1 00:00:04,240 --> 00:00:07,240 Speaker 1: Welcome to tech Stuff, a production of I Heart Radios, 2 00:00:07,320 --> 00:00:13,960 Speaker 1: How Stuff Works. Hey there, and welcome to tech Stuff. 3 00:00:14,080 --> 00:00:17,200 Speaker 1: I'm your host, Jonathan Strickland. I'm an executive producer with 4 00:00:17,239 --> 00:00:19,120 Speaker 1: How Stuff Works and I Heart Radio and I love 5 00:00:19,200 --> 00:00:23,079 Speaker 1: all things tech. And we have come to the end 6 00:00:23,280 --> 00:00:27,080 Speaker 1: of our journey covering the history of General Electric up 7 00:00:27,120 --> 00:00:30,520 Speaker 1: to today, and just a heads up, this episode is 8 00:00:30,520 --> 00:00:33,839 Speaker 1: going to focus a lot on the business side of 9 00:00:33,920 --> 00:00:38,080 Speaker 1: General Electric rather than the tech side of General Electric. 10 00:00:38,560 --> 00:00:41,120 Speaker 1: I could have ended the series with the last episode 11 00:00:41,320 --> 00:00:44,120 Speaker 1: as far as the technological innovations go. Now, that's not 12 00:00:44,159 --> 00:00:47,800 Speaker 1: to say GE hasn't continued to innovate in the post 13 00:00:48,040 --> 00:00:51,680 Speaker 1: Jack Welch era, but rather that the innovations the company 14 00:00:51,760 --> 00:00:57,040 Speaker 1: is most known for span the previous one hundred years 15 00:00:57,120 --> 00:01:00,880 Speaker 1: of its existence. The last twenty year is the most recent. 16 00:01:00,920 --> 00:01:05,360 Speaker 1: Twenty years have been more marked with controversy and business 17 00:01:05,400 --> 00:01:08,960 Speaker 1: practices and market issues, and I think it's important to 18 00:01:09,000 --> 00:01:12,720 Speaker 1: understand what's happened since two thousand one because g has 19 00:01:12,720 --> 00:01:17,840 Speaker 1: been such an incredibly important part of the modern technological landscape. 20 00:01:18,160 --> 00:01:21,400 Speaker 1: I mean, that's one of the main companies that helped 21 00:01:21,920 --> 00:01:25,560 Speaker 1: spread the electrical infrastructure in the United States. You know, 22 00:01:25,640 --> 00:01:29,119 Speaker 1: without GE, it would have taken much longer for that 23 00:01:29,160 --> 00:01:31,920 Speaker 1: to have happened, and the world would be very different 24 00:01:32,040 --> 00:01:35,960 Speaker 1: today if GE had not existed. But in the last episode, 25 00:01:36,319 --> 00:01:39,200 Speaker 1: I told you guys about Jack Welch, the g E 26 00:01:39,360 --> 00:01:44,000 Speaker 1: CEO who pushed the company to incredible profitability, mainly by 27 00:01:44,040 --> 00:01:47,760 Speaker 1: selling off businesses where General Electric wasn't in first or 28 00:01:47,840 --> 00:01:50,920 Speaker 1: second place in the industry. He sold off more than 29 00:01:51,120 --> 00:01:54,440 Speaker 1: seventy of g S businesses just in his first two 30 00:01:54,520 --> 00:01:57,600 Speaker 1: years of being CEO. He also laid off more than 31 00:01:57,720 --> 00:02:02,000 Speaker 1: one hundred thousand employees, which earned him the nickname Neutron 32 00:02:02,160 --> 00:02:05,840 Speaker 1: Jack because like a neutron bomb, he eliminated people without 33 00:02:05,960 --> 00:02:09,560 Speaker 1: damaging the assets. And he also led efforts to acquire 34 00:02:09,639 --> 00:02:14,440 Speaker 1: financial institutions like banks and insurance companies in order to 35 00:02:14,520 --> 00:02:18,040 Speaker 1: launch this financial and insurance business, and that would end 36 00:02:18,120 --> 00:02:22,160 Speaker 1: up giving g E an enormous revenue boost. It would 37 00:02:22,160 --> 00:02:26,800 Speaker 1: become incredibly important for the company in the nineteen eighties 38 00:02:26,880 --> 00:02:32,680 Speaker 1: and beyond for different reasons. Now. One exception to Welch's 39 00:02:33,040 --> 00:02:37,880 Speaker 1: amazing victories was an acquisition of a securities firm called Kidder, 40 00:02:38,080 --> 00:02:42,960 Speaker 1: Peabody and Company, which was actually an even older company 41 00:02:43,000 --> 00:02:46,400 Speaker 1: than General Electric. If you looked at the origin for 42 00:02:46,520 --> 00:02:50,600 Speaker 1: Kidder Peabody and Company, that firm traced its history all 43 00:02:50,639 --> 00:02:53,400 Speaker 1: the way back to eighteen sixty five, more than a 44 00:02:53,520 --> 00:02:58,440 Speaker 1: decade before even the earliest of companies that formed General Electric. 45 00:02:58,919 --> 00:03:03,079 Speaker 1: Welch led the acquisition effort in nineteen six, but then 46 00:03:03,120 --> 00:03:07,239 Speaker 1: there were a series of scandals centered around insider trading 47 00:03:07,600 --> 00:03:10,320 Speaker 1: that brought a lot of suspicion and scrutiny on Kider 48 00:03:10,360 --> 00:03:15,160 Speaker 1: Peabodies business and therefore g E Capital the financial division 49 00:03:15,280 --> 00:03:19,000 Speaker 1: of General Electric, and a year after the acquisition, the 50 00:03:19,080 --> 00:03:23,840 Speaker 1: global stock markets crashed on October nineteenth seven and what 51 00:03:23,960 --> 00:03:27,920 Speaker 1: was called Black Monday. The combination of events convinced Welch 52 00:03:28,080 --> 00:03:32,200 Speaker 1: that he had made an error in judgment acquiring Kidder Peabody, 53 00:03:32,280 --> 00:03:36,600 Speaker 1: and it took several more years and more scandals centering 54 00:03:36,600 --> 00:03:41,160 Speaker 1: on Kidder Peabodies record keeping and allegations of reporting false profits, 55 00:03:41,360 --> 00:03:44,880 Speaker 1: but GE would eventually sell Kidder Peabody off at a 56 00:03:45,080 --> 00:03:49,480 Speaker 1: huge loss. Now that embarrassment aside, GE for the most 57 00:03:49,520 --> 00:03:52,960 Speaker 1: part did very well in the eighties and nineties. The 58 00:03:53,000 --> 00:03:57,000 Speaker 1: stock price for g E rose four thousand percent. Some 59 00:03:57,120 --> 00:03:59,880 Speaker 1: sources state that when you take all the factors into consideration, 60 00:04:00,160 --> 00:04:04,360 Speaker 1: it was more like five thousand two. Under Welch's command, 61 00:04:04,840 --> 00:04:07,320 Speaker 1: he put off his retirement in order to secure an 62 00:04:07,320 --> 00:04:10,920 Speaker 1: acquisition of Honeywell International. If you listen to my last episode, 63 00:04:11,320 --> 00:04:15,120 Speaker 1: you know that didn't go well. The European Commission denied 64 00:04:15,320 --> 00:04:19,440 Speaker 1: the merger for anti competitive reasons, and the man who 65 00:04:19,560 --> 00:04:22,320 Speaker 1: hated to lose, Jack Welch, had to go out on 66 00:04:22,360 --> 00:04:25,800 Speaker 1: a down note. But compared to GE, you could say 67 00:04:25,880 --> 00:04:29,159 Speaker 1: Jack Welch got off easy. Now, this episode will cover 68 00:04:29,240 --> 00:04:33,040 Speaker 1: what happened to General Electric since two thousand one, including 69 00:04:33,080 --> 00:04:36,880 Speaker 1: the events that would create massive problems for the huge company. 70 00:04:37,240 --> 00:04:40,120 Speaker 1: And there is ongoing disagreement as to whether most of 71 00:04:40,120 --> 00:04:43,800 Speaker 1: the blame should fall on Welch's successor, or if Welch 72 00:04:43,880 --> 00:04:48,000 Speaker 1: himself should shoulder some of that responsibility or some other party. 73 00:04:48,080 --> 00:04:52,440 Speaker 1: So what the heck actually happened? Well, first, let me 74 00:04:52,480 --> 00:04:55,520 Speaker 1: talk a little bit about g S stock, because that's 75 00:04:55,520 --> 00:04:58,040 Speaker 1: going to come back around later in this episode. A 76 00:04:58,040 --> 00:05:01,520 Speaker 1: few times. So, for years, g E paid out a 77 00:05:01,560 --> 00:05:05,279 Speaker 1: dividend on its stock. Not all companies do this, and 78 00:05:05,320 --> 00:05:08,040 Speaker 1: a dividend is a payment that a company makes to 79 00:05:08,160 --> 00:05:11,760 Speaker 1: distribute some of its revenue to its shareholders. So a 80 00:05:11,800 --> 00:05:14,880 Speaker 1: company makes money and then distributes some of that money 81 00:05:14,920 --> 00:05:17,800 Speaker 1: amongst the people who hold shares in the company. It's 82 00:05:17,880 --> 00:05:21,560 Speaker 1: usually not very much per share. In fact, it's typically 83 00:05:21,640 --> 00:05:25,520 Speaker 1: less than a dollar. Gees case, it was around thirty 84 00:05:25,560 --> 00:05:28,400 Speaker 1: one cents for a long time. In the US, there 85 00:05:28,440 --> 00:05:31,520 Speaker 1: are no rules about how frequently a company actually pays 86 00:05:31,520 --> 00:05:35,280 Speaker 1: out dividends. Most companies will do it quarterly, so you 87 00:05:35,279 --> 00:05:39,120 Speaker 1: would get one quarter of your dividend four times a year. 88 00:05:39,279 --> 00:05:41,839 Speaker 1: So if it was a dividend of forty cents, that 89 00:05:41,880 --> 00:05:44,200 Speaker 1: means every three months you would get a check for 90 00:05:44,279 --> 00:05:46,960 Speaker 1: ten cents for every share you own. So it's not 91 00:05:47,080 --> 00:05:49,000 Speaker 1: very much, but if you own a lot of shares, 92 00:05:49,040 --> 00:05:52,640 Speaker 1: it starts to add up. And besides distributing revenue, it's 93 00:05:52,720 --> 00:05:57,200 Speaker 1: also meant to incentivize shareholders to reinvest and buy more 94 00:05:57,320 --> 00:06:00,920 Speaker 1: shares of stock in that company. So the idea is, oh, 95 00:06:01,120 --> 00:06:03,240 Speaker 1: you got a dividend payout, it's enough for you to 96 00:06:03,279 --> 00:06:05,479 Speaker 1: buy another share in the company, so