Thursday, April 17, 2008

Restructure GE

After reading the article in the New York Times by Nelson Schwartz and Claudia Deutsch entitled  "G.E.'s Shortfall Calls Credibility Into Question", I agree with critics that GE should be restructured ASAP. I think it makes perfect sense for the company to focus on high-value, high-profit industrial infrastructure and energy production technology. The company should have a CEO focused on infrastructure and energy. Spin off the finance arm, low-margin consumer appliances, and entertainment businesses. Alternative energy is going to be a huge and booming business and GE should be shedding non-industrial businesses to make room in the heads of executives and board members to focus extremely intently on managing both the current infrastructure business and selectively targeting emerging alternative energy infrastructure opportunities.

The longer-term potential for GE is potentially fantastic, but the near-term is somewhat problematic due to their confused corporate structure.

OTOH, I would give the current CEO a year to turn things around and prove that he can make a conglomerate work in a difficult economy. Even if a dismembered GE might deliver more perceived value, sometimes great management can pull off plans that mere analysts and pundits find great fault with.

As long as the CEO and prove that he can manage to grow the infrastructure and energy businesses strongly, nobody is really going to care what is going on elsewhere in the company.

In short, Execute or restructure.

-- Jack Krupansky

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