With Jack Welch turning 65 and retiring next year after more than 20 years at General Electric's helm, the succession talk concerned three candidates: Robert L. Nardelli, President and CEO of GE Power Systems, W. James McNerney, head of GE Aircraft Engines, and Jeffrey R. Immelt, President and CEO of GE Medical Systems. This morning, the company anointed Immelt.
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Diversified manufacturing and finance giant General Electric (NYSE: GE) ended jostling among the princes today and determined CEO Jack Welch's heir. Eighteen-year GE employee Jeffrey Immelt, now president and CEO of GE Medical Systems, will succeed Welch when he retires next year. Immelt immediately becomes president and chairman-elect, joins the board of directors, and grabs a seat with Welch and Vice Chairmen Dennis D. Dammerman and Robert C. Wright as a member of the Corporate Executive Office. Welch called Immelt "a natural leader, and ideally suited to lead GE for many years." At only 44, Immelt could easily do so -- he's about Welch's age when he took the helm. Immelt began his GE career at 26 in 1982 in corporate marketing. He moved to the plastics division, and then to appliances in 1989, where he was vice president of consumer service and vice president for marketing and product management starting in 1991. Back to the plastics division in 1992, he rose to vice president and general manager. In 1997, Immelt was named president of GE Medical Systems, a world leader in medical diagnostic technology and information systems. It now has $7 billion in annual revenues and, as we can see from TV, sells a magnetic resonance imager (MRI) that doesn't close you up and cause people like me to panic. GE's success story past Thomas Edison would hardly recognize his progeny today, as Big Bulb now comprises 13 businesses that would be Fortune 500 companies by themselves and meets the ambitious goal to be number 1 or 2 in almost all its businesses. With $127 billion in trailing twelve month (TTM) revenues and $12.7 billion in TTM net income, no wonder GE brags a market capitalization just under $500 billion -- beating out every other U.S. company. A bright future too? Investors likely expect King-elect Immelt to deal with those who were not chosen, implement his own vision, and continue Welch's leadership that forced divisions to "destroy" themselves in efforts to move forward and beat competition. Welch says that Immelt "brings a keen strategic intellect, a cutting-edge technological background, strong leadership characteristics and a unique set of team-building skills" to the tasks ahead. All eyes will be watching whether he can meet or exceed expectations.
Immelt has a tough act to follow. GE has become perhaps the most famous -- and trusted -- name in U.S. investing, surpassing for many even the "National Bank" of Coca-Cola (NYSE: KO). Paul Larson (TMF Parlay) in the Fool's GE Duel detailed these historical reasons in support of GE Bulls, including the fact that GE is the only company in the current Dow Jones Industrial Average that was in the 1896 original compilation, has paid a dividend every quarter since 1899, and has uninterrupted steady long-term share price appreciation.
Of course, as investors repeat to themselves at bedtime each night, past performance is no guarantee of future results. But Phil Weiss (TMF Grape) thinks GE is on track for future success, after examining GE's lightning fast success embracing the Internet in several business lines. For example, GE now secures 45% of its appliance market through the Internet, and its plastics division involves customers through the 'Net in ways that revolutionize the product design process. Weiss believes these and other examples prove Welch's assertion that "digitizing a company and developing e-business models is easier -- not harder -- than we ever imagined."
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