In June, when Jeff Immelt resigned after 16 years as CEO of General Electric (NYSE:GE), the man who gave him the job, the conglomerate's legendary chief, Jack Welch, publicly offered nothing but praise. In a short statement released to the business network CNBC, Welch stated, "Jeff brought his best every day for 16 years. I wish him the very best in the many good years ahead."
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But in private, Welch's assessment of Immelt's tenure has been much more scathing, according to several former GE executives and others who know Welch. In fact, these people say, Welch has privately conceded that one of the biggest mistakes he made in his often illustrious career as chief executive of one of the nation's largest companies was appointing Immelt as his successor. Welch’s private hostility toward Immelt has grown more acute in recent months as shares of GE have hit recent historic lows and Wall Street questions the direction of the company, these people add.
To be sure, the relationships between big-time CEOs and their successors are often fraught. By and large, executives who reach such positions of power in the cutthroat world of Corporate America are hyper-aggressive personalities who carry more than their fair share of ego and hubris. When replacing a CEO such as Welch -- a corporate superstar and author who over a career that spanned three decades remade GE from a large energy and manufacturing company to a colossus with a roaring stock price -- that dynamic can be even more dicey.
Yet even by those standards, the Welch-Immelt relationship surpasses the normal jealousies and strife among current and former corporate chiefs, these people add. It is fueled in part by what Welch perceived as a series of personal slights spanning the last 16 years and Immelt looking to put his own mark on the sprawling conglomerate by jettisoning some key businesses Welch considered to be part of his corporate legacy.
Then there’s GE’s uneven financial performance and its underperforming stock price under Immelt that has further fueled the resentment between the two men, with Welch blaming the company’s woes on Immelt’s management decisions, and Immelt privately grousing that he believes Welch left him a lumbering behemoth that was ill-equipped to deal with the business challenges that the company has more recently faced.
"There is very bad blood between these two former GE CEOs, which is common, but this is elevated," said Jeffrey Sonnenfeld, dean of leadership studies at the Yale School of Management. "Welch has regrets about Immelt given choices Immelt made, and Immelt has been disappointed about some elements of the Welch legacy."
Neither Welch nor Immelt would comment for this article and their contretemps, but they wouldn’t deny they exist. Both also confirm that the two men last spoke just a day before Immelt announced his resignation in June, when Immelt called Welch to alert him he was stepping down as CEO. According to one former GE executive, Welch was terse in his conversation with Immelt. Welch, through a spokeswoman, confirms the call took place and says Welch simply "congratulated" Immelt on his retirement and that conversation lasted just a "few minutes."
Both men, through their spokespeople, say they haven't spoken since. Immelt, though a spokesman, said: "Jack was a very good CEO, and I appreciate everything he did for me." He declined further comment, as did a spokeswoman for Welch.
For better or worse, CEOs are often graded on their stock price, and it is here where Immelt's relationship with Welch has its biggest strains. Welch's expansion of the company, particularly the vast expansion of GE Capital, which operated like a hedge fund, created enormous shareholder value with some of the biggest gains occurring in the boom years of the 1990s. GE’s businesses under Welch ranged from its tried-and-true energy and manufacturing units to include finance, media, entertainment and even pet insurance—all at or near the top in terms of market share. The company’s stock price increased an astounding 4,000% during Welch’s 30 years running GE.
Under Immelt, meanwhile, GE's stock performed well below market indexes. He officially took over on Sept. 7, 2001, and since then the company has lost $150 billion in stock market value and its shares have declined nearly 33%. Many of its core businesses, while leaders in their niches, began to underperform as well.
People close to Immelt say he blames the stock slump and GE’s business woes on a combination of bad timing and problems tied to Welch's legacy. Immelt took over at a time when shares of GE still reflected some of the hype of the internet bubble and just before the 9-11 terrorist attacks began weighing on the U.S. economy and markets. Immelt also had to manage the company through the 2008 financial crisis, when GE came perilously close to insolvency and relied on government assistance to pull through, they say.
Meanwhile, Immelt has told people that he believed Welch left him with such an incongruous colossus that strayed so far from the company’s core businesses of energy and manufacturing that it could never have survived the changing corporate landscape. That’s why Immelt in 2009 sold off NBC Universal—the media and entertainment company—to Comcast (NASDAQ:CMCSA), and then a few years later he began spinning off most of GE Capital, both of which were considered crown jewels during the Welch years. In the case of GE Capital, its financial crisis-related losses were the reason why GE needed government assistance to survive the 2008 meltdown.