you spend that 97 00:06:05,560 --> 00:06:09,920 Speaker 1: dividend buying another share. That's the logic there. Well, when 98 00:06:09,960 --> 00:06:14,960 Speaker 1: Welch first took over g E stock wasn't doing so great, 99 00:06:15,360 --> 00:06:18,520 Speaker 1: it wasn't super high. A lot of investors thought of 100 00:06:18,560 --> 00:06:22,479 Speaker 1: the stocks as essentially a dividend payout and not much else. 101 00:06:22,600 --> 00:06:25,480 Speaker 1: So you wouldn't buy g E stocks with the idea 102 00:06:25,520 --> 00:06:28,440 Speaker 1: of selling them at a higher price later on the road. 103 00:06:28,560 --> 00:06:31,120 Speaker 1: You know, you weren't thinking, I'm gonna buy now, because 104 00:06:31,279 --> 00:06:34,120 Speaker 1: in five or ten years this stock is going to 105 00:06:34,200 --> 00:06:36,839 Speaker 1: be worth two or three times as much. You bought 106 00:06:36,920 --> 00:06:40,120 Speaker 1: g E stock because it paid out a dividend, so 107 00:06:40,600 --> 00:06:42,840 Speaker 1: it would take a long time, but you would eventually 108 00:06:42,920 --> 00:06:46,000 Speaker 1: make more money than you invested if that dividend were 109 00:06:46,040 --> 00:06:50,080 Speaker 1: to hold steady. Now, when Welch took over, the stock 110 00:06:50,120 --> 00:06:53,080 Speaker 1: price actually dipped a little bit after he had been 111 00:06:53,160 --> 00:06:56,120 Speaker 1: running GE for a year or two, But another year 112 00:06:56,200 --> 00:06:59,599 Speaker 1: later the entire stock market took a turn and it 113 00:06:59,600 --> 00:07:02,360 Speaker 1: started climb and value. This would be the beginning of 114 00:07:02,800 --> 00:07:06,560 Speaker 1: eighteen years of a climbing market, a bull market. In 115 00:07:06,600 --> 00:07:10,240 Speaker 1: other words, even with events like Black Monday in Night 116 00:07:10,400 --> 00:07:13,040 Speaker 1: seven taken into account, so you had moments where the 117 00:07:13,080 --> 00:07:16,280 Speaker 1: market was not bullish, where it was crashing, but it 118 00:07:16,280 --> 00:07:20,920 Speaker 1: would recover and then go back on its bullish route trajectory. 119 00:07:20,920 --> 00:07:24,920 Speaker 1: If you will now, collectively the SMP five hundred index 120 00:07:25,680 --> 00:07:29,520 Speaker 1: it would climb by two thousand and this was the 121 00:07:29,560 --> 00:07:32,440 Speaker 1: same time that we started seeing packages like four oh 122 00:07:32,440 --> 00:07:36,960 Speaker 1: one K plans replaced traditional retirement plans. Now that meant 123 00:07:37,480 --> 00:07:41,120 Speaker 1: that stock market performance would become far more important to 124 00:07:41,320 --> 00:07:44,600 Speaker 1: weigh more people. Like in the old days, it was 125 00:07:44,640 --> 00:07:47,600 Speaker 1: just people who traded in stocks, and largely it was 126 00:07:47,640 --> 00:07:50,440 Speaker 1: a lot of businesses that did that trading. Your average 127 00:07:50,440 --> 00:07:53,800 Speaker 1: person didn't play the stock market that much. But now 128 00:07:53,960 --> 00:07:58,400 Speaker 1: stuff like our retirement was tied directly into stock market performance. 129 00:07:58,680 --> 00:08:03,080 Speaker 1: So suddenly everybody was really really focusing on the stock market, 130 00:08:03,760 --> 00:08:07,040 Speaker 1: and it meant that it became far more important for 131 00:08:07,080 --> 00:08:10,360 Speaker 1: stocks to do well. See before the nineteen eighties, stock 132 00:08:10,440 --> 00:08:13,600 Speaker 1: market performance was you know, it was an indicator of 133 00:08:13,640 --> 00:08:16,560 Speaker 1: a company's overall health, but most people didn't consider it 134 00:08:16,840 --> 00:08:20,920 Speaker 1: the metric against which all companies should stand. You would 135 00:08:20,960 --> 00:08:23,840 Speaker 1: worry more about the company's profitability, how much revenue is 136 00:08:23,880 --> 00:08:26,400 Speaker 1: it bringing in, how much does it cost to do business, 137 00:08:26,480 --> 00:08:29,640 Speaker 1: and how much profit is the company making. The share 138 00:08:29,680 --> 00:08:33,040 Speaker 1: price wasn't as big a deal. That changed around the 139 00:08:33,080 --> 00:08:35,800 Speaker 1: same time that Welch took over at g E and 140 00:08:35,840 --> 00:08:39,920 Speaker 1: Welch's philosophy happened to match this general shift in how 141 00:08:40,000 --> 00:08:43,720 Speaker 1: businesses operated in the United States. Now. I don't say 142 00:08:43,720 --> 00:08:48,160 Speaker 1: this to diminish Welch's contributions or GEES performance, because the 143 00:08:48,200 --> 00:08:53,360 Speaker 1: company's own stock outperformed the general market significantly. But I 144 00:08:53,400 --> 00:08:57,000 Speaker 1: do also want to take the overall market performance into consideration, 145 00:08:57,160 --> 00:09:00,000 Speaker 1: because while I don't want to take any credit away, 146 00:09:00,200 --> 00:09:02,720 Speaker 1: I also don't want to give too much credit to 147 00:09:03,280 --> 00:09:07,960 Speaker 1: Welch and his impact beyond what it actually was. Anyway, 148 00:09:08,120 --> 00:09:11,360 Speaker 1: as the market improved, and as g S performance in 149 00:09:11,400 --> 00:09:15,920 Speaker 1: particular made its stock price rocket upwards, ge stocks were 150 00:09:15,960 --> 00:09:19,680 Speaker 1: seen as more than just a dividend payout. The company 151 00:09:19,720 --> 00:09:22,559 Speaker 1: continued to pay dividends, though, which again is going to 152 00:09:22,600 --> 00:09:25,840 Speaker 1: be important later. Those dividends were largely funded by the 153 00:09:25,920 --> 00:09:30,439 Speaker 1: incredible performance of g E Capital, that's the financial services 154 00:09:30,520 --> 00:09:34,559 Speaker 1: division of General Electric. In the last year of Welch's 155 00:09:34,640 --> 00:09:39,880 Speaker 1: tenure as CEO, GEES stock price did take several hits, 156 00:09:40,040 --> 00:09:43,360 Speaker 1: but then so did just about everybody else. In March 157 00:09:43,440 --> 00:09:46,840 Speaker 1: two thousand, the stock markets performance shifted. It was no 158 00:09:46,920 --> 00:09:50,040 Speaker 1: longer bullish. It was going into a bear market, so 159 00:09:50,080 --> 00:09:54,320 Speaker 1: instead of growing, it was receding. The Dot com bubble 160 00:09:54,440 --> 00:09:56,960 Speaker 1: had crashed, and that caused a bit of a stock 161 00:09:57,000 --> 00:10:00,360 Speaker 1: market crisis. Companies that were in the dot com in dustry, 162 00:10:00,480 --> 00:10:03,480 Speaker 1: obviously they suffered the most. Many of them just were 163 00:10:03,520 --> 00:10:06,959 Speaker 1: blinking out of existence after it became clear that those 164 00:10:07,000 --> 00:10:09,640 Speaker 1: companies had no way to deliver upon the promises that 165 00:10:09,679 --> 00:10:12,880 Speaker 1: they were making or to be able to justify the 166 00:10:13,040 --> 00:10:17,560 Speaker 1: crazy speculation that drove their stock prices into the stratosphere 167 00:10:17,559 --> 00:10:19,960 Speaker 1: before the companies had even figured out how to generate 168 00:10:20,000 --> 00:10:24,280 Speaker 1: ascent in revenue. But even companies like General Electric, which 169 00:10:24,320 --> 00:10:30,600 Speaker 1: were traditional, established, giant conglomerate companies, were affected by this 170 00:10:30,760 --> 00:10:33,679 Speaker 1: change in the market. Between March two thousand and when 171 00:10:33,720 --> 00:10:37,120 Speaker 1: Welch would hand over the CEO role to his successor, 172 00:10:37,480 --> 00:10:41,000 Speaker 1: Jeff Emilt, in early September two thousand one, the stock 173 00:10:41,040 --> 00:10:44,400 Speaker 1: price for GE had fallen by twenty four percent. Now 174 00:10:44,440 --> 00:10:48,120 Speaker 1: I point that out because often the simplified story about 175 00:10:48,160 --> 00:10:52,240 Speaker 1: what happened to GE was that Jack Welch stepped down 176 00:10:52,440 --> 00:10:55,680 Speaker 1: and Imilt fumbled the ball, that Emilt was a terrible 177 00:10:55,679 --> 00:10:59,559 Speaker 1: CEO and he could not follow Welch's lead. But in reality, 178 00:10:59,800 --> 00:11:03,040 Speaker 1: I think the story is far more nuanced, and we 179 00:11:03,120 --> 00:11:06,199 Speaker 1: have to remember that the market itself was changing during 180 00:11:06,240 --> 00:11:09,679 Speaker 1: this transition. It wasn't the case of Emilt being handed 181 00:11:09,800 --> 00:11:12,920 Speaker 1: a profitable company on a silver platter and nothing was 182 00:11:12,960 --> 00:11:16,920 Speaker 1: going wrong and he just messed it up from there. Uh. 183 00:11:16,960 --> 00:11:19,160 Speaker 1: He did make a ton of decisions that would not 184 00:11:19,240 --> 00:11:21,240 Speaker 1: turn out to be great for GE. So I don't 185 00:11:21,240 --> 00:11:24,880 Speaker 1: want to diminish his responsibility either. I just think it's 186 00:11:25,080 --> 00:11:28,920 Speaker 1: important for us to take all these factors into consideration. Okay. 187 00:11:28,960 --> 00:11:32,320 Speaker 1: So Welch stepped down on September six, two thousand one. 188 00:11:32,360 --> 00:11:35,640 Speaker 1: Emil took over on September seven, and four days later, 189 00:11:35,960 --> 00:11:38,720 Speaker 1: the United States was rocked by a series of terrorist 190 00:11:38,800 --> 00:11:43,040 Speaker 1: attacks that shook the country to its core. Those effects 191 00:11:43,040 --> 00:11:48,559 Speaker 1: were widespread. The tragedy touched thousands of people directly, tens 192 00:11:48,600 --> 00:11:52,760 Speaker 1: of thousands millions of people indirectly. It transformed the New 193 00:11:52,840 --> 00:11:56,600 Speaker 1: York City Escape permanently, and it caused disruption in the 194 00:11:56,640 --> 00:12:00,120 Speaker 1: markets as well. Wall Street made the decision to not 195 00:12:00,320 --> 00:12:03,800 Speaker 1: open the New York Stock Exchange the morning of September eleven, 196 00:12:03,960 --> 00:12:07,480 Speaker 1: two thousand one, fearing that the terrorist attacks would prompt 197 00:12:07,600 --> 00:12:12,959 Speaker 1: panic selling amongst shareholders, making a truly horrible situation even 198 00:12:13,040 --> 00:12:16,760 Speaker 1: more dire both the New York Stock Exchange and the 199 00:12:16,880 --> 00:12:22,600 Speaker 1: NASDAC would remain closed until September two thousand one. When 200 00:12:22,679 --> 00:12:26,400 Speaker 1: trading resumed, the market fell by nearly seven hundred points. 