NEW YORK (Reuters Breakingviews) - Succession planning is a big deal at most public companies. For the first time in 124 years, General Electric’s may be determined by dealmaking. As Jeff Immelt nears retirement, the progress of two large acquisitions in the coming year will help guide GE’s board on who should get the top job.
The chairman and chief executive took over from Jack Welch in 2001, but most of his legacy has been imprinted since the financial crisis nearly toppled the maker of jet engines, wind turbines and locomotives. Immelt hacked back GE Capital, which imperiled the parent, and jettisoned assets in media, plastics and even its famed appliances division.
That enabled the $275 billion company, now based in Boston after Immelt uprooted it from Fairfield, Connecticut, to go on the offensive with moves that promise to significantly expand two important divisions. First was the $13.5 billion acquisition of Alstom’s power businesses in 2015. Now, GE is planning to merge its energy business with $29 billion Baker Hughes. Immelt signed the deals, but making them pay off is a job for his lieutenants.
In the case of Alstom, that’s Steve Bolze. The 23-year GE veteran, who leads the power division, is off to a good start. Shortly after absorbing Alstom, GE more than doubled its targeted cost savings from the French company to $3 billion. If these pan out over the next year or two, Bolze will be hard to beat for Immelt’s seat.
Close on his trail is Lorenzo Simonelli, who joined a year after Bolze and leads the oil and gas division that is in the process of integrating with Baker Hughes as a public company of its own. It’s a complicated arrangement that presents a dramatic new blueprint should GE one day abandon its conglomerate structure.
There are other contenders inside GE. Vice Chair Beth Comstock, who runs marketing and the lighting operation, would be the first woman to lead the enterprise founded by Thomas Edison. Chief Financial Officer Jeff Bornstein has an unrivaled purview across GE’s businesses.
With pushy investors like Nelson Peltz burrowed into GE, however, the contest may come down to a simpler equation of who delivers the biggest numbers. At the moment, Bolze and Simonelli are best positioned to squeeze new profit out of deals large enough to be noticed even at a giant like GE. The year ahead may be the most important of their careers.
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