ON JEFF IMMELT’S first day running the company, GE workers streamed into the concrete-and-steel monolith of the Bradley Center in downtown Milwaukee, the aging home court of the NBA’s Milwaukee Bucks. The cavernous space dwarfed the crowd of four thousand workers who arrived by bus to hear their new CEO speak.
Most of the workers came from GE’s medical equipment business, GE Healthcare Systems; Immelt had held his most recent job at its headquarters just a few miles away before being crowned to succeed Jack Welch. The forty-five-year-old new boss wouldn’t actually be in the building that Monday; instead, he would address the crowd via a massive video screen hookup, beamed in from GE’s management training complex back in Crotonville, New York, as cameras in Milwaukee relayed the Bradley Center scene back to him.
In addition, one-third of GE’s workforce of 300,000 employees around the world watched as Immelt addressed them for the first time. In an open-collar shirt and sweater vest, Immelt spoke for two hours, hitting all his bullet points about GE moving fast in the modern world, embracing the internet, and, of course, winning.
For its new boss with a jock style, GE held a pep rally, an unlikely spectacle of a throng of corporate workers cheering for upper management. No detail was left up to chance. Just before Immelt went on, two young women hurried into the arena in Milwaukee to stir up the crowd. Like stage crew members at a TV talk-show taping, they held up signs to the crowd of GE workers that read: NOISE.
After four decades at General Electric, half of them at the top, Jack Welch retired a celebrity. In his first week after handing over the reins, he was in New York, where he had a sprawling apartment on the forty-seventh floor of the Trump International Hotel and Tower, a building GE itself had owned and redeveloped under the Trump banner. On the corner of Central Park, the lavish home had breathtaking views of that ocean of green in the heart of Manhattan.
The previous Friday, GE’s board had convened with Welch as the chairman for the last time, and in his last official task, Welch had formally appointed his successor, Jeff Immelt. A retirement party followed at Crotonville, the cultural center of Welch’s reinvention of the company.
On Tuesday morning, September 11, the sky was crystal clear blue over New York. For Welch, it was a day long in the making. His book, Jack: Straight from the Gut, was going on sale as perhaps the most anticipated business book of all time, and Welch was kicking off the launch with an appearance on The Today Show.
Since Welch had put the show’s host, Matt Lauer, in his job—a tale he included in the book he was hawking—he was assured a warm welcome. No one would be asking hard questions about the Honeywell deal. The book was a hit before he even wrote it. Just about everyone wanted to hear the inside story of GE from the mastermind who built it.
Welch’s track record was legendary, and he was surrounded by people who lavished on him as much praise as possible. Despite the Honeywell trouble and a few months of downward drift in GE’s stock price, Welch was celebrated for his successes and declared a saint in the business world. The New York Stock Exchange held a dinner and cocktail party in honor of his career. To Welch’s devotees, the company’s triumphant decade was proof of the efficacy of the GE management machine he had assembled. Welch, in this telling, was the ultimate leader—a model for the next generation to emulate.
The company’s soaring valuation through the 1980s and ’90s had made high school–educated factory workers into millionaires, Welch said. GE had long encouraged employees to ride along with the soaring trajectory of its stock, offering savings plans that accumulated GE shares at a discount or with subsidies as GE’s stock outperformed virtually all others.
The company’s mystique had been amplified in the figure of Welch himself. Adored by the press and Wall Street, Welch was a household name, with a story to tell about positioning a century-old industrial company for the dawning of the information age. He would be right at home on a national morning television show.
When the first airliner hit the World Trade Center, Welch was at 2 Rockefeller Plaza, just across the street from the GE Building, waiting to go live on The Today Show. Welch never got on the air.
As TV channels around the world dialed in live feeds of the attacks on New York, Washington, and Pennsylvania and cell-phone networks in Manhattan creaked and then gave out under the deluge of calls, Jack Welch, the most famous boss in America, wandered out onto the corner of Forty-Ninth Street. He watched from a vantage he shared with hundreds of thousands of New Yorkers who, alone or in groups, stared south down the stilled avenues, in tears and stunned silence, at the giant plumes of smoke and flame. Welch was as cut off from information as the people around him on the Sixth Avenue sidewalks. Cable chyrons blazed rumors and best estimates, but few had any idea how many attacks were occurring or still might. The roar of military aircraft shook the blue skies over New York.
