Monday, June 20, 2011

"Making Stuff" Marketing

G.E. has an amazing story to tell its investors. As Steve Lohr’s story points out, its resume stretches back to Edison’s invention of the incandescent light bulb and forward to the development of Generation III+ nuclear reactors.

It feels good to hear about G.E. focusing once again on “making stuff” instead of relying on money-for-nothing profits via its downsized financial arm, GE Capital.

It’s pleasing to hear about G.E. creating manufacturing plants where workers operate in teams and aren’t suffocated by a hierarchical structure laden with weighty titles.

But will this new focus be profitable as profitable as the old one was? It’s still unclear.

I raise this point because GE Capital generated tremendous profits for the firm, and investors knew that. At the time of the story (December 2010), G.E.’s stock price was stuck at $16.78 a share. The high so far this year is $18.56, a far cry from its 10-year high of 51.86 in June 2001 and only slightly more than six months ago. G.E. hasn’t persuaded Wall Street of its strength, yet, though many financial analysts rate the blue-chip stock positively for its stability.

Perhaps the reason investors – and people like myself who are inspired by G.E.’s story - should be hesitant about buying into G.E.’s “making stuff” story is its 10-year track record with jobs.

Immelt is on President Obama’s Council on Jobs and Competitiveness, but since 2001, the year Immelt took over from from CEO Jack Welch, G.E. has cut 25,000 to 34,000 domestic jobs (depending on the source) and created about 25,000 overseas. Plus, it received billions in a federal buyout to stay afloat, meaning Warren Buffett wasn't the only one putting money into the company. Taxpayers did, as well.

“Immelt's firm stands as Exhibit A of a successful and profitable corporate America standing at the forefront of the recovery. It also represents the archetypal company that's hoarding cash, sending jobs overseas, relying on taxpayer bailouts and paying less taxes than envisioned,” says the Huffington Post.

“Since 2001, GE has shed at least 25,000 jobs domestically — and created an equal number or more overseas — while shuttering 29 plants in the U.S. over the last couple of years. It's also worth noting that GE's financial arm received a multi-billion-dollar liquidity injection from the Federal Reserve during the 2008 financial meltdown,” says a conservative commentator in the Daily Beast.

It seems like these job cuts and strategy of sending some jobs overseas would be worth noting in the NY Times piece. The word “bailout” isn’t mentioned. As for jobs, the only reference to jobs is the 4,000 jobs being created at new factories in Kentucky, Ohio, New York, Alabama and Mississippi.

That’s good, but it’s hardly 25,000 jobs to replace the ones the company cut on his watch. I just think it was worth noting that G.E. has cut a lot of jobs in the last decade even if it is starting to create them now that it’s focusing on “making stuff." When you say a company wants to "make stuff" again, you raise the notion of The Greatest Generation cranking out steel, cars, appliances, etc. You don't imagine those jobs going overseas. So it's "making stuff" with an asterisk.

As an aside, I love that Immelt quoted Mike Tyson, as saying, “Everybody has a plan till they get punched in the mouth.”

It’s such an excellent quote that I had to delve into its history. It was new to me.
Tyson is credited with saying variations of this quote in 1987 before he fought Tyrell Biggs for the heavyweight championship belt. Tyson KO’d Biggs (an Olympic gold medalist) in the seventh round in November 1987 in Atlantic City, N.J.

Before the fight, newspapers quote “Iron Mike” Tyson as saying, “Everybody has plans, until they get hit,” and some tack on the phrase “for the first time” after the word “hit.” There are no references to “punched in the mouth.” Many athletes have borrowed and reconstituted the boxing ring wisdom since that time.

Tyson vs. Biggs - Newspaper Clippings via Google Archive:
http://news.google.com/newspapers?id=Z-M0AAAAIBAJ&sjid=h5ADAAAAIBAJ&pg=4825,3650242&dq=mike+tyson+and+tyrell+biggs&hl=en

http://news.google.com/newspapers?id=ZiAyAAAAIBAJ&sjid=ouUFAAAAIBAJ&pg=6363,5017081&dq=everybody+has+plans+until+they+get+hit&hl=en

Citations:

The Huffington Post: http://www.huffingtonpost.com/2011/01/21/obama-picks-jeffrey-immel-ge-jobs-overseas_n_812502.html

Daily Beast: http://www.thedailybeast.com/articles/2011/01/23/jobs-boss-jeffrey-immelt-illustrates-obamas-entrepreneur-problem.html?cid=hp:beastoriginalsL6

1 comment:

  1. Jeremy -- that was very interesting. I think you're right that those things should have been mentioned in the NY Times article we read. The article painted a very different picture of the company.

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