30, 2003 US EPA
announced
that GE would pay a $ 94,380 penalty to settle a TSCA enforcement
action related to the improper storage of PCBs at its Pittsfield, MA
facility.
Other Pollution Issues
On March 26, 1998,
General Electric agreed to pay a $92,000 fine for
previous violations of environmental reporting requirements for toxic
releases at its silicone manufacturing plant in Waterford, New York,
according to EPA’s regional office. In addition, GE agreed to spend
about $112,000 to upgrade local emergency response capabilities in
surrounding communities. Between 1991 and 1996, EPA cited GE for 23
violations when toxic releases were un- or underreported. Chemicals
involved include dimethyl sulfate, chlorine, 1, 1, 1, -trichloroethane,
ammonia, and toluene.
On March 13, 1992, the Nuclear Regulatory Commission (NRC) issued a
$20,000 fine against
General Electric for violations of regulations at
the fuel fabrication plant in Wilmington, North Carolina. On May 29,
1991, GE personnel accidentally moved about 320 pounds of uranium to a
waste treatment tank. The danger of the mistake was that the size and
shape of the waste container caused unsafe concentrations of uranium,
which could have led to a nuclear accident. The NRC dispatched a
special incident investigation team the same day and an inspection
began two days later. The NRC found that the mistake was the result of
lax safety controls.
According to documents obtained by Public Citizen under the Freedom
of Information Act, GE-designed nuclear reactors around the world have
a design flaw that make it virtually certain (90 percent) that in the
event of a meltdown, radiation would be released directly into the
environment and into surrounding communities, leaving the public
without any protection. The NRC acknowledges that the reactor
containment structure in GE-built nuclear power plants does not work,
but they licensed the reactors anyway. (Also, a dozen or more
GE-designed boiling water reactors in the United States and abroad have
evidence of cracking in the reactor core shroud — a metal cylinder
surrounding the reactor’s radioactive fuel rods.)
On October 18, 2004, the California Department of Pesticide
Registration announced that it would seek $202,959 in penalties for
violations by GE's Betz Water business of the State of California’s
pesticide registration requirements. The matter was ultimately settled
in 2005 for $120,916, GE later explained in a
letter to the Project on Government Oversight.
In August, 1996 the Florida Department of Environmental Protection
informed Greenwich Air Services that it was seeking penalties of
$278,555 for violations of the state's hazardous waste law at its Miami
facility (the facility was subsequently acquired as a portion of GE's
purchase of Greenwich which was consummated in September 1997).
According to GE (10-K filed in March 1998), the matter was tentatively
settled for $36,270 plus a pledge to perform a supplemental wastewater
treatment project.
Human rights:
In
1995, a Presidential Advisory Commission revealed details of GE’s human
experiments with nuclear radiation. GE ran the Hanford Nuclear
Reservation in Richland, Washington as part of the U.S. weapons
program. Beginning in 1949,
General Electric deliberately released
radioactive material to see how far downwind it would travel. One cloud
drifted 400 miles, all the way down to the California-Oregon border,
carrying perhaps thousands of times more radiation than that emitted at
Three Mile Island.
In 1986, Representative Edward Markey, D-Massachusetts, held
hearings in which it was disclosed that the United States and General
Electric had conducted experiments on hundreds of United States
citizens who became “nuclear calibration devices for experimenters run
amok.” According to Markey: “Too many of these experiments used human
subjects that were captive audiences or populations ... considered
‘expendable’ ... the elderly, prisoners and hospital patients who might
not have retained their full faculties for informed consent.”
One of GE’s most gruesome experiments — disclosed in the Markey
hearings — was performed on inmates at a prison in Walla Walla,
Washington, near Hanford. Starting in 1963, 64 prisoners had their
scrotums and testes irradiated to determine the effects of radiation on
human reproductive organs. Although the inmates were warned about the
possibility of sterility and radiation burns, the forms said nothing
about the risk of testicular cancer. Markey’s committee heard
allegations that, at the time of the experiments, General Electric
violated both civil and criminal laws.
Anti-competitive and consumer protection:
GE
was among four companies that ended up paying New York City over $4
million in 1982 to settle a lawsuit charging that wiring and cables in
754 subway cars were defective.
In 1992 GE agreed to pay $165,000 to settle a suit brought by 11
state attorneys general alleging the company deceptively advertised its
lightbulbs. According to the state AGs, the ads promised consumers the
same amount of light for less energy, but in fact the lightbulbs simply
delivered less wattage.
GE Capital was ordered to pay $100 million for unfair debt
collection practices as part of a 1999 class-action lawsuit settlement.
The suit alleged that GE solicited agreements from bankrupt creditors
to pay their credit card agreements without notifying bankruptcy courts
of the agreements.
