PhillyDeals: How Welch views the post-Welch GE

When John F. "Neutron Jack" Welch Jr. retired as chief executive of General Electric in 2001, after 20 years of shifting, selling, or shutting factories and expanding into TV networks and Asian loan offices, GE was the world's most valuable corporation.

GE, which traces its roots to lightbulb inventor Thomas Edison, moved so far beyond manufacturing on Welch's watch that Barron's called it "a hedge fund in drag." After the 2008 bank crisis, U.S. regulators ranked GE with the too-big-to-fail financial institutions.

The shift worked well for Welch, who got a severance package worth more than $400 million, and a new career as a business guru, which took him and wife Suzy to the Wharton School and Thomas Jefferson University last week to promote their new book, The Real-Life MBA, to packed houses of students.

But post-Welch, GE lost value, as finance profits flattened with falling interest rates and rising government scrutiny. Returns lagged. GE dropped off the Financial Times' Top 10 most-valuable companies list. The stock price is less than half its 2000 high.

Welch's successor, Jeff Immelt, has reversed big Welch deals. He sold NBCUniversal (to Phila- delphia-based Comcast), is spinning off consumer lending (Synchrony Financial), and on April 10 agreed to sell most commercial finance assets to Wells Fargo and Blackstone, writing off $16 billion in lost investment, and collecting or freeing up to $90 billion that Immelt hopes to use to shore up the share price - and buy more factories.

GE, based in Connecticut, will focus on expanding its major industrial sectors, starting with a $14 billion offer for France-based Alstom's electric-power equipment business, Immelt says.

It's no reversal, Welch told me. "The end is not bad," he said, resting at the Union League between college lectures. "Why wouldn't you want to get that? Billions back, and a glorious run."

Better than getting caught with a "heap" of outdated factories, he said. GE remains what it was, "a global company, selling global products, in the most value-oriented way." Looking forward, he added.

I noted that the company GE is buying, Alstom, makes power turbines and parts in high-wage Europe, similar to what GE workers made at its massive plants in Philadelphia, the last of which Welch closed in 2002.

"People make decisions around competitiveness," Welch told me.

GE shares hit a seven-year high on Immelt's latest asset sale announcement - though Moody's Investors Service analyst Russell Solomon cut GE's bond rating a notch. He warned GE is giving too much cash to shareholders.

Energy in wastewater

When Welch took over, GE was still a dominant Philadelphia-area employer. Besides electrical equipment, GE made missile and satellite systems and other complex gear in Bucks, Montgomery, Camden, and Burlington Counties, including sites sold to what's now Lockheed Martin in 1993.

Today, GE's Philadelphia outposts include medical- equipment offices, an industrial-maintenance shop, and the world headquarters of GE Water & Process Technologies, Trevose.

GE Water employs about 350 at offices and labs on the guarded campus, fewer than worked there when GE bought the former Betz Laboratories in 2002.

Revived North American oil and gas drilling means new opportunities for GE Water, group CEO Heiner Markhoff told scholars at a Wharton conference last fall.

"We want to shout it from the heavens: There's energy in wastewater," Ralph Exton, the unit's chief marketing officer, told me on a visit to the Trevose labs.

How different is the current regime? "Welch was operational rigor and operating rhythms," Exton told me. Immelt focuses more "on understanding the customers' needs and putting teams or products together to meet their needs."

GE takes credit for developing what it calls "the industrial Internet" (or Internet of Things), which joins data analytics, data-transmitting sensors, and smartphones, so operators can pinpoint repairs and upgrades, instead of relying only on physical observation and scheduled maintenance.

At the center of the Trevose complex sits the glass-walled Service Reliability Center, where a dozen engineers, including recent Penn State and Temple grads, checks sensors at GE client factories worldwide, coordinating with centers in Brussels and Shanghai, director Steve Davis told me.

The young professionals staffing the site "are all used to digital. They grew up on iPhones," Davis said. "They understand how fast things should work on the Web. Plug your cellphone into industrial equipment, suck the diagnostic data, the sensor data, mash it with utility data. We look at what's happened over history, apply analytics, and we can project what's going to happen seven or 10 days out."

In today's GE, "the sensors talk to each other."