201 00:12:26,720 --> 00:12:30,080 Speaker 1: That was a decline of almost mobile actually more than 202 00:12:30,440 --> 00:12:33,920 Speaker 1: seven per cent, and that was just the first day 203 00:12:33,960 --> 00:12:38,240 Speaker 1: of trading. Losses actually continued throughout that week. I hate 204 00:12:38,320 --> 00:12:42,240 Speaker 1: even talking about this, but it is important in order 205 00:12:42,280 --> 00:12:45,920 Speaker 1: for us to understand ges story. At this stage in 206 00:12:45,960 --> 00:12:51,120 Speaker 1: the company's history, business philosophies had changed significantly in the 207 00:12:51,200 --> 00:12:54,400 Speaker 1: United States in the nineteen eighties and nineteen nineties. We 208 00:12:54,440 --> 00:12:58,360 Speaker 1: had created a new environment where share value was the 209 00:12:58,400 --> 00:13:02,000 Speaker 1: most important metric for a business, the company's stock price. 210 00:13:02,440 --> 00:13:05,400 Speaker 1: If the stock price was going up, that was good. 211 00:13:05,960 --> 00:13:09,080 Speaker 1: That was pretty much the end all be all. A 212 00:13:09,120 --> 00:13:12,320 Speaker 1: company wasn't thought of doing well unless it's stock price 213 00:13:12,440 --> 00:13:15,959 Speaker 1: was growing year over year, or at least the overall 214 00:13:16,040 --> 00:13:18,720 Speaker 1: value of the company when you take in at stock. 215 00:13:18,800 --> 00:13:22,079 Speaker 1: Because of course, companies can do things like stock splits 216 00:13:22,160 --> 00:13:25,079 Speaker 1: so that the price of an individual shriff stock goes down. 217 00:13:25,520 --> 00:13:28,280 Speaker 1: But because you've doubled the number of stocks or a 218 00:13:28,360 --> 00:13:30,840 Speaker 1: number of shares, I should say, out on the market, 219 00:13:30,960 --> 00:13:33,880 Speaker 1: the value of the company itself remains stable and can 220 00:13:33,960 --> 00:13:37,559 Speaker 1: continue to grow. This drove a lot of business decisions 221 00:13:37,600 --> 00:13:42,040 Speaker 1: that put shareholders above just about everything else in the company, 222 00:13:42,120 --> 00:13:45,400 Speaker 1: including customers. Now, in my opinion, it's one of the 223 00:13:45,440 --> 00:13:50,439 Speaker 1: biggest economic mistakes made in recent decades, as it has 224 00:13:50,480 --> 00:13:54,520 Speaker 1: created a world in which many company executives focus very 225 00:13:54,600 --> 00:13:58,480 Speaker 1: much on the short term to mid term gains as 226 00:13:58,559 --> 00:14:02,640 Speaker 1: opposed to long term strategies. So often I think companies 227 00:14:02,679 --> 00:14:06,840 Speaker 1: are making choices that hurt the company's chances to survive 228 00:14:06,920 --> 00:14:09,960 Speaker 1: in the long term, all in an effort to drive 229 00:14:10,000 --> 00:14:15,079 Speaker 1: that stock market price further up. Anyway, this disaster impacted 230 00:14:15,120 --> 00:14:19,280 Speaker 1: gees stock price along with countless other companies, and you 231 00:14:19,400 --> 00:14:23,440 Speaker 1: can't lay that blame on Emilt. It's not his fault 232 00:14:23,800 --> 00:14:28,160 Speaker 1: that this series of awful attacks happened four days after 233 00:14:28,240 --> 00:14:31,160 Speaker 1: he took control of the company. In the wake of 234 00:14:31,240 --> 00:14:35,560 Speaker 1: nine eleven, all airline operations in the United States stopped 235 00:14:35,680 --> 00:14:39,160 Speaker 1: for several days. That had a direct impact on gees business, 236 00:14:39,160 --> 00:14:42,080 Speaker 1: which included building stuff like jet engines for the airlines 237 00:14:42,520 --> 00:14:46,800 Speaker 1: and also leasing out parts for various companies. All of 238 00:14:46,800 --> 00:14:49,320 Speaker 1: that was put on hold. On top of that, gees 239 00:14:49,440 --> 00:14:53,560 Speaker 1: insurance business was suddenly inundated with claims which the company 240 00:14:53,640 --> 00:14:56,160 Speaker 1: had to make good on. For one thing, GE was 241 00:14:56,200 --> 00:14:59,920 Speaker 1: responsible for the insurance policy for the World Trade Center, which, 242 00:15:00,080 --> 00:15:03,080 Speaker 1: as I'm sure you all know, lost the two towers 243 00:15:03,360 --> 00:15:06,400 Speaker 1: that made the center iconic back in two thousand one 244 00:15:06,400 --> 00:15:09,600 Speaker 1: as a result of those attacks. Prior to September eleven, 245 00:15:10,080 --> 00:15:12,880 Speaker 1: it wasn't unusual for GE to lean a bit heavily 246 00:15:13,040 --> 00:15:17,400 Speaker 1: on GE capital to kind of smooth things over. The 247 00:15:17,440 --> 00:15:20,600 Speaker 1: branch was so profitable, that division of GE was so 248 00:15:20,720 --> 00:15:24,680 Speaker 1: profitable that could help conceal if another division weren't quite 249 00:15:24,880 --> 00:15:29,440 Speaker 1: doing so well. A lot of gees accounting practices have 250 00:15:29,680 --> 00:15:33,160 Speaker 1: over the years been called opaque, meaning that you might 251 00:15:33,280 --> 00:15:36,240 Speaker 1: get the end result of how well the overall company 252 00:15:36,320 --> 00:15:39,480 Speaker 1: is doing, but you might not know how it got there, 253 00:15:39,840 --> 00:15:42,720 Speaker 1: which divisions are doing well versus which ones are not. 254 00:15:43,280 --> 00:15:46,280 Speaker 1: The overall performance of the company was what mattered, right, 255 00:15:46,360 --> 00:15:49,960 Speaker 1: So who cares what's happening in the individual divisions. Well, 256 00:15:50,040 --> 00:15:52,800 Speaker 1: Emil would get to work selling off parts of GES 257 00:15:52,840 --> 00:15:55,960 Speaker 1: insurance business, though the company would still maintain some of 258 00:15:55,960 --> 00:15:58,960 Speaker 1: that business up to present day. I'll explain more about 259 00:15:59,000 --> 00:16:01,840 Speaker 1: that in a little bit. It and he also began 260 00:16:01,880 --> 00:16:06,080 Speaker 1: to look at possible acquisitions. So what things turn out, Well, 261 00:16:06,800 --> 00:16:12,240 Speaker 1: we'll find out. But spoiler alert, no they don't. But 262 00:16:12,320 --> 00:16:14,960 Speaker 1: before I get into that, let's take a quick break. 263 00:16:22,600 --> 00:16:24,920 Speaker 1: One thing I want to mention before I forget it 264 00:16:25,000 --> 00:16:29,000 Speaker 1: is that during Emilt's run as CEO of GE, there 265 00:16:29,080 --> 00:16:32,640 Speaker 1: was a particularly wasteful practice going on that would later 266 00:16:32,680 --> 00:16:35,520 Speaker 1: get a lot of media attention when it was made public. 267 00:16:36,080 --> 00:16:39,720 Speaker 1: Emilt traveled a lot. He would meet with various GE 268 00:16:39,880 --> 00:16:42,960 Speaker 1: executives and facilities all around the world, as well as 269 00:16:43,000 --> 00:16:47,720 Speaker 1: with other company and industry leaders and politicians. Particularly. He 270 00:16:47,720 --> 00:16:49,320 Speaker 1: would do this when he was on the lookout for 271 00:16:49,400 --> 00:16:52,880 Speaker 1: possible acquisitions, and he made a lot of those as 272 00:16:52,960 --> 00:16:55,720 Speaker 1: he was CEO of g E. Now, to hop over 273 00:16:55,800 --> 00:16:57,760 Speaker 1: to the other side of the world, he would take 274 00:16:57,840 --> 00:17:01,840 Speaker 1: one of the g E owned business jets. They had 275 00:17:02,000 --> 00:17:05,200 Speaker 1: six of them. But here's the curious thing. Every time 276 00:17:05,240 --> 00:17:08,600 Speaker 1: you would travel, there would be a second empty jet 277 00:17:08,960 --> 00:17:12,600 Speaker 1: that would follow along behind and stay at the same 278 00:17:12,640 --> 00:17:16,320 Speaker 1: airport and wait there. And then when Emilt would fly back, 279 00:17:16,880 --> 00:17:20,560 Speaker 1: so did the empty jet. Now the justification for that practice, 280 00:17:21,280 --> 00:17:25,119 Speaker 1: which again eventually became public, in which a jet carrying 281 00:17:25,240 --> 00:17:29,440 Speaker 1: only a crew no passengers would burn through fuel, it 282 00:17:29,440 --> 00:17:33,320 Speaker 1: would generate pollution. The justification was that Emilt was a 283 00:17:33,440 --> 00:17:38,199 Speaker 1: very important person on very important business and yes I 284 00:17:38,280 --> 00:17:43,359 Speaker 1: capitalized very important in my notes in this section. As such, 285 00:17:43,680 --> 00:17:47,320 Speaker 1: he couldn't be delayed by mechanical failures. His business was 286 00:17:47,359 --> 00:17:51,080 Speaker 1: far too important. So the empty jet was essentially a 287 00:17:51,119 --> 00:17:55,439 Speaker 1: backup transport in case his primary should experience a mechanical delay. 