GE recalled 3.1 million dishwashers beginning in 1999, stating that
a side switch could melt and ignite, presenting a fire hazard. In 2002,
the CPSC
announced
that GE would pay a $1 million fine to settle allegations that the
company knowingly failed to report the defects to the CPSC. (See the
settlement agreement )
Unlawful Debt Collection Practices
On August 7, 1998, 50 States
announced
a $97 million settlement agreement with
General Electric Credit
Corporation (GECC) for unlawful debt collection practices from
consumers who declared bankruptcy, in association with private label
credit cards issued together with Montgomery Ward Credit Corporation.
Under the settlement, GECC and Montgomery Ward Credit together paid an
estimated $70 million to approximately 70,000 consumers nationwide from
whom the companies collected invalid debts. In addition, the companies
paid the states attorneys general $24.5 million. GECC also paid $3
million into a consumer education trust fund.
In April 2001, New York State AG Eliot Spitzer won a ruling in state
court that, in connection with the dishwasher recall, GE falsely told
consumers the problem could not be repaired, prodding customers with
partial rebates to buy new GE dishwashers.
A November 1998 Time magazine profile of GE concluded that “[t]here
is no starker example of the phenomenon of corporate welfare and
vanishing jobs than
General Electric Co.”
On July 14, 1998, the U.S. Department of Justice
announced
(# 98-327) a settlement with GE over anticompetitive practices
involving restrictions GE had imposed in software licenses with more
than 500 hospitals throughout the country. The restrictions prevented
the hospitals from competing with GE to service medical equipment at
other hospitals and at clinics.
Brief company history:
Summary from
World Class Business by Philip Mattera:
In 1879 Thomas Edison and his assistant Francis Jehl created the
first long-lasting incandescent light bulb. The announcement of the
device, which consisted of a carbon filament in a vacuum globe, made
the stock market go wild. The shares of gas companies, which had
dominated the energy business, plunged as investors flocked to the
Edison Electric Light Company, a start-up firm financed by J.P. Morgan
and Western Union president Hamilton Twombly.
Edison's vision of electricity transforming commerce and everyday
life captured the imagination of the country. And Edison was determined
to capture the market, both for light bulbs and for the energy needed
to illuminate them. The wizard of Menlo Park set up the Edison Electric
Illuminating Company to build the first central-station generating
plant. He shrewdly chose as his initial service area a section of
downtown Manhattan that included the financial district.
After the Pearl Street station successfully started operation in
1882, competitors rushed into the new business, both to generate
electricity and to make light bulbs. Edison's poorly written patent
application for the bulb was rejected, and the legal monopoly went to a
rival. The rights to a refined version of that bulb were scooped up by
an aggressive young inventor and entrepreneur named George
Westinghouse, who also began producing generating equipment.
Despite the early setback, Edison's company made money expanding its
service and licensing its equipment designs to others. Yet Edison the
mechanical genius was less than brilliant as a manager. He missed a
number of important opportunities and insisted on using direct current
rather than alternating current. The latter, adopted by Westinghouse
and other companies, allowed higher voltage power to be transmitted
over much longer distances. Edison held to the belief that AC was too
dangerous, and as a way of highlighting the point he urged New York
State to use a Westinghouse AC generator in building the first electric
chair.
The battle between DC and AC was only one of the many differences in
standards among the various purveyors of electricity in any given city.
The desire to resolve this problem and the quest for economies of scale
prompted numerous generating companies to merge with one another. J.P.
Morgan, the apostle of corporate consolidation, wanted to extend this
to the manufacturing of electrical equipment. He gained control over
Edison
General Electric (formed in 1889 to consolidate the Edison
holdings) and in 1892 combined it with another firm,
Massachusetts-based Thomson-Houston, to form General Electric. Edison
had no place in either the name of the new firm or its management. He
went back to his laboratory, and GE, under the leadership of Charles A.
Coffin, went on to become an industrial giant.
One of GE's major businesses was electric railways. Thomson-Houston
had brought two such operations into the combined company, and the
Edison side had included the Sprague Electric Railway and Motor Co., a
pioneer in electric streetcar systems. GE gained a great deal of
publicity by providing an elevated electric train line at the Chicago
World's Fair in 1893.
Before long GE was dominating virtually all aspects of
electrification in the United States--from generating and transmitting
power to making the trolleys, motors (including large ones for
industry), elevators, fans, and bulbs that used it. Around the turn of
the century the company developed high-speed steam turbines, and in
1903 it acquired the Stanley Electric Manufacturing Co., whose founder,
William Stanley, invented the transformer.
In 1900 GE established the country's first corporate research
facility, which, among other things, improved on Edison's light bulb
and devised the tungsten filament still in use today. In 1913 the lab
developed the first X-ray tube, thus forming the basis of GE's medical
equipment business. Later the research lab began doing early work on
plastics as a result of its research on insulation for electric wiring.
