What The Hell Happened?

Few corporate meltdowns have been as swift and dramatic as General Electric’s over the past 18 months—but the problems started long before that. Today, with rumours of a breakup swirling, the question is whether this great company can come back.

- Geoff Colvin

IT’S A BAD DAY for a CEO when he announces he’s retiring and the stock goes up. That was JeffImmelt’s day on June 12, 2017. The news of his departure was in one sense no surprise— some investors and analysts had been urging his ouster for years—but it was also a shock. He’d been General Electric’s CEO for almost 16 years, and outsiders were unaware of any specific succession plans or that Immelt, at age 61, had any intention of stepping down. Suddenly they were told that in just seven weeks he’d be gone as CEO (he remained nonexecutive board chairman an additional two months), to be succeeded by John Flannery, head of GE’s health care business and a 30-year employee. Investors didn’t need long to decide this was good news. The market was flat that day, but they bid GE stock up 4%.

Their optimism was at best premature. The stock closed at $28.94 (Rs 1,828) on June 12 and has not reached that price since. As economies boomed worldwide and U.S. stock indexes soared, GE has collapsed in a meltdown that has destroyed well over $100 billion of shareholder wealth. Pounded by a nonstop barrage of bad news, investors are traumatised and disoriented. “They just can’t figure it out and don’t want to invest,” says analyst Nicholas Heymann of William Blair & Co. “This isn’t like surveying the landscape. It’s spelunking with no lights and no manual.” Analyst Scott Davis of Melius Research says some investors have become permanently disillusioned: “Many have told us they will never own GE again.”