GE CEO Plays Kiss Ass With Obama

GE, the financial company masquerading as a manufacturer, has its eyes on the Pot of Government Stimulus Gold.

The financial crisis hasn't been kind to General Electric Co. Its stock has lost almost half its value, the government has stepped in to prop up its enormous financial arm, and sales have slumped in core industrial businesses.

But Chief Executive Jeffrey Immelt now has his eye on a huge new pool of potential revenue: Uncle Sam's stimulus dollars. Mr. Immelt, a registered Republican, quips about the shift in thinking in the nation's corner offices: "We're all Democrats now."

GE has high hopes for the strategy. It says that over the next three years or so it could bring in as much as $192 billion from projects funded by governments around the globe, such as electric-grid modernization, renewable-energy generation and health-care technology upgrades.

The company is just starting to see a payoff. Last month, for example, President Barack Obama announced $3.4 billion in government-stimulus grants for power-grid projects. About one-third of the recipients are GE customers. GE expects them to use a good chunk of that money to buy its equipment.

"The government has moved in next door, and it ain't leaving," Mr. Immelt said at the International Economic Forum of the Americas in Montreal in June. "You could fight it if you want, but society wants change. And government is not going away."

The 53-year-old executive supported the presidential campaign of Sen. John McCain, yet scored an invitation onto the President's Economic Recovery Advisory Board, led by former Federal Reserve Chairman Paul Volcker. Inside GE, he pushed his managers hard to devise plans for capturing government money.

As part of that effort, GE has promoted policy proposals such as a government-backed power-grid modernization, and pressed the government to increase the size of stimulus grants for that purpose. It also has helped customers design projects and apply for government money, with the expectation that those customers will then buy GE equipment.

GE isn't in agreement with the Obama administration on some proposals. Its GE Capital financial unit, which contributed nearly half of its earnings in recent years, received government backing for its debt when the credit markets seized up last fall. Now GE is lobbying against proposals that would separate GE Capital or its industrial-loan company from the parent company. More regulation on its finance division seems inevitable. The company also is opposed to health-care proposals that would result in $40 billion in fees on health-care device makers such as GE.

Mr. Immelt concluded that the company needed to capitalize on the surge in government spending. According to two people present at the meeting, Mr. Immelt told the group that business people needed to support the Democrats' stimulus package.

By January, Mr. Immelt had become a leading corporate voice in favor of the $787 billion stimulus bill, supporting it in op-ed pieces and speeches. Reporters who called the Obama administration for information on renewable-energy provisions in the legislation were directed to GE.

As the bill worked its way through Congress, GE lobbyists pressed for grants, tax cuts or rebates aimed at businesses GE is engaged in, including provisions worth more than $80 billion for energy projects, appliances, health-care information systems and wind farms.

When the stimulus package was rolled out, Mr. Immelt instructed executives leading the company's major business units "to put together swat teams to get stimulus money, and [identify] who to fire if they don't get the money," says a person who heard him issue the instructions.

In February, a few days after President Obama signed the stimulus plan, GE lawyers, lobbyists and executives crowded into a conference room at GE's Washington office to figure out how to parlay billions of dollars in spending provisions into GE contracts.

Separately, Mr. Immelt got an invitation to serve on the President's Economic Recovery Advisory Board, which would afford him access to the president's economic inner circle.

GE spent $7.55 million lobbying in the second quarter, a 34% increase from the year-earlier period and more than any other single company, according to federal data compiled by the Center for Responsive Politics.

This just goes to show you, if you have enough clout and you are are willing to kiss Obama's ass, he just may be willing to kiss yours. This is the way the game works, so someone may as well be blunt about it.

Everyone wants a handout for themselves or their company while not wanting anyone else to get one. It does not matter one iota to these corporations how much of the stimulus is wasted. All that matters is how much they get.

In October, amidst all the excitement of companies beating 5 times watered down earnings estimates, GE managed to lay an egg as noted in Earnings Disaster At GE; Profit Drops 45%; Revenues Lag.

In my review I stated "The best way to think of GE is as a finance company masquerading as a manufacturing company. This was essentially the business model of GM as well, except GE is better at it. "

That prompted an immediate Email from Anne Eisele, GE Director, Financial Communications, who said "GE generated $18.4 billion in Infrastructure orders this quarter alone. That's $500 million more in real, live manufacturing-related orders than we booked last quarter. We have $174 billion in non-financial (read: manufacturing) equipment and services backlog. At the same time, we're making good on plans to reduce the size of our financial services company so that it contributes only about 30% of company earnings. To say that GE is simply a finance company masquerading as a manufacturing company is not only incorrect, it's absurd."

I asked what percentage of earnings financial services provided now and when would it get down to 30%. I did not receive a reply back.

However I would like to point out the catchy phrase at the end of her email "GE imagination at work".

Indeed, "We're all Democrats now" is pretty imaginative. Moreover, the campaign was a success. Immelt got an invitation to serve on the President's Economic Recovery Advisory Board where he can now pitch products and ideas that will be good for GE whether they do a damn thing for the US or not.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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