The decline of General Electric, once the world's largest and most renowned corporate conglomerate, hit home hard in Pittsfield and the Berkshires. The presence of GE fueled the city's glory days, but today it only makes news locally for fighting the EPA's plan to make the company clean the Housatonic River it polluted with PCBs.
The newly released book "Lights Out: Pride, Delusion and the Fall of General Electric" by Wall Street Journal reporters Thomas Gryta and Ted Mann, deals only tangentially with Pittsfield, focusing on the 16-year reign of CEO Jeff Immelt that came after GE had largely abandoned the city. But it's a story that will resonate with anyone who remembers the GE era, or is interested in the cautionary tale of the collapse of a company that appeared to be an impregnable fortress.
That is certainly how the top executives saw the corporation. "Lights Out" is above all a tale of corporate hubris, of top executives whose aura of infallibility could only be maintained by law-bending accounting, the intimidation of underlings who suspected that the emperors had no clothes, and the dereliction of a board of directors that rubber-stamped the edicts of the emperors rather than challenge them.
The myth of GE CEO and media darling Jack Welch has taken a hit in recent years and Gryta and Mann do a thorough job of debunking the myth. Welch, who began his GE career at GE Plastics in Pittsfield, became known as "Neutron Jack" for getting rid of people and leaving buildings standing — some of which are still decaying in the center of Pittsfield. Tens of thousands of jobs were eliminated or sent overseas, which thrilled stockholders as profits grew but destroyed company morale, write the authors, and ended the era of "Generous Electric."
Welch's much-ballyhooed practice of "rank and yank" in which the bottom rank of middle managers were cut loose when the profits and losses of each division were tallied led to those managers juggling the books to stay employed. This practice became institutionalized at GE.
Welch would tolerate no criticism or challenge. (A former Berkshire Eagle managing editor told this writer that an editorial critical of Welch could persuade him to yank what was left of GE from Pittsfield out of spite.) His chosen heir had the same trait, write Gyrta and Mann.
Immelt took over as CEO in 2001. Like Welch, he began his career at GE Plastics in Pittsfield. (It was under Immelt that GE Plastics was sold to SABIC.) Genial and given to sports metaphors, Immelt was a consummate salesman. John Flannery, Immelt's honorable but ill-fated successor, thought Immelt practiced "success theater" to hide grim reality and cover up mistakes.
The authors chronicle plenty, most notably Immelt's failure to rid the company of GE Capital as the damage it caused escalated. A financial services unit begun under Welch, GE Capital served as a bank for GE to pad the profit margin and keep paying unrealistic dividends. It also practiced the kind of financial manipulations used by firms like Lehman Brothers that fueled the economic collapse and recession of 2008-2009.
There was Immelt's disastrous purchase of the French oil and gas firm Alstom as the fossil fuel industry was declining and renewable energy was on the rise. Immelt's decisions went unchallenged. Executives who were not perceived as team players or "didn't want it enough" risked being passed over for promotion or eased out the door.
Gryta and Mann explain that the "incredible complexity" of the machinations of GE Capital, and also floundering GE Power, made it difficult for anyone outside these divisions, as well as federal regulators, to see what they were up to. The authors do a remarkable job of deciphering these Byzantine practices and explaining them in layman's terms.
They also devote a chapter in the book to the move of GE's corporate headquarters from Fairfield, Conn. to Boston. Top executives wanted to move to a major city and were chafing under Connecticut's high taxes, but the "final straw" we read, was Democratic Gov. Dan Malloy joining the state's congressional delegation to celebrate the delegation's success in blocking GE from competing with Pratt & Whitney, a major Connecticut employer, on construction of an engine for a new jet fighter. The spite thing again.
GE promised many jobs and a shiny new corporate building to Boston, but the company's collapse under the weight of bad investments, misleading, fudged figures and lost investor confidence was well underway. The move happened but the bulk of GE's promises went unfulfilled.
Gryta and Mann combine impressive research and a deep collection of sources into a crisply written page-turner on the implosion of a great American corporation, brought down from within. GE retirees from around the city, county and nation who saw their dividends dissolve may enjoy a sense of schadenfreude while reading "Lights Out," but probably not much. It is still too painful.
Bill Everhart is a former Eagle editorial page editor.