Jack Welch was a legendary leader — taking GE to soaring heights through the growth of GE Capital. But, GE Capital was doing everything from Thai auto loans to long-term care insurance policies to “floating-rate Polish residential mortgages . . . denominated in Swiss francs.” When 2008 hit, GE Capital was, literally and figuratively, in a world of hurt. Now that GE Capital is selling and shrinking, analysts are looking at GE and stunned at how little cash the business of GE generates, i.e., the turbines, the jet engines, and health care equipment.
The board says that it was “in some level of shock.” That would be because former CEO Jeffrey Immelt, who took over after Mr. Welch retired, told them, analysts, and the world that all was well in GE.
Now the SEC is investigating the company’s accounting on booking revenues for software sales to gas turbine customers. it looks as if GE tried to cram all those software sales into obeyer even though the contracts for them are performed over time.
There is nowhere to run and nowhere to hide. The accounting tomfoolery generally comes when the business model is failing. So it is and was with GE. A company of quality products may die of self-inflicted wounds. The irony is that during this long death march, Mr. Immelt, the board, and other officers spun yarns about their success. If you have bad news, get it out there and take your lumps. Then move the company forward. GE is still in cover-up mode. And no one seems to be sure which way to move forward.