Three CEOs later, is Boston a curse for GE?
Jeff Immelt, John Flannery, and here comes Larry Culp. Count’em: That makes three CEOs since General Electric Co. moved its headquarters to Boston in 2016.
Only the late Yankees owner George Steinbrenner went through more field managers.
One could conclude that Boston is GE’s curse. Since it set up a temporary headquarters in an old loft space in the Fort Point neighborhood, its stock has plummeted more than 61 percent. Not only was the industrial giant the worst-performing stock in the Dow Jones industrial average in 2017, but the company got bounced from the list in June after more than a century.
But the truth is GE arrived in Boston wounded, an organization in the middle of a massive reboot, in search of a place that could make it more nimble and innovative. Say what you will about Immelt, but he got this right: GE sure as hell wasn’t going to be transformed in suburban Connecticut, where the firm had been headquartered for four decades.
Perhaps we were blinded by the glittering prospect of a marquee global company uprooting to Boston and conveniently forgot how troubled GE was. That being said, I’m not sure even employees knew how much of a tailspin the company was in.
The good news is that taxpayer exposure to GE’s woes is limited. That $150 million incentive package the state and city put together to lure the company to Boston was cleverly crafted. Cautious Charlie Baker gets to take a bow.
The state has spent about $125 million to buy and rehab two former Necco candy buildings along Fort Point Channel that GE will lease. If GE were to walk away, the state would be left with properties in one of the country’s hottest real estate markets. Not bad at all.
As for the city of Boston, GE hasn’t triggered any incentives. That’s because the city’s $25 million in property tax breaks only applies to the second phase of the GE headquarters — a 12-story building next door, and if the company creates 800 jobs.
The way things are going, I’m not sure if there will be a gleaming new tower as the company radically restructures, shedding divisions and employees. Executives are sticking to a script that the new construction will begin sometime after mid-2019 when the Necco complex opens. Who knows who will be in charge then?
So there’s a possibility that GE moves to Boston, and it doesn’t cost the city a dime in tax breaks. Not bad at all.
State economic development secretary Jay Ash, who played a pivotal role in bringing GE to Boston, never got to know Flannery (a Red Sox fan with a dog named Mookie Betts) and doesn’t know much about the new guy, Culp — a former medical-device company CEO and the first outsider to take the reins of the 126-year-old company. Culp joined the board of GE earlier this year and also teaches at Harvard Business School.
“This is what happens in corporate America. You’re never surprised that change is happening,” Ash told me. “We see companies large and small go through internal restructuring. Lots bounced back, some don’t. What we’ve seen about GE makes us optimistic that they will bounce back.
It’s hard to believe the breathtaking change that has taken place at GE, a company cofounded by Thomas Edison in 1892, which made its name selling light bulbs, refrigerators, and microwave ovens, but now wants to be a tech company — an Apple for modern industry, bringing smarts and the power of the Internet to hulking gear like jet engines and turbines.
Immelt did a lot of restructuring in his 16 years, and Flannery in his 14-month tenure exited or planned to exit major businesses such as lighting and health care, while selling GE’s stake in oil and gas operation Baker Hughes General Electric. On Monday, GE reported that it will take an eye-popping writedown of its power unit that will total as much as $23 billion.
Do I still believe GE is good for Boston? Absolutely.
It just may take a few more years to realize it, but GE’s decision to choose Boston for its next chapter acts as a beacon to other companies looking for a place where there is enough brainpower to figure out the future of everything from tech to science to health care.
In August, as GE marked its second anniversary in Boston, I got a hard-hat tour of the two century-old brick buildings that are being renovated for GE. The offices feel like a startup with their open working environment, roof deck, and bistro on the first floor that will be open to the public.
Seeing, I found, was believing that GE will be here to stay.