GE: the corporation beyond Erie

(This is a bit off-topic; I won't be at all offended if the moderator decides to delete it.)

The builder of the world's best locomotives (who, us? biased?) is part of a large conglomerate: a company that makes engineering stuff, but that also has a very large financial side, one that for a while seemed to be dwarfing the part that actually makes things. This
http://www.thefiscaltimes.com/Articles/ ... -Mire.aspx
is an interesting column about the company and its management.

Item: The people in charge of GE's real estate investment arm apparently suggested selling out in 2006 (near the peak of the boom), but Immelt rejected the suggestion. (One suspects he regrets this now!)

Item: GE seems to be pulling in its horns a bit in the financial industry, looking more to developing and marketing technology. Recent (= last year or so) acquisitions have been comparatively small, and in industries like energy where growth is foreseen. (The article doesn't mention the railway supply industry, but I take this to be good news: GE top management is focusing on a range of industries that would include the interesting one.)

Item: Jeff Immelt is a second-generation GE employee... (So maybe he has more of a sense of loyalty than some CEOs?)

GE Rail is going to be in for the fight of its' life....

In my opinion, Immelt, being a mathematician and Harvard MBA, focuses and understands the General Electric's financial businesses but only perceives the heavy metal divisions as a distraction. As a result, the manufacturing divisions are just a sideline to him. It seems to me his management efforts focus on the financial divisions performance and manufacturing has fallen by the wayside. Immelt's educational background is mathematics and business, he is certainly not an engineer and I do not perceive him as someone who thinks like an engineer. This is sad to me because foreign conglomerates like Areva and Siemens are filling the lucrative heavy metal void that Immelt mostly ignores and is letting slip through his fingers.

This is only my opinion and is only based on what I read on CNN etc. However, it frustrates me greatly to see such a powerful industrial nation like the US just throw away it's once great industrial strength for financial only ventures, frequently only good for short term and unsustainable financial windfalls. I strongly believe this is due to the MBA's (without engineering degrees) that have taken over the business world. BTW, I am an engineer (BSEE) and did work for GE in one of their manufacturing divisions for seven years. Back then (early 70s), GE was a powerful industrial influence. They still have a considerable amount of manufacturing left but no longer even come close to dominating the large electrical equipment arena as they clearly did then. I see this every day as I work in a very large industrial facility (nuclear power plant) and see who I have to go to when there is a need for switchgear, etc.

GE's diversification away from manufacturing was prompted by Jack Welch years ago. I don't have the numbers, but I'd expect that manufacturing as a percentage of GE's portfolio has not significantly declined under Immelt.

The one thing to consider about GE - they've been masters at earnings management... and in doing so, they're slaves to short-term earnings. It's a bit of a "flavor of the month" attitude toward their businesses as their earnings fluctuate. GE Rail Services (the car lessor [classified as a financial services org], not locomotive group) was put on the block earlier this year (as it was in 2008 and 2009). It's been reported that GE quietly took it back off the market last month due in part to improved performance.

By the way, Jack Welch is an engineer.

The 9-6-11 edition of The Wall Street Journal contained several related articles on GE. The lead article was titled "Immelt and GE, 10 Years In".