Privately, Welch has fumed when he heard those sentiments, and blamed the company's stock erosion and the company’s lackluster performance during the Immelt years on what he viewed as Immelt's plodding management style and his inability to grow businesses while keeping costs down.
Welch, after all, earned the nickname “Neutron Jack” during the 1980s for eliminating tens of thousands of employees even as he continued to accumulate businesses that dominated in market share. Immelt didn’t move to unload GE Capital until 2015, people close to Welch point out, well after the financial crisis and when the markets were clearly bouncing back. (A spokesman for Immelt points out that he exited one Welch legacy, GE Capital’s insurance business, in 2003, which was a “particularly bad fit.”) Welch also holds Immelt accountable for GE’s enormous overhead and cost structure, which has weighed on the company’s bottom line nearly from the moment he took over as CEO.
There may have been sound business reasons to exit these businesses, but according to people who know Welch, they say Welch believes many of these moves were more about Immelt looking to put his imprimatur on the company that he couldn’t effectively manage. Some moves by Immelt were taken very personally by Welch. In one instance, he privately fumed when Immelt ousted his friend, Home Depot (NYSE:HD) co-founder Ken Langone, from GE’s board in 2005. People close to Welch believed Immelt used as an excuse Langone’s then battle with regulators over his role as a board member of the New York Stock Exchange to push him off the board when the real reason was Langone’s relationship with Welch. Langone, through a spokeswoman, had no immediate comment.
With that, Welch and Immelt became increasingly estranged. People who know them say they rarely spoke in recent years unless they happened to run into each other at an event where they might exchange a few faint pleasantries.
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Welch is said to own an apartment in the same New York City building as Immelt and looks to avoid riding in the same elevator as the man he named as his successor. Friends of Welch were even put on notice a couple of years ago not to invite Immelt to a reunion of GE executives because they thought Welch didn’t want to be in the same room as Immelt.
These same people close to Welch marvel that the garrulous and blunt former CEO turned management guru never let his increasingly personal animus of Immelt become public other than a single instance: an interview with CNBC in 2008, just after GE missed its own earnings estimates. When asked on air about it by one of the network’s anchors, Welch said: “Here’s the screw-up: You made a promise that you’d deliver this, and you missed three weeks later…Jeff has a credibility issue. He’s getting his a-- kicked. He apologized.”
Since then, Welch has steered clear of discussing Immelt’s management of the company other than with friends and former GE colleagues, but his assessment has been the same: Immelt isn’t up to the job of running a company like GE.
Back in 2000, when he chose Immelt as his successor over two other longtime GE executives, Robert Nardelli and Jim McNerney, Welch believed he had chosen the perfect management specimen for the modern age: a smooth, Ivy League educated wunderkind who understood business and the increasingly political nature of running a major American company.
Welch now says that while Immelt may look the part of the CEO, either Nardelli or McNerney would have been a better choice as CEO.
It’s unclear what Welch thinks of John Flannery, who was named the new chief executive of GE after activist investor Nelson Peltz bought $2.5 billion of the company’s stock and seized a board seat with the intention of re-inventing the company once again. Flannery is a longtime GE executive and a close associate of Immelt over the years. But since taking over, he has done his best “Neutron Jack” imitation by cutting jobs, as he continues the downsizing that began under Immelt.
That said, Flannery’s moves haven’t done much to help GE’s stock, which Welch presumably still holds. Shares have traded as low as $17 post-Immelt’s retirement announcement, well below its Welchian highs, as Wall Street continues to question the company’s business model and ability to grow earnings. And the negative buzz about Immelt has persisted even after he announced he was stepping down. It was recently revealed that the company had assigned a costly “spare” jet to fly alongside Immelt when he was traveling overseas. Immelt later said he didn’t know about the practice and ended it when he found out in 2014.
But when the jet fiasco went public, it only underscored some of Welch’s criticism about Immelt’s management of the company. Flannery, for his part, says he will create $20 billion in savings over the next two years through downsizing, and if that doesn’t work, people close to Peltz say he may be forced to break up the conglomerate by spinning it off into separate companies. GE had no comment.
If that happens, Welch at least privately will lay the blame on Immelt, people close to him say.
“Jack is sick over what happened to GE,” says one friend of both Welch and Immelt who spoke on the condition of anonymity. “And he holds Jeff responsible.”