288 00:17:55,680 --> 00:17:59,920 Speaker 1: It was his just in case measure, a very expend 289 00:18:00,160 --> 00:18:04,240 Speaker 1: of wasteful measure. The company would actually stop that practice 290 00:18:04,280 --> 00:18:07,080 Speaker 1: in two thousand fourteen, which was a few years before 291 00:18:07,119 --> 00:18:10,880 Speaker 1: Emilt would be replaced as CEO. Spoiler alert, will get there, 292 00:18:11,160 --> 00:18:13,960 Speaker 1: all right, So back to the post two thousand one 293 00:18:14,080 --> 00:18:17,439 Speaker 1: g E. In two thousand two, GE would acquire a 294 00:18:17,480 --> 00:18:21,560 Speaker 1: business from a formerly huge company. That company was in Ron, 295 00:18:21,760 --> 00:18:24,280 Speaker 1: which went bankrupt in two thousand one after its own 296 00:18:24,520 --> 00:18:27,520 Speaker 1: massive scandal, which I'm not going to get into here. 297 00:18:27,600 --> 00:18:30,399 Speaker 1: It's outside the purview of this episode, but one of 298 00:18:30,440 --> 00:18:32,639 Speaker 1: the many parts of in Ron to go up on 299 00:18:32,720 --> 00:18:38,040 Speaker 1: the auction block after the bankruptcy was a wind power business. 300 00:18:38,520 --> 00:18:43,160 Speaker 1: Emilt was, in his own words, not enthusiastic about wind power. 301 00:18:43,560 --> 00:18:46,400 Speaker 1: He felt wind power wasn't profitable, and it was too 302 00:18:46,440 --> 00:18:49,960 Speaker 1: dependent upon subsidies, and those subsidies could disappear at any 303 00:18:49,960 --> 00:18:53,959 Speaker 1: time according to which way any government budget might be headed, 304 00:18:54,200 --> 00:18:56,359 Speaker 1: So there was no way to control that. If the 305 00:18:56,400 --> 00:18:59,920 Speaker 1: subsidies went away, you'd be saddled with a really expensive 306 00:19:00,040 --> 00:19:04,600 Speaker 1: of a nonprofitable business. But Emil gave the authority to 307 00:19:04,920 --> 00:19:08,000 Speaker 1: executives who really believed in that acquisition to go forward 308 00:19:08,040 --> 00:19:10,840 Speaker 1: with it, and they went and purchased the division. It 309 00:19:10,880 --> 00:19:14,840 Speaker 1: would end up becoming profitable and perhaps should have served 310 00:19:14,880 --> 00:19:17,760 Speaker 1: as a lesson for future emmilt and I'll get back 311 00:19:17,920 --> 00:19:20,280 Speaker 1: into what I mean about that in just a little bit. 312 00:19:20,640 --> 00:19:24,240 Speaker 1: In two thousand three, GE announced its intention to purchase 313 00:19:24,280 --> 00:19:28,680 Speaker 1: a majority stake in Universal Pictures. That was a company 314 00:19:28,720 --> 00:19:31,120 Speaker 1: that was under the control of another company called Vivendi, 315 00:19:31,200 --> 00:19:34,760 Speaker 1: a French company. In this deal, g E would acquire 316 00:19:34,880 --> 00:19:39,000 Speaker 1: eighty percent of Universal. Vivindi was going through kind of 317 00:19:39,000 --> 00:19:43,399 Speaker 1: a financial crisis at the time, so GE merged Universal 318 00:19:43,640 --> 00:19:48,199 Speaker 1: with NBC, creating NBC Universal, and the deal included several 319 00:19:48,320 --> 00:19:52,760 Speaker 1: cable television channels like Sci Fi Network, USA Network, as 320 00:19:52,760 --> 00:19:56,159 Speaker 1: well as the Universal Film Studio, the Universal Theme parks. 321 00:19:56,720 --> 00:19:59,720 Speaker 1: It did not include Universal Music that would remain completely 322 00:19:59,760 --> 00:20:03,240 Speaker 1: under Vendy's control, but lots of the other Universal properties 323 00:20:03,400 --> 00:20:07,000 Speaker 1: were part of this deal. Vivendi would have twenty control 324 00:20:07,040 --> 00:20:11,159 Speaker 1: of this and then UH you would have GE with 325 00:20:11,920 --> 00:20:16,280 Speaker 1: control and you got in BC Universal. G E would 326 00:20:16,280 --> 00:20:19,600 Speaker 1: not hold on to this property forever. G was acquiring 327 00:20:19,640 --> 00:20:21,960 Speaker 1: other companies as well at this time, adding them to 328 00:20:22,040 --> 00:20:26,720 Speaker 1: the various divisions of General Electric. GE. Healthcare was growing 329 00:20:26,760 --> 00:20:32,160 Speaker 1: with companies like UH Instrumentarium and Amersham Plc. Those were 330 00:20:32,160 --> 00:20:36,560 Speaker 1: being added as part of healthcare. G Capital was also 331 00:20:36,600 --> 00:20:40,560 Speaker 1: growing with similar acquisitions, including some subprime mortgage loan companies, 332 00:20:40,600 --> 00:20:42,560 Speaker 1: and we'll get into that in a bit. And G 333 00:20:42,880 --> 00:20:46,680 Speaker 1: would also build out its industrial, consumer and energy businesses 334 00:20:47,040 --> 00:20:50,520 Speaker 1: and made several acquisitions of companies in the oil industry, 335 00:20:50,880 --> 00:20:54,840 Speaker 1: also in banking and that old course of fossil fuels 336 00:20:54,880 --> 00:20:59,320 Speaker 1: in general, because he really believed that that was going 337 00:20:59,359 --> 00:21:03,879 Speaker 1: to be the mainstay for energy production or electricity production. 338 00:21:03,920 --> 00:21:06,840 Speaker 1: I guess I should say for the foreseeable future. Throughout 339 00:21:06,880 --> 00:21:10,520 Speaker 1: this time, GE Capital would remain the most profitable division 340 00:21:10,600 --> 00:21:13,280 Speaker 1: of General Electric, and so the company would lean more 341 00:21:13,359 --> 00:21:16,840 Speaker 1: heavily upon GE Capital in order to do things like 342 00:21:16,920 --> 00:21:21,360 Speaker 1: pay out that dividend to shareholders that set up GE 343 00:21:21,359 --> 00:21:24,680 Speaker 1: for disaster. Just a couple of years after GE purchased 344 00:21:24,960 --> 00:21:30,520 Speaker 1: subprime mortgage businesses, the world plunged into a global economic crisis, 345 00:21:30,560 --> 00:21:33,160 Speaker 1: which we often refer to as the two thousand eight 346 00:21:33,320 --> 00:21:38,280 Speaker 1: financial crisis, but really the crisis first started becoming apparent 347 00:21:38,359 --> 00:21:42,080 Speaker 1: in two thousand seven with the subprime mortgage market. So 348 00:21:42,119 --> 00:21:44,920 Speaker 1: what the heck is a subprime mortgage Well, the short 349 00:21:44,960 --> 00:21:50,000 Speaker 1: answer is it's an incredibly risky, predatory, and irresponsible market 350 00:21:50,040 --> 00:21:54,280 Speaker 1: practice that depends upon people who are some of the 351 00:21:54,280 --> 00:21:57,639 Speaker 1: most vulnerable folks out there. Maybe that's just me putting 352 00:21:57,640 --> 00:21:59,840 Speaker 1: my own bias on things, but it's hard for me 353 00:21:59,880 --> 00:22:02,320 Speaker 1: to see the whole concept as anything other than dumb 354 00:22:02,400 --> 00:22:05,359 Speaker 1: and harmful. But here's how it breaks down, all right. 355 00:22:05,359 --> 00:22:08,000 Speaker 1: So you know about credit scores, right, They're supposed to 356 00:22:08,000 --> 00:22:10,959 Speaker 1: represent how much of a risk or a lack of 357 00:22:11,080 --> 00:22:13,160 Speaker 1: risk a person is when it comes to paying off 358 00:22:13,200 --> 00:22:16,359 Speaker 1: debt like loans. So if you have a high credit score, 359 00:22:16,720 --> 00:22:19,480 Speaker 1: it means your history shows that you're diligent about paying 360 00:22:19,480 --> 00:22:22,359 Speaker 1: off debt and that you represent a low risk for 361 00:22:22,440 --> 00:22:25,160 Speaker 1: future loans. It does not mean that you've never had debt. 362 00:22:25,480 --> 00:22:27,200 Speaker 1: You want to have some debt, and then you want 363 00:22:27,200 --> 00:22:29,080 Speaker 1: to be able to pay it off because that's what 364 00:22:29,440 --> 00:22:31,359 Speaker 1: gets you that high credit score. But if you have 365 00:22:31,400 --> 00:22:34,040 Speaker 1: a low credit score, it means that, in the eyes 366 00:22:34,080 --> 00:22:36,720 Speaker 1: of a lender, you represent a risk. Maybe you have 367 00:22:36,760 --> 00:22:39,399 Speaker 1: a spotty employment history, maybe you have a lot of 368 00:22:39,400 --> 00:22:42,880 Speaker 1: outstanding debt, maybe you've missed some payments on some loans. 369 00:22:43,400 --> 00:22:45,760 Speaker 1: The purpose of these credit scores is to give lenders 370 00:22:45,840 --> 00:22:51,480 Speaker 1: enough information to make responsible loan agreements. Subprime lending involves 371 00:22:51,560 --> 00:22:55,800 Speaker 1: giving loans to high risk individuals, and typically you pair 372 00:22:55,840 --> 00:22:59,199 Speaker 1: this with really high interest rates and other restrictions in 373 00:22:59,280 --> 00:23:02,640 Speaker 1: order to mitigate the risk you incur when you give 374 00:23:02,720 --> 00:23:04,879 Speaker 1: a loan out to one of these people who have 375 00:23:04,960 --> 00:23:07,520 Speaker 1: a very low credit score. And so people who are 376 00:23:07,520 --> 00:23:10,640 Speaker 1: looking to buy homes or to take out other loans 377 00:23:11,000 --> 00:23:15,240 Speaker 1: were securing the money through financial institutions with these subprime 378 00:23:15,400 --> 00:23:21,040 Speaker 1: mortgages and subprime loans, but with incredibly punishing restrictions on 379 00:23:21,080 --> 00:23:24,080 Speaker 1: those loans, and surprise, surprise, a lot of folks found 380 00:23:24,080 --> 00:23:27,560 Speaker 1: it impossible to pay off that debt, and ultimately many 381 00:23:27,600 --> 00:23:30,520 Speaker 1: of the companies that were making those loans found themselves 382 00:23:30,520 --> 00:23:33,719 Speaker 1: in a hole that they had dug themselves and it 383 00:23:33,760 --> 00:23:37,199 Speaker 1: was too deep to climb out. Everyone was put in 384 00:23:37,240 --> 00:23:40,240 Speaker 1: an awful situation and it had a really big ripple effect. 