Jack Welch Transformed GE into a big Financial company with an industrial Arm. Why do you thing GE went up so quickly in terms of value after Jack Welch Took over. GE will survive but it will take a few years to clean up the mess and then it will be back to boring old General Electric. Immelt has been trying. The problem is GE shareholders were happy as long as GE made the numbers. He has been trying to exit some of these businesses for years. Now that GE has been kicked in the groin I think Immelt has much more leeway to make GE into an infrastructure company.
Welch's mantra was, "Deliver at all costs." And deliver he did. Immelt delivered as well but when the deck ran dry they couldn't shuffle. There's no doubt GE is an economic powerhouse but when a company is able to "deliver at all costs" there can only be some slight of hand. Companies like Honeywell or Catepillar or Boeing, all have a certain variation in their earnings but not GE. Why exactly is that? I'm willing to bet that Buffett exited out of GE because their business became to complex and therefore, easily manipulated. I wonder how high GE will be able to stack that deck once again?
I would say a large portion of American companies play games such as holding back earnings to use for future quarters etc.. American companies have become short term quarterly thinking companies at all costs instead of thinking long term. And American investors have the same attitude as well. Warren Buffet is one of the last few old school folk left .
It's an accounting technique called smoothing earnings. Made possible by questionable accruals. It's not an American thing, it's used all over the world by most companies.