Jack Welch Sees a ‘Bathtub’ U-Shaped Recession
September 26 2008 by JP Donlon
“We’re in a recession and I don’t see a V-shaped recovery–more like a bathtub U-shaped recovery which will last deep into the second half of 2009 before we start to come out of it,” said former GE CEO Jack Welch speaking at the World Business Forum in
Welch attributed the current financial meltdown to many causes, saying money was essentially free and that interest rates were negative causing many to “roll the dice not once but many times.” He compared those responsible to suspects on Agatha Christie’s “Murder On the Orient Express,” where every character on the train had a motive to game the system and share the blame. Switching metaphors, he added that the situation was comparable to people going to
Welch recalled “one of my worst decisions” in the 1980s when GE acquired the investment house Kidder Peabody. “We didn’t own this outfit more than seven days when I had several guys in my office proposing a $400 million deal using GE’s balance sheet as leverage.” He recalls being so apoplectic that he “nearly lost my teeth.” If earnings “seem too good to be true, it’s because they are,” he added.
The former GE chief, himself generously compensated said he had no problem with imposing limits on compensation or separation on CEOs as part of the anticipated bailout package of concerned financial institutions.
Pressed on his political views, Welch said the U.S. system works best under divided government pointing to the years in which President Reagan battled a Democrat controlled Congress and when President Clinton had to contend with a Republican Congress led by Newt Gingrich. Asked why he supported John McCain over rival Barack Obama, Welch shook his head, his voice rising with the broad “As” in his
Welch identified the pending Employee Free Choice Act (EFCA) as the single greatest hazard facing business leaders today apart from the credit crisis. Under EFCA, an employer is duty bound to recognize one-or many-unions which have obtained authorization cards from 50 percent plus 1 of the workers in any given bargaining unit. At no point in the process will the National Labor Relations Board organize and oversee any election for unit members to determine whether employees actually want union representation. “If business leaders are not aware of this terrible piece of legislation, they should be. It would hurt us dramatically in our ability to be competitive globally. Think about it,” he added, “When was the last time you heard a CEO say, “‘I wish we had a union.’”
Welch sidestepped questions about how his successor Jeff Immelt was performing at the helm of GE, saying he was responding to many challenges and operating in a different environment. He praised Immelt’s eco-imagination strategy saying it isn’t necessary for business leaders to believe in whether global climate change was real or not because there is a market for green products and services that ought to be served.
Asked by a World Business Forum audience member what his definition of CSR (corporate social responsibility) is, he replied dismissively, “Winning!”“Get serious! When you win you get money. If you don’t win you don’t have anything to €˜give back’ to anyone. What did the dot coms do for CSR; they burned the office furniture to stay warm.