THE YEAR'S 50 MOST FASCINATING BUSINESS PEOPLE JACK WELCH THE MAN WHO BROUGHT GE TO LIFE
By - Peter Petre

(FORTUNE Magazine) – LAST FALL an influential New York security analyst received three unexpected visitors from Hitachi, the $21-billion-a-year maker of consumer electronics products and computers. Like most Japanese giants, Hitachi has seen its profits zapped by the suddenly strong yen. The emissaries were searching for ways Hitachi might cut costs, streamline itself, and thrive in tough times. Their question to the security analyst: How does General Electric do it? The answer, not easily translated into Japanese, is Jack Welch. The gregarious, nail-biting son of a railroad conductor was a surprise choice when GE's directors picked him six years ago as the company's chief executive -- at 45, the youngest ever. Today even the board must be surprised at how wisely it chose. Welch jolted the staid and sprawling conglomerate to life. He chopped 100,000 jobs, a quarter of GE's work force, sank billions of dollars into automated factories, and started winnowing the company down to major businesses that dominate their markets, a process that has involved buying or selling over 100 operations. In 1986 he startled Wall Street by gobbling RCA in history's biggest non- oil merger. Welch paid a bargain $6.4 billion, then swallowed investment bank Kidder Peabody ($600 million) for dessert. Under Welch, GE's sales have nearly doubled, to an almost IBM-size $40 billion a year. He has pleased shareholders: GE's stock has outpaced market averages, return on equity hovers at an enviable 18%, and analysts predict 15% earnings growth for the next two years. No other boss in the world can do what Welch did in a recent interview: He enthusiastically named 15 major businesses where his company is a market leader, from light bulbs and locomotives to high-tech plastics and network television. As a child in Salem, Massachusetts, Welch never imagined he'd become a captain of industry. Hockey stars and ballplayers were his boyhood heroes. ''I had no background in corporations,'' he says. He got his ambition and self- confidence from his mother, a proud, tough housewife who told her son that his stammering, which persists today, was no handicap but simply a sign that his mind raced faster than his mouth. GE's future chairman played intramural hockey and golf as a University of Massachusetts undergraduate. A former roommate remembers him as awkward but a fearsome competitor: ''Jack wasn't blessed with a lot of grace or athletic ability. He trounced people by trying harder.'' A member of the fraternity that threw the wildest parties on campus, Welch studied enough to earn respect as the group's one serious student. He won a graduate fellowship in chemical engineering at the University of Illinois. But until he faced his doctoral dissertation, Welch says, he saw himself as ''just a ballplayer.'' His thesis, a study of condensation in nuclear reactor steam systems, convinced Welch he could master tough analytical tasks. ''You go down 27,000 blind alleys,'' he remembers. ''It doesn't work, you start again. You feel there's no hope while you're asking those questions, pressing, probing, pushing. But you have to get it resolved; otherwise you'd spend your whole life looking for the ultimate answer.'' Welch brought the same relentlessness and urgency to GE. Setting down roots in Pittsfield, a working-class town in the Berkshire Hills of western Massachusetts, Welch built GE's fledgling plastics unit into a $400-million-a- year business. Known as a brilliant and sometimes abrasive boss, he showed a voracious appetite for detail and the stamina to work most subordinates under the table. His success catapulted him to GE's headquarters, where he won a six-way race for the top spot. For the 350,000 people GE employs, Welch has changed what it means to go to work in the morning. He revoked the tacit promise of lifetime employment GE used to make, substituting what he sees as a realistic new deal: ''The job of the enterprise is to provide an exciting atmosphere that's open and fair, where people have the resources to go out and win. The job of the people is to take advantage of this playing field and put out 110%.'' Welch has no patience with those who pine for the glory years of American business that followed World War II. ''The people who get in trouble in our company,'' he says, ''are those who carry around the anchor of the past.'' Lately Welch has devoted much time to his big new acquisition. Two chunks of RCA report directly to him: NBC and the consumer electronics business. While promising to ''keep GE's nose and taste buds'' out of programming, Welch has already made his mark on NBC. Instead of promoting a broadcasting veteran to replace outgoing Chairman Grant Tinker, Welch chose Robert Wright, 43, the head of GE Credit. Welch wants his ace dealmaker to strengthen NBC by acquiring more local stations and negotiating more favorable contracts with studios. Some people in the broadcast business expect that Welch and Wright may even challenge the practice -- dating back to the Twenties -- of radio and television networks paying affiliates to carry their shows. . Another surprise move was Welch's decision to keep GE in consumer electronics. Before the merger, GE was ready to quit producing television sets. But with the addition of RCA, the company has become the world's largest marketer of color TVs. The yen's rise gives GE a new advantage against the likes of Hitachi. Welch abhors the cutthroat pricing that permeates consumer electronics. However, security analysts say there are other things to like, such as the royalties RCA collects on its patents and the clout the business gives GE in international trade. The RCA acquisition makes GE one of the world's largest purchasers of electronics products and components. Welch was only half-joking when he told analysts recently that by shifting its orders GE could change whole countries' balance of trade. Analysts predict that its formidable bargaining power is going to help other GE units, such as the plastics business, sell abroad. GE's fast-forward chairman is pursuing more mergers. He recently presented a set of acquisition do's and don'ts to GE's board. His main recommendation: Avoid what he calls popcorn stands, small companies that are hard to digest and that provide GE with little nourishment even if they thrive. Large companies are a different matter. If Hitachi keeps watching, it will likely see Welch invade such industries as insurance and pharmaceuticals, making GE more inimitable still.