There were so many surprising things I learned about the General Electric company while researching my new book, Power Failure: The Rise and Fall of an American Icon, that it’s not so easy to focus on just one.
For instance, I had no idea that in the aftermath of the 2008 financial crisis, Jeff Immelt, the C.E.O. of G.E. at that time, seriously considered having G.E. Capital, the company’s massive non-bank bank—a largely unregulated financial institution—file for bankruptcy protection not once but twice. Nor did I know that a century ago, G.E. was one of the first companies to try to develop an electric car, though it ended up being a flop. I also didn’t know that in 2018, the current C.E.O., Larry Culp, worked with Trian Partners, the hedge fund that still owns a big stake in G.E., to engineer a coup d’état that would install Culp and get rid of John Flannery, who had been C.E.O. for a little more than a year.
Culp has held the top job for more than four years now, and it’s worth noting that the company has since seen its stock lose some 20 percent of its value and will begin the process of splitting itself up into three pieces early next year. Au revoir, G.E.
But the biggest surprise in my three years of researching the 130-year-old company, once the highest-valued (and most admired) business in the world, was that G.E.’s best-known deal—its $6.3 billion, all-cash acquisition of RCA, in 1985—had actually returned RCA and its NBC television and radio networks to their original home.
At the request of none other than Woodrow Wilson, G.E. incubated and owned RCA after World War I. Wilson was so concerned that the British would become the dominant player in the burgeoning radio-broadcasting industry—the British company Marconi was G.E.’s leading competitor—that Wilson and his acting secretary of the Navy, Franklin Delano Roosevelt, blocked the sale of an important radio transmitter G.E. had pioneered, the Alexanderson alternator, to the British.
G.E. was unhappy about losing out on tens of millions of dollars in sales, and as a reward for complying with Wilson’s directive, the government forcefully encouraged G.E. to combine its radio assets and patents with those of American Marconi, the publicly traded U.S. outpost of British Marconi. After a quick round of negotiations, G.E. bought American Marconi for $11.5 million. And so the Radio Corporation of America was born into the G.E. family.
At its start, RCA was the largest radio-communications company in America. It not only manufactured radio equipment but also controlled the nation’s first network of radio broadcasters, known as the National Broadcasting Corporation, or NBC.
After a dozen or so years with RCA inside G.E., for reasons that never made much sense to me, the federal government reversed course and launched a successful anti-trust case against G.E.’s ownership of RCA. In 1932, the Justice Department forced G.E. to spin off RCA to its shareholders, making it a publicly traded and independent company. As part of the deal, G.E. got to keep a minority stake in RCA, which it eventually sold off, as well as the RCA building, at 51st Street and Lexington Avenue, in New York City. That building became G.E.’s world headquarters for the next 40 or so years, until 1974, when G.E. moved to a sprawling campus in Fairfield, Connecticut. (In 2016, Immelt moved G.E.’s headquarters to Boston to be closer to M.I.T. and Harvard, whose talented ranks of graduates he hoped to pull from. The company has since announced its plans to abandon the Boston headquarters as soon as they finish splitting G.E. into three parts.)
It could fairly be said, then, that the highlight of Jack Welch’s sterling, 20-year tenure as C.E.O. of G.E., from 1981 to 2001, was actually an act of reunion. The purchase of RCA, then the largest non-oil M&A deal of all time, was made possible by a lingering technical impediment that a low-level G.E. lawyer and his counterpart at RCA stumbled upon. Welch then brought the two companies together to get the Justice Department to eliminate a 52-year-old consent decree that prevented G.E. from buying any RCA stock. G.E. agreed to buy RCA back in December, 1985. It was front-page news, even though the media mostly neglected to mention that G.E. was buying back a business it had started 65 years earlier.
Welch also focused a lot of his attention on getting NBC into the cable-television business, which he correctly figured would rescue NBC from its linear decline. He and his team of top-notch executives such as Bob Wright, David Zaslav, and Tom Rogers not only revitalized NBC, they also created CNBC and MSNBC. Not too shabby.
While it was intellectually satisfying to learn more about Welch’s master stroke, which created tremendous value for G.E. shareholders, my most rewarding emotional moment in reporting Power Failure came during my last interview with the man himself, in August 2019. We were both on Nantucket, and Jack agreed to meet for lunch at one of his favorite spots, the tony Nantucket Golf Club. Then 83 years old and a survivor of any number of ailments, including a heart attack and a severe staph infection, Jack was fading, I could tell.
He was hauling around what he called his “wagon,” a tricycle of a walker, and dribbled a fair amount of his strawberry milkshake on his sweater. He seemed more gnomish than usual, only having a few bites of his standard fare of two chicken hot dogs. I sensed this might be our last visit together. (He would die seven months later, in March 2020, just before the pandemic hit America.)
The purchase of RCA, then the largest M&A deal of all time, was made possible by a lingering technical impediment that a low-level G.E. lawyer and his counterpart at RCA stumbled upon.
But Jack was as effervescent as ever and still had a twinkle in his eyes. My son Teddy called in the middle of lunch, and I was surprised when Jack insisted that he and his friend come by the club to say hello. I thought it was a great idea, the chance for them to meet a legend before it was too late.
Teddy and his friend hightailed it over. Even though they were wildly underdressed, nobody said a peep. They were there to see Jack Welch, after all. Once they had said hello and shook Jack’s hand, he insisted they each order a beer and settle in. It was Mr. Gregarious’s show now.
William D. Cohan is a Writer at Large for AIR MAIL and the author of such best-selling books as The Last Tycoons, House of Cards, and The Price of Silence. He is a founding partner of Puck. His new book, Power Failure, will be published on November 15 by Portfolio