Immelt works to reassure shareholders at GE's annual meeting

ERIE, Pa. -- General Electric Co.'s annual meetings are typically upbeat affairs as executives showcase the company's successes to satisfied shareholders of one of the world's most diversified and successful companies.

But after GE chief executive Jeff Immelt was lambasted earlier this month for failing to hit first-quarter goals and triggering a sell-off that wiped out more than $46 billion of GE's market capitalization, Wednesday's annual meeting was essentially a mea culpa to investors and analysts alike.

"This has triggered a tough reaction and it should," Immelt told about 1,000 shareholders. "I can assure you that we look in the mirror and ask ourselves some very tough questions."

Immelt worked to reassure shareholders less than two weeks after GE reported a 6 percent loss in first-quarter profits. The surprising report came a month after GE promised investors 10 percent earnings growth in 2008.

Analysts downgraded GE's stock and its share price fell nearly 13 percent. Some analysts said Immelt had credibility problems for not warning Wall Street, and former CEO Jack Welch fueled the fire by promising to "get a gun out and shoot" his successor if he allowed GE to miss its targets again.

In speaking to shareholders Wednesday, Immelt noted the weak U.S. economy and said GE's financial services earnings dropped 28 percent.

"We are in the toughest economy since 2001 and the worst housing crisis since the Depression," Immelt said. "Banks have written off more than $250 billion. ... Days of easy credit have turned into months of no credit at all. While I am confident about the economy long term, we could see even more difficult times ahead."

He pledged that the company will increase its planned cost-cutting by 50 percent, from $2 billion to $3 billion, and adjusted GE's expected 2008 earnings growth to be 5 percent or less.

Executives are making changes in the company's operations and planning, including more frequent business forecasting, with Immelt reviewing businesses weekly instead of monthly.

"This will ensure that there are no time gaps between how we describe the company and what we deliver," he told shareholders.

"And we have had detailed discussions with all leaders in the company to describe what happened in the quarter and make sure it doesn't happen again," he said.

Meeting with reporters Wednesday, Immelt praised officials in GE's commercial finance business, but would not rule out staff changes.

"You have to perform to be in this company," he said. "That's always been true and always will be true."

Shareholders peppered Immelt with questions about the company's falling stock price and challenged him to protect retirees' pensions despite the economy's downturn. GE shares traded at more than $42 per share when Immelt took over in 2001, but closed at $32.36, up 3 cents, Wednesday.

Immelt said GE's earnings have more than doubled, revenue is up 70 percent and cash flow has almost tripled in his nearly seven-year tenure after replacing Welch.

"We've built a better company," Immelt said. "That's what CEOs are supposed to do, is build companies for the long term. ... We have won in the marketplaces. This is a fantastic company that's globally positioned and the earnings are there. The share price will take care of itself."

Patricia Surrena, a shareholder and Erie resident, said she was disappointed with Immelt's response.

"Jack did so good," she said, referring to Welch after the meeting. "We made a lot of money with Jack and now it's gone down."