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The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America—and How to Undo His Legacy
David Gelles
By
Published: Jun 05, 2022
Category:
Non Fiction
Bette Midler (on Twitter): “Workers of America, you keep asking, ‘Why is my life so shitty?’ Here’s your answer in two words: this prick.”
Two Boeing 737 Max crashes — in Indonesia in October 2018 and in Ethiopia in March 2019 — killed 346 people. Why did they die? Let David Gelles explain:
Starting in 2019, I was one of the reporters at the New York Times who started digging into Boeing after the second crash of the 737 Max. The plane’s technical problem was very clear early on. There was a bad piece of software that relied on one flimsy sensor on the fuselage of the plane. So, we understood, in theory, what caused the planes to crash.
What we started understanding as we dug deeper, though, was that there was a cultural story. Over 25 years, something fundamental had shifted inside Boeing—the company’s priorities and what made it tick. When we started trying to understand that cultural change, it was a story of Jack Welch.
Starting in 1997, three successive CEOs who studied at Jack’s knee at GE, took over Boeing. They deliberately, explicitly tried to make Boeing more like GE. And in doing so, they transformed one of the great American manufacturers, a company that for nearly 100 years had been focused on aeronautical engineering, into one that was motivated by financial engineering.
Records from congressional inquiries revealed messages between mid-level Boeing employees. These records showed that engineers and test pilots were thinking about the stock price when making decisions about safety. The awareness of the company’s stock price percolated all the way down to the level of people who should be focused on the quality and safety of the plane, not Wall Street.
In 2011, Boeing faced this critical juncture; it was faced with the loss of a major order from American Airlines. The company had been a Boeing customer for decades, so they gave the Boeing CEO, Jim McNerney, a courtesy call to let him know that they were about to place a big order from Airbus instead of Boeing. McNerney asked for a week or two to make a counter-offer. In those few days, Boeing decided to redesign the 737 one more time. Rather than design a whole new plane that was suitable for the 21st century, they tried to re-engineer and tinker with the 737, which had been introduced in the 1960s.
To paraphrase Bette Midler: 346 people died because the Boeing CEO believed Jack Welch was God.
Jack Welch served as the CEO for General Electric (GE) from 1981 to 2001. Known as “Neutron Jack,” he made 1,000 acquisitions, spending $130 billion. (Among them: Kidder Peabody, an investment bank on Wall Street responsible for the biggest insider trading scandal in Wall Street history at the time.) True to his motto (Fix it, close it, or sell it”), he sold 408 businesses for $10.6 billion. He was a brutal manager, crass and belligerent and sexist. He called firing employees “shooting people.”
Once, at a conference, he said he admired George Bush. I was sitting in the front row. I called out, “Which one?” He snapped, “Both,” and blasted a one-second hate stare in my direction.” [There were reports that on election night in 2000, Welch was in the decision room at NBC and pressured the team to call the election for George W. Bush. He is reported to have said, “How much do I have to pay you assholes to call this thing for Bush?”]
Was he also a friend of Donald Trump? Yes. They had much in common. Welch was a celebrity CEO who used his celebrity to create a cult of the CEO — in 1999, Fortune named him “Manager of the Century.” Talk about myopia! GE brought us electric light bulbs, power plants, X-ray machines. There was a phrase: “As GE goes, so goes the American economy.” Welch turned his back on that history. In his first few years as CEO, he fired more than 100,000 people in a series of mass layoffs and factory closures. “That began a process of destabilizing the American working class,” Gelles says. “Up until this point, people who had a job at a company like GE or IBM basically figured they had a job for life. Now, all of a sudden, we have this much more transactional relationship between a worker and an employer that we’re still living with today.”
It gets worse:
In addition to these mass layoffs and factory closures, he turned to outsourcing and offshoring, looking for contractors who could do the work of GE security guards and janitors rather than keeping those people on staff. And when those jobs moved to contractors, suddenly those men and women were not at a blue-chip Fortune 100 company with a history of great benefits, but they were at a contractor that was a service provider for those companies and looking to minimize costs. And on the offshoring front, Welch sent many factory jobs overseas. They still needed to make the products, but they wanted to make them much, much more cheaply. And so we see the first great wave of American manufacturing labor going abroad. And thus begins the real beginning of serious outsourcing that would, of course, decimate America’s manufacturing base.
When he was asked by the Wall Street Journal about what he believed his greatest legacy was, Welch said “making GE the most valuable company on Earth.” Instead, in 2018, GE was removed from the Dow Jones Industrial Average. In 2021, GE’s current chief executive announced that the company would separate itself into three smaller standalone companies — one focused on jet engines, one focused on medical devices and one focused on power equipment.
Part of the book’s subtitle is “How to undo his legacy.” This book is a good start. At the very least: a gift for anyone who works at a corporation… or is considering it.
[To read an excerpt, click here. To buy the book from Amazon, click here. For the Kindle edition, click here.]