Yet the company realized that electricity would have to be employed
much more widely if its power generation and equipment operations were
going to continue growing. Thus GE began to introduce new electric
appliances, beginning with the toaster and iron in 1905. During the
1910s, GE came out with a waffle iron and an experimental household
refrigerator. In 1918 the company merged with its two major
competitors: Pacific Electric Heating Co., maker of the popular
Hotpoint iron, and Hughes Electric Heating Co., which made an electric
range. By the 1920s GE was selling an affordable household refrigerator
and soon introduced vacuum cleaners, washing machines, and other
electric devices for the home.
While GE's appliance business was blossoming, government concern
about the company's market dominance was growing. In 1924 GE and
Westinghouse were forced out of the power generating business, and a
later antitrust action forced GE to make its light bulb patent
available to competitors.
Meanwhile, GE was boldly entering new lines of business, most
notably the young field of broadcasting. Following the achievement of
the first wireless voice transmission in 1906, the radio business was
being developed by the Marconi Wireless Co. of America; GE was also
working on the technology. In 1919 the federal government was alarmed
at the attempt of American Marconi, as the subsidiary of a foreign firm
(British Marconi), to purchase certain essential patents owned by GE.
As an alternative the Wilson administration worked with GE to create a
new company called Radio Corporation of America (RCA), which absorbed
the assets of American Marconi.
RCA, essentially a subsidiary of GE with a large minority interest
owned by AT&T, was the vehicle by which a small group of companies
attempted to dominate the new industry through the pooling of
patents--so much so that soon after Westinghouse Electric entered the
arena, it was invited to join the combine, as was United Fruit, which
made use of radio to communicate with its banana boats going to and
from Central America.
Westinghouse went on to create the first commercial broadcasting
station in 1920, and soon radio stations were popping up everywhere and
people were clamoring for listening devices. Tensions among the
partners in RCA over who could do what led to a 1922 agreement that
gave the phone company the exclusive right to produce and sell radio
transmission equipment, while receiving apparatuses would be
manufactured by GE and Westinghouse and marketed by RCA. In 1926
AT&T decided to quit broadcasting in exchange for a monopoly on
wire connections between stations. That same year a new entity called
National Broadcasting Company (NBC) was formed to operate AT&T's
former stations and RCA's outlets. It was agreed that NBC--50 percent
owned by RCA, 30 percent by GE and 20 percent by Westinghouse--would
pay AT&T generous rates for guaranteed access to land-line
connections.
NBC began its network broadcasting with a November 1926 gala
production originating at the old Waldorf-Astoria Hotel in New York
City and at other sites. By early 1927 NBC had two radio networks:
NBC-Red and NBC-Blue. Although a competing operation called the
Columbia Broadcasting System (CBS) was formed in 1927, the federal
government felt that NBC was too dominant in the industry. In 1930 the
Justice Department brought antitrust charges against RCA, GE and
Westinghouse.
The industry was stunned but worked out a consent decree they could
live with. The final deal was for GE and Westinghouse to give up their
ownership interests in RCA. The latter was allowed to keep its radio
manufacturing facilities, and GE and Westinghouse would be allowed to
compete in that business after a 30-month interval.
GE kept up its stream of new products--including electric
dishwashers and fluorescent lighting--during the Depression, but with
the onset of the Second World War, the company shifted its focus to
military needs. GE produced radar systems and power plants for ships
while also building some of the first jet engines for airplanes.
After the war GE resumed production of its consumer goods, but also
branched into new areas. Among these were silicone-based sealants and
lubricants and, on a much bigger scale, nuclear power. GE produced the
first nuclear reactors for submarines and, after the federal government
opened up atomic energy to civilian purposes, nuclear reactors for
power plants. Although orders slowed down after the last American
nuclear facility was licensed in the 1970s, the company continued to
manufacture Boiling Water Reactors (BWR) for sale abroad.
During the 1950s the company was a fount of innovations: among them
were turbine engines for jet aircraft, gas turbines for electric power
generation, synthetic diamonds, and self-cleaning ovens. GE's promoted
the slogan "Progress is Our Most Important Product" and sent Ronald
Reagan around the country as a good-will ambassador.
Yet the old bugaboo of the company--antitrust--returned to torment
it. In 1961 the Justice Department indicted several dozen companies, GE
among them, for criminal price fixing in the electrical equipment
business. A couple of years before the indictments Senator Estes
Kefauver had conducted an investigation that found that GE and its
"competitors" were submitting identical bids to major customers like
the Tennessee Valley Authority. All of the defendants decided to plead
guilty to the charges. GE was fined $437,000 and ended up paying tens
of millions of dollars in damages in civil suits brought by customers.
Several company executives paid personal fines and received short jail
sentences.