385 00:23:40,680 --> 00:23:43,240 Speaker 1: Part of that ripple led to an investment bank called 386 00:23:43,320 --> 00:23:47,560 Speaker 1: Lemon Brothers collapsing in September of two thousand eight. Other 387 00:23:47,640 --> 00:23:51,399 Speaker 1: major financial institutions were in danger of following suit. The 388 00:23:51,480 --> 00:23:55,600 Speaker 1: whole thing was leading to a global economic collapse, with 389 00:23:55,680 --> 00:23:59,600 Speaker 1: the financial industry on the brink of total disaster. That's 390 00:23:59,600 --> 00:24:03,640 Speaker 1: when arious parties swooped in to rescue the situation, bailing 391 00:24:03,680 --> 00:24:07,280 Speaker 1: out banks that had over extended themselves. This in turn 392 00:24:07,400 --> 00:24:10,320 Speaker 1: ticked off a lot of folks who are directly affected 393 00:24:10,320 --> 00:24:12,840 Speaker 1: by this problem. These were people who had been evicted 394 00:24:12,880 --> 00:24:15,239 Speaker 1: from their homes because they weren't able to make their 395 00:24:15,280 --> 00:24:18,439 Speaker 1: mortgage payments, or people who were otherwise hurt by the 396 00:24:18,480 --> 00:24:22,160 Speaker 1: subprime mortgage crisis, either directly or indirectly. And it didn't 397 00:24:22,200 --> 00:24:24,800 Speaker 1: help that many of these people saw the bailouts as 398 00:24:24,800 --> 00:24:29,280 Speaker 1: being rewards for the same financial institutions that caused all 399 00:24:29,320 --> 00:24:32,760 Speaker 1: the misery in the first place. Well. Ge Capital was 400 00:24:32,880 --> 00:24:36,600 Speaker 1: one of those institutions, and it was hit hard by 401 00:24:36,640 --> 00:24:40,240 Speaker 1: the two thousand eight crisis worse because General Electric was 402 00:24:40,320 --> 00:24:44,119 Speaker 1: so dependent upon GE Capital for revenue, it put all 403 00:24:44,160 --> 00:24:47,520 Speaker 1: of General Electric at risk. To help whether the storm, 404 00:24:47,720 --> 00:24:50,480 Speaker 1: the company announced it would attempt to raise twelve billion 405 00:24:50,560 --> 00:24:55,480 Speaker 1: dollars through a common stock offering. Warren Buffett investor Extraordinaire, 406 00:24:55,760 --> 00:24:58,640 Speaker 1: also helped out by investing billions of dollars in GE 407 00:24:59,400 --> 00:25:02,520 Speaker 1: in retros. Fact, many analysts have said that GE was 408 00:25:02,560 --> 00:25:06,720 Speaker 1: playing an increasingly dangerous game since Welch had transformed GE 409 00:25:06,760 --> 00:25:10,440 Speaker 1: Capital from a small division that helped consumers get financing 410 00:25:10,520 --> 00:25:15,840 Speaker 1: to purchase big appliances like refrigerators into a global financial institution. 411 00:25:16,240 --> 00:25:22,040 Speaker 1: Gees more traditional divisions like it's lighting business, industrial equipment business, 412 00:25:22,440 --> 00:25:25,639 Speaker 1: medical equipment business, it's a via Asian businesses. All of 413 00:25:25,680 --> 00:25:29,280 Speaker 1: these secured for the company the respect of Wall Street 414 00:25:29,359 --> 00:25:33,520 Speaker 1: because they were dependable parts of GE. They could make 415 00:25:33,600 --> 00:25:37,200 Speaker 1: a dependable revenue, and they were traditional. They had a 416 00:25:37,240 --> 00:25:40,399 Speaker 1: long history with the company that gave the company a 417 00:25:40,400 --> 00:25:42,960 Speaker 1: lot of room to swing for the fences with GE 418 00:25:43,119 --> 00:25:46,719 Speaker 1: Capital and thus engage in more risky behaviors in an 419 00:25:46,720 --> 00:25:50,199 Speaker 1: effort to win big payoffs, drive that stock market price up, 420 00:25:50,240 --> 00:25:53,520 Speaker 1: and again pay out those dividends, and that risk was 421 00:25:53,600 --> 00:25:57,640 Speaker 1: somewhat necessary because of that changing climate of business, So 422 00:25:58,320 --> 00:26:01,639 Speaker 1: you had to grow year over years. Traditional businesses usually 423 00:26:01,680 --> 00:26:05,000 Speaker 1: had steady performance, and they did grow, but they grew slowly, 424 00:26:05,560 --> 00:26:08,119 Speaker 1: so that wasn't the kind of performance that would really 425 00:26:08,680 --> 00:26:13,960 Speaker 1: when you the the front cover of various business magazines, 426 00:26:14,440 --> 00:26:17,600 Speaker 1: you wanted to really go for it. So GE Capital 427 00:26:18,320 --> 00:26:22,320 Speaker 1: was that method. That was how GE was going to 428 00:26:22,440 --> 00:26:25,439 Speaker 1: be the leader. Then it became an anchor weighing the 429 00:26:25,480 --> 00:26:29,240 Speaker 1: company down in the wake of this financial crisis. EMIL 430 00:26:29,280 --> 00:26:32,320 Speaker 1: would start trying to sell off parts of g E Capital, 431 00:26:32,480 --> 00:26:36,160 Speaker 1: but it wasn't easy. Before Buffett rushed into help. GE 432 00:26:36,440 --> 00:26:40,480 Speaker 1: famously couldn't secure overnight loans to keep the business afloat. 433 00:26:40,800 --> 00:26:43,320 Speaker 1: Most investors felt it was far too risky to pour 434 00:26:43,400 --> 00:26:46,520 Speaker 1: money into General Electric, so the house that Jack built 435 00:26:46,600 --> 00:26:50,480 Speaker 1: was in danger of crashing to its foundations. Even with 436 00:26:50,600 --> 00:26:54,440 Speaker 1: the influx of investment cash, not to mention an incredible 437 00:26:54,560 --> 00:27:00,240 Speaker 1: one thirty nine billion dollars of federal government bailout money, 438 00:27:00,520 --> 00:27:03,840 Speaker 1: g was still struggling, and one thing barreling down at 439 00:27:03,840 --> 00:27:07,879 Speaker 1: the company was that dividend payout. The dividend made g 440 00:27:08,040 --> 00:27:11,680 Speaker 1: E stock one of the most popular stocks on the market. 441 00:27:11,800 --> 00:27:15,359 Speaker 1: Tons of people owned g E stock because it paid 442 00:27:15,359 --> 00:27:18,240 Speaker 1: out dividends, But paying how that dividend was going to 443 00:27:18,280 --> 00:27:20,720 Speaker 1: put a huge burden on the company. It just wasn't 444 00:27:20,720 --> 00:27:22,840 Speaker 1: going to have the cash to do it, so in 445 00:27:22,880 --> 00:27:26,320 Speaker 1: two thousand nine, EMIL decided to cut the dividend from 446 00:27:26,400 --> 00:27:30,000 Speaker 1: thirty one cents a share down to ten cents a share. 447 00:27:30,240 --> 00:27:32,800 Speaker 1: It would mark only the second time the company had 448 00:27:32,800 --> 00:27:36,440 Speaker 1: reduced its dividend payout. The first time had been during 449 00:27:36,480 --> 00:27:40,359 Speaker 1: the Great Depression and spoiler alert. It would not be 450 00:27:40,440 --> 00:27:43,480 Speaker 1: the last time they would have to cut the dividend. Also, 451 00:27:43,560 --> 00:27:46,639 Speaker 1: in two thousand nine, the company announced its intention to 452 00:27:46,680 --> 00:27:51,960 Speaker 1: sell off NBC Universal to cable provider Comcast. To do that, 453 00:27:52,240 --> 00:27:55,280 Speaker 1: it would first have to acquire the other twenty percent 454 00:27:55,560 --> 00:28:00,600 Speaker 1: of NBC Universal from Vivindy. They still had that air. 455 00:28:00,640 --> 00:28:03,480 Speaker 1: That process took some time, so it wasn't until two 456 00:28:03,520 --> 00:28:07,119 Speaker 1: thousand eleven that GE would sell off a majority stake 457 00:28:07,240 --> 00:28:11,040 Speaker 1: in NBC Universal to Comcast. At that time, GE would 458 00:28:11,040 --> 00:28:14,040 Speaker 1: still retain a forty nine percent share in the company, 459 00:28:14,080 --> 00:28:16,880 Speaker 1: although it did have the intention to sell the rest 460 00:28:16,960 --> 00:28:20,119 Speaker 1: of those shares off. A few years later, uh. This 461 00:28:20,119 --> 00:28:22,879 Speaker 1: would become a common plot element and a source of 462 00:28:22,960 --> 00:28:26,879 Speaker 1: jokes in the series thirty Rock, just as ges ownership 463 00:28:26,920 --> 00:28:30,400 Speaker 1: of NBC Universal had been a source for humor previously 464 00:28:30,480 --> 00:28:34,280 Speaker 1: in that series. Two years later, in Comcast would arrange 465 00:28:34,320 --> 00:28:37,800 Speaker 1: to purchase the entirety of NBC Universal from g E, 466 00:28:38,000 --> 00:28:39,800 Speaker 1: and g E would get out of the entertainment and 467 00:28:39,880 --> 00:28:42,240 Speaker 1: media business and it would use some of that money 468 00:28:42,280 --> 00:28:44,320 Speaker 1: to cover some of the debt that g E had 469 00:28:44,360 --> 00:28:48,640 Speaker 1: accrued following the two thousand eight financial crisis. The NBC 470 00:28:48,760 --> 00:28:51,960 Speaker 1: Universal deal was just one of several that GE pursued 471 00:28:52,000 --> 00:28:54,719 Speaker 1: in the first decade of the two thousand's The company 472 00:28:54,760 --> 00:28:57,320 Speaker 1: looked to sell off some of its businesses and divisions 473 00:28:57,360 --> 00:29:00,920 Speaker 1: in an effort to refocus on core strategy. G's Emilt 474 00:29:01,000 --> 00:29:05,040 Speaker 1: kept working on ways to extract GE from GE capital business, 475 00:29:05,920 --> 00:29:07,760 Speaker 1: and he didn't have a whole lot of success with it, 476 00:29:07,960 --> 00:29:10,400 Speaker 1: and he had his eyes set on another company to 477 00:29:10,520 --> 00:29:14,600 Speaker 1: try and turn gees prospects around. The company in question 478 00:29:14,960 --> 00:29:18,440 Speaker 1: was a French company that was making coal powered turbines. 