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In Focus: GE
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November 27, 2000: 12:47 p.m. ET
Analyst Bill Fiala discusses General Electric's move to make Immelt CEO
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NEW YORK (CNNfn) - Replacing General Electric CEO Jack Welch, a long-time corporate legend, is no easy task. But the biggest challenge facing Jeffrey Immelt, who was tapped for the top spot Monday, will be instilling confidence in investors and upper management, according to one Wall Street analyst.
GE's board of directors named Immelt president and chairman-elect, effective immediately. He will succeed Welch at the end of 2001 -- a move that industry analysts said was no surprise.
Bill Fiala, capital goods analyst, Edward Jones, spoke to CNNfn about what the move meant for the company.
In Focus airs daily on CNNfn's network at 12:10 p.m. The following includes comments made both during the show and in the pre-show interview.
CNNfn: Why do you think they chose Jeffrey Immelt over the two other executives believed to be under consideration - Robert L. Nardelli, president and CEO of GE Power Systems, and W. James McNerney, head of GE Aircraft Engines? What is most attractive about him?
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Jack Welch was about the same age when he took over GE, and he's done very well over that period. GE is a fine-tuned machine and the earnings outlook is strong. There's some uncertainty with the Honeywell acquisition but GE's hitting on all cylinders.
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Bill Fiala, capital goods analyst, Edward Jones |
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Fiala: All three were internal candidates. Jeff was considered the front runner so it's not too much of a surprise. All three were good candidates but Jeff had two things going for him: One, he was the youngest so he has a good 20 years at the helm -- a consistency GE likes; and two, he has the extra charisma you like to see in a leader -- he's the kind of leader that will do what it takes to get the job done.
CNNfn: Is Immelt's experience broad enough?
Fiala: Following in Welch's footsteps will be a challenge for anyone taking over -- GE is such a diversified company. It's going to be a challenge to fill Welch's shoes, especially with the Honeywell acquisition in front of them.
CNNfn: What other challenges will the new CEO have?
Fiala: You're replacing the CEO of the century -- those are not small shoes to fill. The biggest challenge is to maintain the leadership that's so important at GE, and to gain the employee's confidence. It's important to maintain the talent at GE -- there's a lot of headhunters calling GE offices around the world and you can't afford a brain drain during a succession.
CNNfn: At 44 years old, do you think he's too young to run the world's largest company?
Fiala: Jack Welch was about the same age when he took over GE, and he's done very well over that period. GE (GE: Research, Estimates) is a fine-tuned machine and the earnings outlook is strong. There's some uncertainty with the Honeywell acquisition but GE's hitting on all cylinders.
CNNfn: Ideally, what characteristics would Welch's successor need to have?
Fiala: He needs to be a great leader, and Jeff's got energy and emotion and the confidence of the people that will work with him.
CNNfn: The market is having a positive reaction to the news -- what's your outlook for GE stock?
Fiala: I have a "hold" rating on the stock. With its premium valuation and the succession coming through at a time when they're digesting an acquisition, the stock won't do much here.
CNNfn: What's your outlook for the capital goods sector?
Fiala: It's mixed. Industry and manufacturing is slowing down as the economy slows down.
CNNfn: What are your favorite stock in the capital goods sector?
Fiala: I look for companies that have something unique going on, like Emerson Electric (EMR: Research, Estimates) which is going through a big transition to more growth and starting to get Wall Street's confidence, which will help going forward and enable them to make acquisitions to support that growth. I also like Boeing (BA: Research, Estimates).
-- compiled by Tanya Helenius. Carmina Perez contributed to this report. 
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