GE Close to Kissing Connecticut & Gov. Malloy Goodbye
Connecticut Governor Dannel Malloy failed to impress officials at General Electric (NYSE:GE) with a last-ditch effort to keep the conglomerate from moving its corporate headquarters out of the state even after he vowed to match the best offer dangled by other governors looking to lure away the company and its bevy of jobs and taxes, the FOX Business Network has learned.
Though no final decision has been made, people with direct knowledge of the matter say Malloy’s December presentation, described as lackluster by GE officials, increases the possibility that the company CEO Jeffrey Immelt will move its long-time corporate headquarters out of Fairfield, Connecticut.
A final decision is expected before the end of January.
“They [Malloy and other state officials] basically came in and said ‘we will match the best proposal offered by any other state,’” said a person with direct knowledge of the meeting. “But Immelt isn’t looking for a deal; this is more complicated.”
A spokesman for Malloy declined to comment. A GE spokesman said: “We have formed an exploratory team to assess the company’s options to relocate corporate headquarters. The team is currently engaged in the process and is taking many factors into consideration. When there is a final decision on relocation, we will communicate it publicly.”
Such a move would be a blow to Connecticut’s economy, which has failed to fully recover from the 2008 financial crisis and could have political implications in a state dominated by Democrats, like Malloy, who was elected governor in 2010. The state’s senior U.S. Senator Richard Blumenthal is seeking re-election in November, and his likely Republican challenger, economist and television personality Larry Kudlow will likely make the state’s dismal business climate—and GE’s possible move—a central theme of his campaign.
Immelt announced in June that GE was considering moving its corporate headquarters out of Connecticut to a more tax friendly state. The announcement came after Malloy reneged on a campaign promise not to raise taxes and then crafted a budget with the state’s Democratically-controlled legislature that called for higher levies on individuals and corporations.
Since then, officials from around a dozen states such as Texas and Ohio have met with Immelt and his “exploratory team” in an attempt to woo the company and its jobs. GE insiders say Immelt has narrowed the potential sites of a relocation to Westchester County, NY, New York City, Providence, RI and Boston, MA. He might also opt to remain in Fairfield in the end.
Part of the decision to remain in the northeast is predicated on the proximity to the company’s massive leadership and development center in Crotonville, New York near the Westchester County town of Ossining, according to people with direct knowledge of the matter. If the firm decides to leave Connecticut it would likely keep some employees in the state and could donate its headquarters to Sacred Heart University, which named its business school after the company’s former CEO, Jack Welch.
About 800 people work at GE corporate headquarters in Farfield, and the relocation would also bring significant corporate and individual tax revenues to the winning state. GE is one of the world’s largest companies with a market value of close to $310 billion. Earlier in the year, it announced it would sell off most of its massive GE Capital unit, amid tougher regulations that have made the financial business less profitable.
Immelt did not attend the December meeting between Malloy and the company’s exploratory team, but he was immediately briefed on the matter, according to people with direct knowledge of the meeting. The biggest sticking point for GE in Malloy’s presentation was that it didn’t address all the factors that Immelt is considering in determining whether or not to move the corporate headquarters aside from the state’s tax structure.
They include Connecticut’s access to quality transportation and the overall business climate that remains sluggish even years after the 2008 financial crisis, according to people with direct knowledge of the matter.
A big part of the problem facing Malloy in keeping GE at its current location in the state is that GE officials believe he didn’t take Immelt’s threat to leave Connecticut seriously, these people say. A number of other state officials met with Immelt even before Malloy made his initial pitch to the company in the summer, and when he did, Malloy made a crucial error.
In a power-point presentation, Malloy used a photo of a jet engine that was built by a GE competitor, Pratt & Whitney. Immelt pointed out the mistake during the meeting, these people say.
“That incident has set the tone for the rest of the negotiations,” a GE insider tells FOX Business.
And GE's final decision may set the tone for other large corporations located in Connecticut including Aetna (NYSE:AET), Hartford Financial Services Group (NYSE:HIG) and United Technologies (NYSE:UTX).