THE PROTESTERS’ SIGNS carried messages like PENSION FAIRNESS and RAGE as they converged on the entryway of the Sheraton Hotel and Towers on Chicago’s Water Street on April 23, 2014. In their ranks were GE workers and retirees, former employees of the Erie locomotive works and the turbine halls of Schenectady, and veterans of the engine factory in Lynn, a site that predated the company itself.
Their rage was focused on Jeff Immelt, Jeff Bornstein, and the board of directors, the authors of the corporate cost-cutting program that the GE executives called “Simplification.” That program had zeroed in on worker pensions and retiree health insurance as a good place to tighten the company belt. The company said that cutting unsustainable costs and trimming expenses would boost profit margins and placate investors, who remained unenthusiastic about GE’s performance in the sixth year since its near-death experience in the financial crisis.
But while GE was making moves to change the terms of the lifetime health coverage it had promised workers, Immelt was also showing signs that he was in a spending mood. GE had been in the market for “bolt-on” acquisitions for the past few years. It was also keeping to its target, the two Jeffs had told investors as recently as that spring, of raising $1 billion from selling off businesses for which it no longer had any use. But Immelt had also let slip—in a classic example of GE’s investor semaphore—that the company would be willing to exceed its acquisition targets and make a much larger deal should the right opportunity present itself.
Inside the Sheraton, Immelt did his customary grip-and-grin circuit through the crowd in the moments before the annual shareholder meeting began. Towering over nearly everyone in the crowd, the CEO grinned broadly, his eyes wide in his broad, fleshy face, and squinted slightly as he greeted share owners. Immelt was fundamentally genial and greeted even adversaries like Dennis Rocheleau—a former GE labor negotiator and a current advocate for retiree benefits—with a chuckle. It was the same Dennis Rocheleau who had almost come to blows with Immelt while rowing off Hurricane Island years before. Nonetheless, as he sped through the room with a smile that sometimes seemed on the verge of a grimace, he greeted everyone he could, including reporters and some of the dissidents who would condemn the company’s course during the public comment period that was soon to begin.
The shareholder meeting was a chance for the broad GE constituency—Immelt’s voting public, for lack of a better term—to air out its every last disappointment with the company over the almost fifteen years of his tenure. The annual meeting was the worst day of the year for Immelt, who was powerless against whatever dissent was expressed. He had to listen, but his impatience betrayed him when he pointedly cut off speakers who belabored their point with an abrupt “Okay, thank you.”
At this year’s meeting, beyond the ceremonial duties Immelt would perform on the dais, fielding questions alongside Bornstein and general counsel Brackett Denniston, Immelt had something else on his mind. The deal that would be the centerpiece of his pivot was finally coming together in secret meetings in hotel suites mere blocks from this conference hall, where retirees deigned to give him hell about wanting GE to return to its industrial roots and treat its workers as they had in the good old days.
Ironically, that was exactly where he was trying to go, not that anyone wanted to give him any credit for it. Very few in the room knew what Jeff Immelt had been up to in Chicago that week, in the busy hours before he entered the great hall to address his shareholders.
Holed up in a hotel suite across town, GE’s deals team and negotiators from Alstom were combing through asset lists and pricing models, trying to pencil out the arithmetic that would turn Jeff Immelt’s and Patrick Kron’s deal dream into reality. The storied Alstom train business, maker of the vehicles for France’s high-speed TGV, would stay put, becoming the new core of the public Alstom SA. GE would sell Alstom its own railroad signaling business, a relic of a time when GE’s locomotive and railcar business was far more central to its operations. The bankers argued over the valuations they attributed to Alstom’s assets; for example, GE’s team felt that Alstom’s murky backlog of power orders had not been reviewed comprehensively enough to make a proper estimate of its flaws and liabilities. GE board members, whom Immelt had alerted to the possible deal in February, believed that they were on track to completing a $12 billion deal.
As the GE shareholder meeting approached, a transatlantic flight touched down in Chicago. Kron himself had arrived. Immelt and Kron retired to a private meeting in a hotel suite, their presence known to internal business development teams and now to investment bankers who had been lined up to help close the largest acquisition in GE’s history—one that, if successful, would help exorcise the ghost of Jack Welch’s debacle thirteen years earlier when his attempt to buy Honeywell was blocked. The two CEOs negotiated as their teams waited for news. Finally, they shook hands.
Jeff Immelt emerged with his prize, still a secret, having agreed to sweeten the pot by roughly $1 billion. GE and Alstom negotiators returned to work, penciling out the terms of a deal that would place an enterprise value of $13.5 billion on Alstom’s portfolio of gas and steam turbines, windmills, and electrical grid equipment. The figure would be enough to win endorsement from Alstom’s board and, Kron was sure, an approving vote from Alstom shareholders. Crucially, the deal could go forward with the blessings of almost all of the key parties because $13.5 billion was enough to get Bouygues on board.
Now, the Alstom CEO said, it was time to give the French government, especially its activist economy minister and markedly pro-business Socialist president, a friendly heads-up that one of the country’s most venerable industrial companies was preparing to sell itself to the Americans. Jeff Immelt, for his part, headed over to the Sheraton for the shareholder meeting. Sitting on the dais, humoring his interlocutors with attention in the public comment period, he had the air of a man with many important things going on elsewhere.
It was almost time to unveil his biggest maneuver yet.