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For reasons that are impossible to explain, much of the mythology of the late 20^th Century American CEO was placed Atlas-like on the shoulders of John Francis Welch, GE’s head man from 1981 to 2001. He was physically small but sported a two handicap, was unusually brilliant and could slit a competitor’s throat as easily as he could read a balance sheet. Only Lee Iaccoca could be considered a popular rival, because he had turned around a deeply troubled company at Chrysler. Welch had done something far more difficult. He had taken a great company and made it far greater.

Welch became what every CEO wanted to be. He became the vessel for skills he did not have and became the symbol of things he had never been. The wide-spread notion was that Welch could run any company better than its incumbent management. Welch’s skill and guile trumped the experience of all other managers.

Welch’s sloganeering, backed by the cagey skills of the GE public relations machine, pushed his fame beyond Wall Street. “Never be in a business where you are not No.1 or No 2”. “Change before you have to.” “Control your own destiny or someone else will.” Whatever his great talents may have been, his penchant for fame and the adulation of the business world matched it.

Welch was actually the antithesis of the CEO who had been educated and groomed for the top job at a huge American corporation. Welch did not go to Harvard Business School, the birthplace of many of the men who ran the Fortune 500 during that time when he ran GE. Welch had a degree in chemical engineering and graduated from the University of Massachusetts. He added to his degrees at the University of Illinois at Urbana-Champaign, located in a town best known for its large number of fluorescent light bulb recycling locations. Welch was not part of the club and this probably added to the chips on his shoulder.  This assured some degree of his success when he took over the top spot at GE from Reginald H. Jones, an Ivy League man from Penn.

GE was founded by Thomas Edison, a genius far more inventive than Bill Gates, Steve Jobs, or the West Coast software engineers who began Google and Yahoo!. Edison slept under his desk, worked for 20 hours each day, and amassed 1,093 US patents. His favorite film was “Birth of a Nation”, making it unlikely that, as he grew old and rich, he was a friend of anyone other than those who were rich, powerful, and insular.

Edison was GE’s most famous employee until Welch turned himself into America’s most admired businessman.

Under Welch, GE’s revenue rose from $27 billion to $130 billion and the market cap of the company went from $14 billion to $410 billion. He needed no myth makers to embellish that record. He has remained well-regarded since, save for the management self-help column that he writes with his third wife. It runs on the last page of BusinessWeek and appears to be Welch’s only contact with the outside world.

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Fairfield, Connecticut is a single Superfund site covered by a massive strip mall located along Long Island Sound about halfway between New York City and New Haven. The local cops spend their time busting drunks and harassing pot smoking teenagers. Fairfield is a monument to the mediocrity in which Americans are willing to live, believing that the good life is made up of McDonald’s and schools which can get their children into state universities. If the people who live in Fairfield could live in a richer suburb like Greenwich, they would.

Fairfield is a step down ward from the American Dream. It is also the home of the world headquarters of General Electric, which is still considered by some as the most widely admired company in the world.

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When Welch’s fame was at its peak, he stepped down from GE. Jeff Immelt, Welch’s hand-picked successor, had run the company’s medical systems unit.  Immelt was a graduate of Dartmouth and Harvard Business School. It may be telling that he was also the president of his fraternity, Phi Delta Alpha, known for its secret handshake and the bizarre rituals of its Winter Rush. Immelt was chosen over Bob Nardelli, who subsequently went to Home Depot and nearly destroyed the company while looting it out of $250 million in compensation. To this day, Welch calls Nardelli “the best operational executive I have ever met,” which begs that question of why he was not given the top job at GE. It is as if Welch had undermined the future fortunes of company as he left.

There is no telling whether Immelt has the talent to run a company as massive as GE, or whether it can be run at all. The knee jerk evaluation of the company by Wall St. analysts is that GE is in too many businesses, and that many of them are crummy. About once a month, a brokerage firm which has run out of other companies to analyze puts together a plan to break GE into pieces. Every analyst falls victim to the adage that the parts are worth much more than the whole. As recent break-up calculations for companies like Motorola and Yahoo! show, the parts are often worth less.

Even under Immelt, GE has usually “made its numbers” avoiding anything that might deeply disappoint investors. Last quarter, that changed. On April 1, the stock traded above $38. After earnings hit, it moved to below $32. For the first time in a long time, GE had become unreliable. As the market has dropped recently, GE’s shares have fallen below $27.

As the business press looks at GE, it cannot calm itself. How could a company be so well-regarded and perform so far below the market averages?  Almost any press report on the firm runs the same sentence: “GE trades below where it did when Welch left”.

While Immelt and his management group have not solved the puzzle of how to improve GE’s stock, neither has the company’s board. It is a blue ribbon panel that includes the head of MIT and the CEOs of Procter & Gamble, Avon, and Deere & Company, all of them ideal agents of radical change.

As GE releases second quarter earnings, it is likely to be hung, drawn, and quartered by its critics. The company’s measure of good will with investors is exhausted.  But, if Immelt can post strong numbers and can beat expectations time and again from here on out, he could become the worthy successor he was supposed to be the day he stepped into his job.  Almost no one is betting in that direction.

If Q2 earnings and GE’s forecasts are poor, the judgment of Immelt’s tenure will no longer be one of mediocrity. Instead, it will likely be viewed as the dismantling of the company’s decades-old image as the Hercules of the business world. The whispers about Immelt’s future will begin to grow louder, and, at some point, they will be legitimized by a mention in a big business magazine the way the criticism of the Vietnam War escalated after Walter Cronkite attacked the conflict on the CBS Evening News. If that happens, GE will have gone from being an institution to being a turnaround candidate, all in less than half a generation.

Each and every time there is a discussion of the best way to solve GE’s problems, the recurring theme is that the weaker divisions of the company should be sold off. This usually includes the firm’s Industrial division and NBC Universal. Radical thinkers also want GE out of many of its financial services operations. The reckless destruction of American banks and brokerages has left them terrified that one huge write-off could substantially damage GE earnings. Almost no one wants the firm out of its Infrastructure business which grew 22% last quarter against the firm’s overall growth rate of 8%. This division was also over 41% of GE’s segment operating profit for the period.

For the quarter about to be reported, none of these changes will have been made. The earnings release will be the numbers for the business largely as it has existed for several quarters. The results may be OK, but the general economy is too poor for the numbers to be spectacular. GE has become a company in a difficult position run by gentlemen.

If there is a Mount Rushmore of business leaders, Welch has Jefferson’s place—ambitious beyond a fault, wildly narcissistic, and deviled by measuring up to standards set by a world of class distinction. Welch would not have been allowed into Phi Delta Alpha, nor would he have been invited to Edison’s winter mansion at "Seminole Lodge". But GE had been founded by a younger Edison, born in Milan, Ohio, with next to nothing to his name. He became a member of the American establishment much, much later.

Welch was the most talented CEO of his generation because he was obsessively ambitious, refused to be bested, was remarkably able to operate in the chaos that is part of all huge corporations, and was willing to leave his wounded behind in order to stay on the march.

What troubles GE is not the businesses it is in, it is how the business is run.

Douglas A. McIntyre