That moment, Welch thought, made the launch of his book seem “like the dumbest, most insignificant thing.”
Day broke over Seattle on Jeff Immelt’s first Tuesday morning as GE’s CEO. The salesman was on a sales call in the Pacific Northwest to meet with Boeing, the world’s largest plane maker and one of GE’s most important customers.
Immelt was in the Pacific Time Zone in the midst of his morning routine. On this day, that was exercising on a StairMaster while devouring live TV coverage of the inferno in the North Tower when the second plane struck. As a consensus immediately registered among cable news reporters that an accident was an impossibility, it dawned on Immelt that, with air travel indefinitely halted, he was stranded in Seattle, with other GE executives scattered around the country, on his fourth day on the job.
The new CEO was quickly on the phone to heads of the business units and the board of directors. He also called Jack Welch, eager for advice. Immelt knew that, faced at the beginning of his watch with a global catastrophe that would have huge effects on every level of the company, and before the markets and the public had had a chance to take his measure, how he responded would be formative. It would also be a test for the fortress of GE, which had found prosperity through wartime and peace.
From the first moments on the StairMaster when he saw the news, it was clear to Immelt that the attacks would hit General Electric hard. Its insurance business was one of the companies covering the destroyed buildings, its TV business would feel the sting of lost ad revenue and absorb a surge in reporting costs, and the indefinite suspension of air travel would strangle the sales of GE spare parts and repairs of its jet engines, which now sat idle across the country.
But the real hit would be deeper. The economy was already heading into its first recession in a decade, putting undeniable pressure on GE, and the attacks would only exacerbate that downturn.
Meanwhile, even Jack Welch’s stock was falling. With his era as CEO concluded, Welch now stewed as his messy divorce played out in newspapers and legal filings, revealing embarrassing details about lavish perks and spending—fresh-cut flowers flown in from Europe, divorce by fax—that reflected badly not just on one rich couple but on the company that had permitted and often paid for it all. As in his “Neutron Jack” days, this was another easily grasped portrayal of what Welch looked like up close that was not very flattering. Even more galling were the questions, as the stock price swooned from its peak under Welch, about whether the very best of the golden years hadn’t been driven by creative accounting rather than his genius. These doubts were quietly voiced at first, but something had to explain an otherwise incomprehensible streak of earnings growth. Now the obligation to explain away such concerns sat squarely in the lap of Jeff Immelt.
Like his predecessor, Immelt had shown an ability to shake off criticisms and unwelcome questions. And nothing whisked them away more quickly than financial success. Now, despite his youth, he had to keep up the same impregnable defense that Welch had managed and navigate the changed state of a company whose detractors wondered where it still fit in a shifting global economy.
Immelt quickly adjusted to being in the club of prominent CEOs, the handful of (mostly) men who ran the world’s biggest enterprises. He devoured books and consumed a steady diet of news—heavy on business and sports. Like Welch, he relied on humor and an emphatic plain-spokenness to maintain support among the rank and file. And Immelt still clung to his Ohio roots. His language was peppered with the jargon of the Finneytown High jock he once had been as he enthused about “blocking and tackling” from the stages on which he held forth to GE investors.
It was a belief in the wisdom of the playbook that had informed Immelt’s every step along the path to becoming CEO. Even in his early days, peers felt, Immelt had seemed so confident in GE’s operational excellence—the quality it claimed it could instill in any manager and teach to customers and colleagues alike—that he hadn’t always seemed to burrow into the details of the particular industrial unit he led. He’d been able to manage through crises and goad his team to success using only GE’s management machine and his own positive and aggressive browbeating to stretch goals and hit higher targets. It was the GE way.
Structured as a series of silos in a matrix management scheme, GE was a corporation with multiple, complex, and entangled management hierarchies. Workers generally reported to more than one boss. For example, chief financial officers of a business division reported to the leader of that division, but also to another supervisor in GE’s Finance Department, which was led by the CFO of the corporation.
Immelt had risen in the company from the ranks of those who sold GE’s products and services. He had only rarely been responsible for the intricacies of production problems, operational inefficiencies, research, or finance. Nevertheless, like Welch, Immelt had no problem trusting his gut. But it could be a weakness. When deciding on a deal or a move into a new line of business, his peers said, he rarely strayed from his initial position, and being presented with contrary evidence by internal analysts often visibly annoyed him. Immelt had a tendency to blow off bad news.
