Does GE gain by lending the White House its CEO?

January 21, 2011

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

When the  president asks for help it would be difficult for even the busiest corporate chief to say no. It’s even harder when he owes the federal government a big favor. And so it is that Jeffrey Immelt, General Electric’s longstanding boss, is heading to Washington to advise Barack Obama on how to make the United States a job-creating colossus again.

Shareholders, already cheered by GE’s stellar fourth-quarter earnings, including a strong showing by its troublesome GE Capital unit, don’t seem bothered that Immelt will have to divert some of his attention to the president’s agenda. After all, many of the objectives — such as bolstering America’s manufacturing might and promoting access to foreign markets — dovetail nicely with GE’s own global industrial businesses.

But it’s a matter of timing. While GE’s share price has nearly tripled from the dark days of the financial crisis, it’s still around 50 percent off the highs seen before the investors panicked about dodgy investments made by the conglomerate’s finance unit. Immelt should be credited with steering the company — with generous support from the government through debt guarantees and short-term loans — in the right direction. But he also failed to avert GE’s falling into a precarious state to begin with.

Gaining access to the  president’s ear has its advantages, and there’s a long history of executives, including former GE officials, advising a commander-in-chief while continuing to run their own firms. Yet the current climate carries a distinctive disadvantage: backlash from the public if it suspects the relationship is too cozy. Angry voters could make it difficult to focus on business — just ask Goldman Sachs.

And GE still needs its best minds focused on business. To Immelt’s credit, investors spend much less time worrying about the finance unit, which knocked its mammoth parent to its knees two years ago. He’s committed to cutting it down to a more manageable size by 2012 and making it less dependent on short-term financing.

But GE shareholders, especially those who stuck with the company through its darkest days and are still nursing losses, deserve a committed captain. Should Immelt appear stretched too thin, they’d be right in demanding he choose between one job and the other.

Comments

The outcomes should be interesting to say the least and well worth tracking over the months to come…

Posted by Buse | Report as abusive
 

OK now I did read in the Washington Post that Immelt was being allowed to lobby as long as he declared it. This is a win/win situation because other CEOs are more likely to listen to Immelt than most other CEOs.
As far as him getting the company into trouble with the financial division I would remind you that Securities had a system known as underwriting that was supposed to have rules to be followed to assure only reasonable risks were taken. GE along with many others never dreamed all the underwriters as well as the rating company would cheat. If we had prosecuted everyone involved in the Great Recession we would have had America declaring bankruptcy.

Posted by Powerpeace | Report as abusive
 

Bingo. Warren Buffett and I want our money back. Between Nardelli and Immelt the ‘Deep Bench’ that was GE’s legacy from Welch has definitely underwhelmed.

Posted by ARJTurgot2 | Report as abusive
 

It will be great for GE. It will probably win few hefty contracts from India, China, Brazil or another growing economy. It does not hurt to help your country and be close to the President.

Posted by MAGICBOX | Report as abusive
 

Corporate GE well might.

The White House will likely gain too — in going yet further to show how Pro Business they are; to do a lot more of that, Obama would have to declare he was switching to be a Republican. (Being a Corpracrat — based on his appointments — he is almost as far that way as he can be; in the Democratic Party.)

Too bad the workers in either the United States, and maybe not anyplace, will benefit as much. How many more jobs is GE going to create in 2011, where?

The GE stockholders might not do so well. Unless somebody in Washington D.C., or someplace, actually does something to help stimulate demand, and in turn drive employment up, that drives yet more demand, … well …

You can only squeeze out so much profit by trimming expenses. When you can’t grow the top line, GAME OVER!

When everybody in every country drops to slave wages, how the heck is that going to support enough demand to support the major corporations world-wide?

Someday, we will all discover, that when nearly everybody lives in abject poverty, there really isn’t, then, a whole lot of prosperity left for anybody whatsoever!

The Third World has know that for year. It will come as SUCH a chock to the Developed World!!

Posted by MadAsHell2 | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/