479 00:29:18,680 --> 00:29:20,920 Speaker 1: In other words, it was a company that built stuff 480 00:29:21,000 --> 00:29:25,160 Speaker 1: for the energy electric industry electric utilities, right specifically for 481 00:29:25,240 --> 00:29:29,400 Speaker 1: fossil fuel based power companies. The name of this company 482 00:29:29,560 --> 00:29:33,080 Speaker 1: was Alstom A L S T O M. And as 483 00:29:33,080 --> 00:29:36,080 Speaker 1: it would turn out, the timing could not have been worse, 484 00:29:36,240 --> 00:29:40,240 Speaker 1: though it is arguable over whether or not that was predictable. 485 00:29:40,520 --> 00:29:43,760 Speaker 1: At that time, Emil was hoping that Alstom would become 486 00:29:43,800 --> 00:29:46,880 Speaker 1: a key component in g ees power division. He thought 487 00:29:46,880 --> 00:29:49,520 Speaker 1: that Ge could take this French company which had been 488 00:29:49,560 --> 00:29:54,560 Speaker 1: struggling financially, and used GES processes and practices to turn 489 00:29:54,640 --> 00:29:57,560 Speaker 1: Alstom around. Then he would use Alstom to meet the 490 00:29:57,600 --> 00:30:00,680 Speaker 1: electricity demands of clients all over the world at all 491 00:30:00,760 --> 00:30:05,520 Speaker 1: with fossil fuel based turbines. So what went wrong? Well, 492 00:30:05,520 --> 00:30:15,840 Speaker 1: I'll tell you after we take this quick break. Not 493 00:30:15,960 --> 00:30:20,160 Speaker 1: everyone at g was crazy about acquiring Alstom. Several executives 494 00:30:20,160 --> 00:30:23,000 Speaker 1: felt that the asking price was far too high, but 495 00:30:23,120 --> 00:30:26,680 Speaker 1: Emma was optimistic that Ge could take Alstom and turn 496 00:30:26,720 --> 00:30:29,640 Speaker 1: it into a profitable business. As it turns out, he 497 00:30:29,680 --> 00:30:31,680 Speaker 1: wouldn't get the chance to stick around long enough to 498 00:30:31,720 --> 00:30:35,480 Speaker 1: see how far Alstom would fall. But I'm not quite 499 00:30:35,520 --> 00:30:39,440 Speaker 1: there yet. Ge needed to do something. The company's oil 500 00:30:39,480 --> 00:30:43,000 Speaker 1: and gas services, which revolved around actually extracting oil. You know, 501 00:30:43,040 --> 00:30:45,320 Speaker 1: making the equipment that would be used for that sort 502 00:30:45,360 --> 00:30:48,440 Speaker 1: of stuff. Those were on the decline as energy prices 503 00:30:48,480 --> 00:30:52,280 Speaker 1: were collapsing. But the power division GE Power, the part 504 00:30:52,320 --> 00:30:55,280 Speaker 1: of g that actually produced equipment that was used to 505 00:30:55,400 --> 00:30:59,080 Speaker 1: generate electricity, that was still a reliable revenue source. In fact, 506 00:30:59,240 --> 00:31:02,520 Speaker 1: at that point was the largest source of revenue for GE, 507 00:31:03,120 --> 00:31:05,480 Speaker 1: and it had a high profit margin to boot. G 508 00:31:05,640 --> 00:31:08,320 Speaker 1: E made a lot of money from that particular division. 509 00:31:08,560 --> 00:31:10,120 Speaker 1: So if g E could do the same thing for 510 00:31:10,160 --> 00:31:13,440 Speaker 1: Alstom and turn things around, then in Emilt's mind, the 511 00:31:13,480 --> 00:31:16,640 Speaker 1: company would have a rock solid foundation from which to work. 512 00:31:17,120 --> 00:31:20,760 Speaker 1: But a few big factors would hamper the success of Alstom. 513 00:31:20,800 --> 00:31:23,400 Speaker 1: One was that there just wasn't as big a demand 514 00:31:23,440 --> 00:31:27,360 Speaker 1: for turbines as Emilt had anticipated. They got fewer orders 515 00:31:27,360 --> 00:31:29,560 Speaker 1: than what they were hoping for. In places like the 516 00:31:29,640 --> 00:31:33,960 Speaker 1: United States, power companies were improving efficiencies and so they 517 00:31:33,960 --> 00:31:36,240 Speaker 1: were able to do more with less. There wasn't as 518 00:31:36,240 --> 00:31:40,480 Speaker 1: big a demand to add additional infrastructure to meet consumer needs. 519 00:31:41,120 --> 00:31:44,480 Speaker 1: Then there was the fact that Alstom's employees were very 520 00:31:44,560 --> 00:31:48,280 Speaker 1: highly compensated, which was good for them but rough for GE, 521 00:31:48,880 --> 00:31:52,160 Speaker 1: and regulations in the EU meant that EMILT couldn't just 522 00:31:52,240 --> 00:31:55,600 Speaker 1: pull a Jack Welch and start laying off employees in 523 00:31:55,680 --> 00:31:59,200 Speaker 1: an effort to cut costs. EU had protections in place 524 00:31:59,240 --> 00:32:01,440 Speaker 1: to prevent that sort of thing, so you couldn't just 525 00:32:01,800 --> 00:32:04,720 Speaker 1: make the books look better by laying off a bunch 526 00:32:04,720 --> 00:32:07,520 Speaker 1: of people. And the EU also blocked one part of 527 00:32:07,560 --> 00:32:10,960 Speaker 1: the business from g E acquiring it. That was Alstom's 528 00:32:11,120 --> 00:32:14,959 Speaker 1: service business, their maintenance business that would have supplied revenue 529 00:32:14,960 --> 00:32:17,880 Speaker 1: as the company would provide maintenance services for its clients. 530 00:32:18,200 --> 00:32:21,040 Speaker 1: That was off limits. And the other major factor was 531 00:32:21,080 --> 00:32:24,560 Speaker 1: that the cost of building out renewable energy systems fell 532 00:32:24,800 --> 00:32:29,160 Speaker 1: drastically not long after GE completed the ten billion dollar 533 00:32:29,280 --> 00:32:33,280 Speaker 1: acquisition of Alstom in two thousand fifteen, so it looked 534 00:32:33,320 --> 00:32:37,560 Speaker 1: like the wrong bet right buying a very expensive fossil 535 00:32:37,720 --> 00:32:42,600 Speaker 1: fuel based company just as renewable energy prices were falling 536 00:32:42,640 --> 00:32:46,560 Speaker 1: to the point where they were uh they could compete 537 00:32:46,600 --> 00:32:50,360 Speaker 1: against fossil fuels. Now, around the same time that the 538 00:32:50,480 --> 00:32:54,120 Speaker 1: Alstom deal was starting to take shape, GE would spin 539 00:32:54,200 --> 00:32:57,560 Speaker 1: off its credit card business, which was part of GE Capital, 540 00:32:57,680 --> 00:33:01,720 Speaker 1: and it would become Synchrony Finance. Nchell and I'm guessing. 541 00:33:01,720 --> 00:33:03,480 Speaker 1: It filled a lot of folks at GE with a 542 00:33:03,520 --> 00:33:05,920 Speaker 1: bit of dismay to see that once it was free 543 00:33:05,960 --> 00:33:10,680 Speaker 1: of General Electric, this former division actually outperformed all expectations. 544 00:33:10,680 --> 00:33:13,000 Speaker 1: It did much better on its own than it did 545 00:33:13,040 --> 00:33:15,560 Speaker 1: as part of General Electric. On top of that, the 546 00:33:15,600 --> 00:33:19,160 Speaker 1: oil price crash pushed GE to merge its own oil 547 00:33:19,200 --> 00:33:22,719 Speaker 1: and gas division with a company called Baker Hughes, and 548 00:33:22,760 --> 00:33:26,600 Speaker 1: then g E got a majority ownership in the Baker 549 00:33:26,680 --> 00:33:30,040 Speaker 1: Hughes company became Baker Hughes, a g E company at 550 00:33:30,080 --> 00:33:33,800 Speaker 1: least for the time. Oh and two thousand fifteen, GE 551 00:33:33,800 --> 00:33:36,840 Speaker 1: formed a unit called GE Digital. G had been in 552 00:33:36,920 --> 00:33:40,320 Speaker 1: various digital products for a while, but marked the move 553 00:33:40,360 --> 00:33:44,000 Speaker 1: for the company to create an independent business unit. Most 554 00:33:44,040 --> 00:33:47,760 Speaker 1: of the unit's focus was on a software product called Predicts, 555 00:33:47,760 --> 00:33:51,040 Speaker 1: sort of a play on Prediction, and it was a 556 00:33:51,120 --> 00:33:54,600 Speaker 1: business to business product. It was meant to help big 557 00:33:54,640 --> 00:33:59,480 Speaker 1: companies like airlines identify strategies and manage assets. But over 558 00:33:59,560 --> 00:34:03,160 Speaker 1: time that unit would experience slow revenues and technical issues, 559 00:34:03,480 --> 00:34:06,520 Speaker 1: and in eighteen there was real serious talk of GE 560 00:34:06,720 --> 00:34:10,880 Speaker 1: potentially selling off the division entirely. That is yet to happen. 561 00:34:11,160 --> 00:34:14,919 Speaker 1: GE Digital still as part of GE, but GE did 562 00:34:15,000 --> 00:34:18,839 Speaker 1: do a few rounds of layoffs, so things have not 563 00:34:18,880 --> 00:34:22,000 Speaker 1: gone smoothly for that part of the company. Back to 564 00:34:22,080 --> 00:34:25,880 Speaker 1: gees leadership WOS. In October two thousand seventeen, GE announced 565 00:34:25,920 --> 00:34:29,040 Speaker 1: that Jeff Emilt would be stepping down as CEO, and 566 00:34:29,080 --> 00:34:31,640 Speaker 1: he had served in that role for about sixteen years. 567 00:34:32,120 --> 00:34:34,839 Speaker 1: The company's stock price was around a third of what 568 00:34:34,920 --> 00:34:37,760 Speaker 1: it had been when he took control. Emerald had spun 569 00:34:37,760 --> 00:34:42,360 Speaker 1: off numerous businesses over the years, including gees Plastics division 570 00:34:42,760 --> 00:34:45,440 Speaker 1: if you remember, that's the division that Jack Welch had 571 00:34:45,440 --> 00:34:50,240 Speaker 1: actually come to. He had also spun off the appliances business. 572 00:34:51,000 --> 00:34:53,680 Speaker 1: He's spun off the insurance business, or a lot of 573 00:34:53,680 --> 00:34:56,600 Speaker 1: it anyway, and more. And by that time much of 574 00:34:56,600 --> 00:35:00,440 Speaker 1: the upper leadership at g E got caught in a shacub. 