“That’s just your opinion,” he would say. “You’re not looking at it right.”
But times were now changing, and changing rapidly—in almost every conceivable way. The terrorist attacks marked the dawn of a new era of uncertainty and fear in the United States. There was no question that the period of prosperity and safety in the 1990s was over, and even the certainty and authority of General Electric would be subject to the storm of swirling forces.
Stranded in Seattle, Immelt was working numbers with his advisers. A global panic had grounded thousands of planes that GE rented to airlines, along with tens of thousands of GE engines, which spit out profits only if they were in the air. Its insurance business was wavering, and the prospect of global instability dampened the prospects for the major investments that buoyed GE’s power and medical device businesses.
A few days later, the GE investor relations shop emerged with a number for the immediate cost to General Electric, financially, from the September 11 attacks: $600 million, meaning the next quarter’s earnings would be only slightly less than what analysts were expecting.
Like most of corporate America, GE was hit hard—it also lost two employees in the attacks—but it did find a marketing victory as downtown Manhattan was still smoking. Chief of communications Beth Comstock, a forty-one-year-old public relations climber who came to GE from a similar role in NBC’s news division, had been called up to the big leagues by Jack Welch, who was looking for someone to run communications as he prepared to hand off the baton. Immelt inherited Comstock, and she clicked right into place with Immelt. In those first days, she helped develop an advertisement to declare GE’s patriotism and show support for rebuilding after the attack. It was a sketch of the Statue of Liberty rolling up her sleeves and getting to work.
Immelt liked it and told her to go ahead with it. But BBDO Worldwide, GE’s longtime ad agency, and pretty much everyone else at the company who saw the idea hated it. Those opinions didn’t matter.
“We listened to everyone. But in the end, we overruled them,” Comstock wrote in her memoir. The ad was a big hit. Its success over the chorus of objections was a major victory for Immelt, who appreciated leaders who went with their gut and stuck to their guns. The success of the ad also set the tone for Comstock’s trajectory at the company.
Immelt had been handed the keys to a house that immediately caught fire. It was his company now, the new CEO felt, and the new assaults felt personal, and as if they came from all sides.
“My second day as chairman, a plane I lease, flying with engines I built, crashed into a building that I insure, and it was covered with a network I own,” he said just weeks afterward.
Immelt wasn’t just watching from the sidelines. The attacks instantly flattened the airline industry; not only was the four-day halt to all air traffic crippling, but passenger reluctance to fly would last for years. GE teams helped carriers adjust to the downturn and provided crucial financial support by allowing customers to defer payments and advancing $5 billion in direct financing to the airlines.
In the aftermath, Immelt was learning what Welch had known: how much GE’s CEO could lean on GE Capital when times got tough. There was an option in this fraught moment as stock markets warily reopened and companies lumbered back into operation, trying to locate a new normalcy: take a giant charge. A massive loss in the accounting would reflect all the financial loss that GE knew about in the wake of the disaster—its engines, its insurance book, its macroeconomic outlook. It also might reflect the lingering uncertainty that GE’s investors did not fully understand, like the weaknesses in its opaque financial arm that couldn’t be valued by everyday investors, and its knowledge that it probably had never quite been worth what it seemed to be at the high-water mark. A massive loss might trigger a sell-off in the company’s shares, but it would also serve as something like a reset—an understandable adjustment in a moment of national reckoning, and perhaps a new beginning.
But GE opted to soften the blow. Only later would it be obvious that 9/11 did more harm to GE than the company acknowledged at the time.
The company’s fourth-quarter earnings in 2001 managed to rise nearly 10 percent, hitting revised Wall Street expectations. The jet engine business was hit hard, and so was NBC, but the strong financial services business helped to offset that weakness at just the right time.
Immelt went on Fox News in January to declare victory, citing GE’s strategy of owning diverse businesses to offset tough times. “I think it just works,” he said, pointing to the company’s digitization and well-known Six Sigma practices. “And we have just great financial discipline to allow us to do acquisitions and continue to grow in down cycles.”
But GE’s fortress of diverse businesses couldn’t ward off the economic downturn and the corresponding drop in demand for GE’s sweeping portfolio of products. Layoffs were coming.