In the following years the company went through a massive
reorganization, reducing the number of its operating units from some
200 to several dozen. GE also reassessed its position in the computer
industry. The company had started making mainframes in 1956 and ended
up as one of what were called the seven dwarfs trying to compete with
industry giant IBM. In 1970 GE got tired of its losses in the business
and sold out to Honeywell. GE later decided it needed a foothold in
electronics and purchased semiconductor maker Intersil (though it was
sold in 1988). As some of GE's core businesses--especially nuclear
reactors--went into a slump in the 1970s, the company made a bold
diversification move. It spent more than $2 billion in 1976 to acquire
Utah International, a natural resources company involved in oil,
uranium, copper, coal, and other minerals.
Utah added substantially to GE's earnings, but the larger company
was still in something of a rut when Jack Welch took over as chief
executive in 1981. The go-getter Welch set out to do something about
that, vowing to retain only those businesses in which GE was number one
or two. Over the next decade he sold and bought scores of operations.
In the course of this shake-up Welch eliminated some 100,000 jobs,
earning him the nickname "Neutron Jack." Among those businesses
divested was Utah International, which (except for its Ladd Petroleum
unit in the United States) was sold in 1984 to Australia's Broken Hill
Proprietary. The houseware division (toasters, irons, etc.) went to
Black & Decker. On the acquisition side, Welch made several
dramatic moves. In 1985, amid a merger wave in the media, he agreed to
spend $6.3 billion to purchase RCA and its subsidiary NBC, one of the
big three television networks.
After GE had given up its interest in RCA in the 1930s the company,
under the leadership of "General" David Sarnoff, played an important
role in the development of television technology and became a leading
military and civilian electronics producer, though like GE it abandoned
the computer business. In the period before the GE buyout it was
suffering from instability in its top ranks. Its NBC subsidiary, which
in the 1940s was pressured by the federal government to sell one of its
two radio networks (giving rise to the third network, ABC), moved
aggressively into television in the 1950s, though it was later
overshadowed in that medium by CBS. It was not until the 1980s, when
the legendary programmer Grant Tinker took over, that the network was
able to rise toward the top in the ratings war.
In addition to taking on RCA, GE got more heavily involved in
financial services. The
General Electric Credit Corp., founded decades
earlier in order to help consumers finance the purchase of GE
refrigerators, had come into its own in the 1980s by plunging into
areas such as leasing. To this GE first added Employers Reinsurance
Corp., bought from Texaco for more than $1 billion in 1984. Two years
later GE went Wall Street by purchasing 80 percent of the investment
banking firm Kidder, Peabody & Co. for $600 million. During the
early 1980s Kidder, founded in the mid-19th Century, was propelled to
the top ranks of the mergers & acquisitions game by hot-shot Martin
Siegel, yet in the overall securities business it ranked only number 15.
Welch also resumed some of his housecleaning, extending the process
of the assets of RCA. In 1987 he sold the combined GE-RCA business in
consumer electronics (televisions, VCRs, etc.) to the French firm
Thomson SA for cash (somewhere between $500 million and $1 billion)
plus that company's medical diagnostic operations, adding to GE's
existing strong position in that business. Thomson arranged to go on
using the GE brand name.
Since the 1986 GE has had to contend with a boycott of its products
launched by the organization INFACT to protest the company's
involvement in nuclear weapons production. INFACT later extended its
boycott to GE's medical products and succeeded in getting several major
institutions to cancel orders for expensive diagnostic equipment.
In 1989 GE added a new dimension to one of its oldest businesses by
agreeing to purchase 50 percent (later increased to 75 percent) of the
Hungarian lighting company Tungsram for $150 million. Two years later
GE took another step in Europe by acquiring the light bulb business of
Thorn EMI for $360 million.
While Welch was admired for massively increasing GE's market
capitalization (the value of GE’s shares grew from about $12 billion
when he took over in 1981 to just under $500 billion twenty years
later), he was also criticized for his ruthless management style.
During Welch's tenure, the shape of the corporate conglomerate also
changed. By 2001 GE Capital -- a wholly owned subsidiary and financial
arm of the company, involved in more than a dozen finance businesses
including insurance, commercial lending, real estate, etc. -- was the
world’s largest finance operation. GE Capital is the largest owner of
aircraft, and manage more credit cards than American Express. GE
Capital grew in importance from 8 percent of the company’s total
earnings when Welch took over in 1981 to about 50 percent around the
time of his retirement. The wider profit margins stimulated the
company's shift from manufacturing to finance.
Author Thomas O'Boyle
says
that "until 1986 GE was the number one patentee of inventions every
year in the twentieth century among all U.S. corporations, every year
from 1900 to 1986. Now they’re not even in the top 20."
Financial information
Total revenue: $163.391 billion
Net Income: $20.829 billion
Sources
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