575 00:35:00,520 --> 00:35:02,839 Speaker 1: There were members of the board who left, there were 576 00:35:02,840 --> 00:35:06,839 Speaker 1: other executive members who left, and investors, employees, and retirees 577 00:35:06,920 --> 00:35:09,839 Speaker 1: were all growing more and more unhappy. The company had 578 00:35:09,920 --> 00:35:13,600 Speaker 1: lost and estimated one hundred billion dollars worth of shareholder 579 00:35:13,640 --> 00:35:17,480 Speaker 1: wealth over the previous decade and a half. Critics stated 580 00:35:17,800 --> 00:35:21,280 Speaker 1: the Emilt had a habit of chasing after fads, investing 581 00:35:21,280 --> 00:35:24,439 Speaker 1: in businesses at the peak of their visibility and then 582 00:35:24,520 --> 00:35:27,080 Speaker 1: later selling them off for less than what g had 583 00:35:27,120 --> 00:35:29,319 Speaker 1: paid for them in the first place, And people said 584 00:35:29,320 --> 00:35:32,640 Speaker 1: the GE method was to buy high, sell low, which 585 00:35:32,640 --> 00:35:34,560 Speaker 1: in general is the opposite of what you want to do. 586 00:35:35,120 --> 00:35:38,600 Speaker 1: I think, oh no, not a business guy. Not every 587 00:35:38,640 --> 00:35:41,120 Speaker 1: deal Emilt made went sour. By the way, the in 588 00:35:41,280 --> 00:35:43,720 Speaker 1: Ron deal in which g took over that wind power 589 00:35:43,840 --> 00:35:48,000 Speaker 1: business ended up being very profitable, though again Emil initially 590 00:35:48,000 --> 00:35:52,120 Speaker 1: opposed that deal, and when GE sold off its plastics 591 00:35:52,160 --> 00:35:54,480 Speaker 1: division it was for a higher price than what a 592 00:35:54,480 --> 00:35:58,240 Speaker 1: lot of analysts expected. But generally speaking, the deals didn't 593 00:35:58,320 --> 00:36:02,719 Speaker 1: break in gees favor or imilts watch. Emeralt's successor was 594 00:36:02,800 --> 00:36:05,920 Speaker 1: John Flannery, who had up to that point headed up 595 00:36:06,000 --> 00:36:10,200 Speaker 1: gees healthcare business and had worked for GE for thirty years. 596 00:36:10,560 --> 00:36:13,400 Speaker 1: Flannery's goal was to build a strong core for g 597 00:36:13,560 --> 00:36:17,640 Speaker 1: E around its aviation business, its power business, and its 598 00:36:17,680 --> 00:36:20,920 Speaker 1: healthcare business, and there was talk of the possibility that 599 00:36:21,000 --> 00:36:25,440 Speaker 1: GE itself might break apart into several different companies. The 600 00:36:25,520 --> 00:36:29,000 Speaker 1: reaction to that idea kind of fell across the spectrum. 601 00:36:29,160 --> 00:36:31,880 Speaker 1: Some people saw it as a necessity if the various 602 00:36:31,920 --> 00:36:35,520 Speaker 1: parts of GE were to stabilize. Others saw it as 603 00:36:35,600 --> 00:36:38,239 Speaker 1: the end of a legacy, and they had a bit 604 00:36:38,280 --> 00:36:40,760 Speaker 1: of a point. One of the discussions was about possibly 605 00:36:40,840 --> 00:36:44,680 Speaker 1: selling off GES lightbulb business, that was the business that 606 00:36:44,880 --> 00:36:48,160 Speaker 1: started it all, really, all the way back in eight 607 00:36:48,520 --> 00:36:52,520 Speaker 1: seventy eight, and the Edison Electric Light Company. But innovation 608 00:36:52,560 --> 00:36:55,320 Speaker 1: could sometimes be a double edged sword. The move towards 609 00:36:55,520 --> 00:36:59,120 Speaker 1: l E ed lights, which can last for thousands of hours, 610 00:36:59,480 --> 00:37:01,759 Speaker 1: meant that there just wasn't as big a demand for 611 00:37:01,840 --> 00:37:04,080 Speaker 1: light bulbs anymore. Because if you don't have to worry 612 00:37:04,080 --> 00:37:07,040 Speaker 1: about the light bulb burning out on a regular basis, 613 00:37:07,360 --> 00:37:09,560 Speaker 1: there's not much call to buy new ones. You just 614 00:37:09,840 --> 00:37:12,960 Speaker 1: buy the LEDs. You might sell your house before you 615 00:37:13,040 --> 00:37:16,440 Speaker 1: ever have to change that light bulb. So lightbulb sales 616 00:37:16,480 --> 00:37:19,440 Speaker 1: were starting to drop. There just wasn't enough call for them. 617 00:37:19,480 --> 00:37:21,680 Speaker 1: I bet it made GE long for the days when 618 00:37:21,680 --> 00:37:25,440 Speaker 1: it had formed that secret lightbulb cartel in which companies 619 00:37:25,480 --> 00:37:27,640 Speaker 1: agreed to limit the useful life of a light bulb 620 00:37:27,719 --> 00:37:31,279 Speaker 1: through engineering. And things were rough for shareholders too. Since 621 00:37:31,400 --> 00:37:34,240 Speaker 1: GE had cut its dividend payouts a few years earlier, 622 00:37:34,520 --> 00:37:37,839 Speaker 1: the payouts had slowly increased again. They had grown up 623 00:37:37,880 --> 00:37:41,319 Speaker 1: to twenty four cents per share, so that was an improvement. 624 00:37:41,680 --> 00:37:44,160 Speaker 1: It was still below the thirty one cents that it 625 00:37:44,280 --> 00:37:47,600 Speaker 1: had been at its peak, but it was better. But 626 00:37:47,840 --> 00:37:52,080 Speaker 1: in late G had to cut the dividend again, that 627 00:37:52,160 --> 00:37:55,439 Speaker 1: time down to twelve cents, and then not too long 628 00:37:55,480 --> 00:37:58,399 Speaker 1: after that they were forced to do another cut. They 629 00:37:58,440 --> 00:38:01,279 Speaker 1: just realized that they're just wasn't enough money to cover 630 00:38:01,360 --> 00:38:04,440 Speaker 1: the dividend payout, so the dividend got cut down to 631 00:38:04,680 --> 00:38:08,759 Speaker 1: just one cent per share. It just didn't have the 632 00:38:08,800 --> 00:38:12,600 Speaker 1: money to cover the payments otherwise. In addition, G was 633 00:38:12,640 --> 00:38:16,279 Speaker 1: having to deal with an unexpected cost. The company had 634 00:38:16,320 --> 00:38:19,960 Speaker 1: not issued any long term care insurance policies since two 635 00:38:20,000 --> 00:38:22,880 Speaker 1: thousand six, and in fact, it had spun off almost 636 00:38:22,960 --> 00:38:27,000 Speaker 1: its entire insurance business with a company called gen Worth. However, 637 00:38:27,440 --> 00:38:30,800 Speaker 1: in order to make that deal happen, GE was forced 638 00:38:30,800 --> 00:38:35,040 Speaker 1: to agree to cover any losses from long term care insurance. 639 00:38:35,320 --> 00:38:38,839 Speaker 1: It was just seen as too great a financial risk otherwise, 640 00:38:39,200 --> 00:38:43,359 Speaker 1: so GE signed that agreement. Now, those long term care 641 00:38:43,440 --> 00:38:46,600 Speaker 1: agreements are policies that are meant to cover the elderly, 642 00:38:47,000 --> 00:38:49,920 Speaker 1: and it turned out that insurers not just a GE, 643 00:38:50,080 --> 00:38:55,080 Speaker 1: but across the industry had underestimated how long policy holders 644 00:38:55,160 --> 00:38:58,680 Speaker 1: would actually live, and the medical costs, including things like 645 00:38:58,800 --> 00:39:02,360 Speaker 1: nursing home fees, would tend to get higher as customers 646 00:39:02,400 --> 00:39:05,680 Speaker 1: got older. So as people lived longer, they were creating 647 00:39:05,760 --> 00:39:10,000 Speaker 1: a larger and larger drain on resources for these insurance companies. 648 00:39:10,480 --> 00:39:12,640 Speaker 1: Like if you looked at it from a financial perspective, 649 00:39:13,200 --> 00:39:16,400 Speaker 1: the person who was paying for the policy was getting 650 00:39:16,480 --> 00:39:19,480 Speaker 1: way more benefits out of it than they were paying 651 00:39:19,520 --> 00:39:23,680 Speaker 1: into it, and that was an issue. So this was 652 00:39:23,719 --> 00:39:26,880 Speaker 1: a huge cost for GE, and it's no wonder that 653 00:39:26,880 --> 00:39:29,400 Speaker 1: the company was continuing to try and find ways to 654 00:39:29,520 --> 00:39:33,080 Speaker 1: get completely out of the insurance business. Now. To meet 655 00:39:33,200 --> 00:39:38,160 Speaker 1: the obligation, Flannery had to redirect fifteen billion dollars of 656 00:39:38,280 --> 00:39:41,400 Speaker 1: GES wealth in two thousand eighteen just to cover the 657 00:39:41,400 --> 00:39:45,080 Speaker 1: obligations of that insurance policy stuff. And the company was 658 00:39:45,080 --> 00:39:47,320 Speaker 1: also hit with a seven and a half billion dollar 659 00:39:47,520 --> 00:39:51,400 Speaker 1: after tax charge, so things were really rough. Also in 660 00:39:51,440 --> 00:39:55,520 Speaker 1: two thousand eighteen, GE would leave the dal Jones Industrial Average. 661 00:39:55,840 --> 00:39:58,680 Speaker 1: If you listen to my previous episodes, you remember that 662 00:39:58,800 --> 00:40:02,440 Speaker 1: GE was one of the original companies listed on that 663 00:40:02,480 --> 00:40:05,399 Speaker 1: average when it was first created, and it was the 664 00:40:05,480 --> 00:40:09,279 Speaker 1: only company of that original list that still existed in 665 00:40:09,320 --> 00:40:11,799 Speaker 1: two thousand eighteen. It had been part of the Dow 666 00:40:11,880 --> 00:40:16,600 Speaker 1: Industrial Average for a hundred eleven years, but the performance 667 00:40:16,640 --> 00:40:19,840 Speaker 1: of the company, along with the perception that industrial companies 668 00:40:19,920 --> 00:40:24,080 Speaker 1: in general weren't really key indicators for overall market performance, 669 00:40:24,400 --> 00:40:27,480 Speaker 1: meant that those days were over, so in its place, 670 00:40:27,520 --> 00:40:30,480 Speaker 1: a different company would join the Dow. That was Walgreen's 671 00:40:30,560 --> 00:40:35,719 Speaker 1: Boots Alliance drug store chain company. Meanwhile, a problem with 672 00:40:35,800 --> 00:40:39,720 Speaker 1: gs most recent heavy duty gas turbines caused other issues 673 00:40:39,840 --> 00:40:42,960 Speaker 1: for General Electric. A utility in Texas had to shut 674 00:40:43,000 --> 00:40:47,239 Speaker 1: down two different power plants for repairs due to failures 675 00:40:47,280 --> 00:40:50,120 Speaker 1: with these new turbines. That news would end up hurting 676 00:40:50,160 --> 00:40:53,600 Speaker 1: GE power sales, which weren't doing super a great at 677 00:40:53,600 --> 00:40:57,799 Speaker 1: that moment. Already, Flannery's efforts were seen as insufficient by 678 00:40:57,800 --> 00:41:00,640 Speaker 1: the board of directors, and on October one, els and eighteen, 679 00:41:00,640 --> 00:41:04,040 Speaker 1: the company announced that Flannery had been removed from the 680 00:41:04,080 --> 00:41:08,200 Speaker 1: position of chairman and CEO, and the board appointed an outsider, 681 00:41:08,560 --> 00:41:12,240 Speaker 1: Lawrence Culp, to serve as the new chairman and CEO. 682 00:41:12,400 --> 00:41:16,319 Speaker 1: Flannery had been CEO for about fourteen months and then 683 00:41:16,360 --> 00:41:20,360 Speaker 1: he was out that would give Flannery the unenviable distinction 684 00:41:20,680 --> 00:41:24,520 Speaker 1: of having served the least amount of time as CEO 685 00:41:24,719 --> 00:41:27,600 Speaker 1: of all g e C e o s, at least 686 00:41:28,040 --> 00:41:31,919 Speaker 1: so far. Culp would be the third CEO to lead 687 00:41:31,960 --> 00:41:35,680 Speaker 1: the company since two thousand seventeen. The company Culp took 688 00:41:35,680 --> 00:41:39,759 Speaker 1: over was in turmoil and there were pending investigations into 689 00:41:39,800 --> 00:41:43,080 Speaker 1: g S accounting practices, which had for years, as I 690 00:41:43,080 --> 00:41:46,239 Speaker 1: said earlier, been described as opaque. It's polite way of 691 00:41:46,280 --> 00:41:48,520 Speaker 1: saying the company wasn't making it easy to see where 692 00:41:48,520 --> 00:41:50,560 Speaker 1: money was coming from or where it was going to. 693 00:41:51,400 --> 00:41:56,960 Speaker 1: GE had already settled sec charges in the past, but 694 00:41:57,360 --> 00:41:59,720 Speaker 1: there were others that sought to find out more about 695 00:41:59,719 --> 00:42:02,080 Speaker 1: the finances of the company. And then, of course there 696 00:42:02,120 --> 00:42:06,520 Speaker 1: was no recent report from Marcopolis, the guy who was 697 00:42:06,560 --> 00:42:09,200 Speaker 1: one of the early whistleblowers on Bernie made Off before 698 00:42:09,239 --> 00:42:12,080 Speaker 1: everyone was aware of the Ponzi scheme that made Off 699 00:42:12,120 --> 00:42:16,760 Speaker 1: was running. The Marcopolis report alleges that GE is essentially 700 00:42:16,840 --> 00:42:20,920 Speaker 1: robbing Peter to pay Paul, shifting cash around frantically to 701 00:42:21,040 --> 00:42:24,760 Speaker 1: fend off insolvency. It's kind of like a shell game 702 00:42:25,200 --> 00:42:28,560 Speaker 1: to trying to move money around fast enough so that 703 00:42:28,600 --> 00:42:32,279 Speaker 1: the company doesn't collapse. G E I should add, disputes 704 00:42:32,360 --> 00:42:35,880 Speaker 1: this report and says that the allegations are baseless and 705 00:42:35,920 --> 00:42:39,680 Speaker 1: it cannot be ignored that Marcopolis himself actually stands to 706 00:42:39,719 --> 00:42:43,200 Speaker 1: make a lot of money should GES stocks decline and value. 707 00:42:43,600 --> 00:42:47,360 Speaker 1: So you could argue there is a motive for Marcopolis 708 00:42:47,360 --> 00:42:50,759 Speaker 1: to try and drag ges name in the mud. Uh 709 00:42:51,160 --> 00:42:54,080 Speaker 1: So their valid arguments on either side about whether or 710 00:42:54,160 --> 00:42:57,239 Speaker 1: not this report is something you should pay attention to 711 00:42:57,680 --> 00:43:01,040 Speaker 1: or if it's something that has alter are your motivations 712 00:43:01,080 --> 00:43:05,719 Speaker 1: behind it. That being said, the fact that the Marcopolis 713 00:43:05,840 --> 00:43:08,160 Speaker 1: report came out doesn't change the fact that there were 714 00:43:08,200 --> 00:43:14,520 Speaker 1: already numerous investigations government investigations into g S businesses that 715 00:43:14,560 --> 00:43:19,160 Speaker 1: could end up hindering the company further. So there seems 716 00:43:19,200 --> 00:43:22,400 Speaker 1: to be smoke. There's just a question of is the 717 00:43:22,480 --> 00:43:25,640 Speaker 1: fire what Mark coupolists is saying or is it something else? 718 00:43:26,120 --> 00:43:29,040 Speaker 1: On top of all the problems the company faces, is 719 00:43:29,080 --> 00:43:33,800 Speaker 1: another external force that could really spell doom. Many financial 720 00:43:33,840 --> 00:43:38,680 Speaker 1: analysts say that signs point to another global recession. Already, 721 00:43:38,800 --> 00:43:42,400 Speaker 1: industries like manufacturing and freight are in a bit of 722 00:43:42,400 --> 00:43:47,200 Speaker 1: a slide, so a recession would greatly exacerbate General Electrics problems. 723 00:43:47,320 --> 00:43:50,600 Speaker 1: So are we seeing the end of days for a 724 00:43:50,600 --> 00:43:54,279 Speaker 1: company that helped launch the technological age? I don't know. 725 00:43:54,800 --> 00:43:57,239 Speaker 1: I don't feel great about it, but it is a 726 00:43:57,360 --> 00:44:00,960 Speaker 1: very large company. It's not like any of these things 727 00:44:01,239 --> 00:44:05,719 Speaker 1: is definitively the death knell for General Electric And there's 728 00:44:05,760 --> 00:44:07,520 Speaker 1: a lot of stuff that could happen. We could see 729 00:44:07,560 --> 00:44:11,480 Speaker 1: GE get broken up into smaller companies that individually are 730 00:44:11,520 --> 00:44:14,839 Speaker 1: able to succeed much better than they can collectively. All 731 00:44:14,880 --> 00:44:18,640 Speaker 1: of that remains to be seen. But it was fascinating 732 00:44:18,760 --> 00:44:24,160 Speaker 1: to learn more about this company's incredible, rich history. And UH. 733 00:44:24,239 --> 00:44:26,719 Speaker 1: I know that this last section was much lighter on 734 00:44:26,760 --> 00:44:29,040 Speaker 1: the tech side, as I said at the beginning, but 735 00:44:29,320 --> 00:44:31,400 Speaker 1: at the same time, I thought it was important for 736 00:44:31,480 --> 00:44:34,560 Speaker 1: us to understand how a company that had been so 737 00:44:34,680 --> 00:44:40,120 Speaker 1: instrumental in setting the tone for the technological age could 738 00:44:40,120 --> 00:44:46,080 Speaker 1: be facing extinction UH in two thousand nineteen. So here's 739 00:44:46,120 --> 00:44:50,680 Speaker 1: hoping that things turn around for GE, that the company 740 00:44:50,719 --> 00:44:55,440 Speaker 1: is able to reconcile all these accounting practices, that it 741 00:44:55,560 --> 00:45:00,680 Speaker 1: is able to deliver value to employees, to customers, to retirees, 742 00:45:01,239 --> 00:45:06,840 Speaker 1: and two shareholders not just two shareholders, and that wraps 743 00:45:06,920 --> 00:45:10,080 Speaker 1: up this episode. If you have suggestions for future topics 744 00:45:10,120 --> 00:45:12,960 Speaker 1: of tech stuff, whether it's a company, a technology, a 745 00:45:13,080 --> 00:45:17,359 Speaker 1: concept in tech, anything like that, let me know. Send 746 00:45:17,360 --> 00:45:20,080 Speaker 1: me an email the addresses tech stuff at how stuff 747 00:45:20,080 --> 00:45:23,000 Speaker 1: Works dot com or draw me a line on Facebook 748 00:45:23,080 --> 00:45:24,959 Speaker 1: or Twitter. The handle of both of those is text 749 00:45:25,000 --> 00:45:27,920 Speaker 1: Stuff hs W. You can also pop on over to 750 00:45:27,960 --> 00:45:31,120 Speaker 1: our website that's tech Stuff podcast dot com. You've got 751 00:45:31,120 --> 00:45:33,080 Speaker 1: to find a link to the archive of all of 752 00:45:33,120 --> 00:45:35,359 Speaker 1: our previous episodes there, so you can look up all 753 00:45:35,360 --> 00:45:38,760 Speaker 1: the different stuff we talked about, including the previous episodes 754 00:45:38,800 --> 00:45:41,319 Speaker 1: I did on g S History where Chris Pallette and 755 00:45:41,320 --> 00:45:43,399 Speaker 1: I sat down and talked about it. But the show 756 00:45:43,480 --> 00:45:45,320 Speaker 1: was very different back in those days. But if you 757 00:45:45,360 --> 00:45:47,799 Speaker 1: want to hear a different take on this same sort 758 00:45:47,800 --> 00:45:50,680 Speaker 1: of stuff, you can check that out. That one came out, 759 00:45:50,680 --> 00:45:54,279 Speaker 1: I believe in two thousand twelve. And don't forget we 760 00:45:54,320 --> 00:45:57,399 Speaker 1: also have a link to our online store where every 761 00:45:57,400 --> 00:45:59,840 Speaker 1: purchase you make goes to help the show, and we 762 00:46:00,080 --> 00:46:02,840 Speaker 1: greatly appreciate it and I will talk to you again 763 00:46:03,840 --> 00:46:10,759 Speaker 1: really soon. Y Text Stuff is a production of I 764 00:46:10,840 --> 00:46:13,840 Speaker 1: Heart Radio's How Stuff Works. For more podcasts from I 765 00:46:13,920 --> 00:46:17,520 Speaker 1: heart Radio, visit the i heart Radio app, Apple podcasts, 766 00:46:17,640 --> 00:46:19,640 Speaker 1: or wherever you listen to your favorite shows.