Farewell to arms for GE's Jack Welch

NEW YORK -- Jack Welch is stepping down after 20 years as chairman of General Electric Co. with only one real concern about the future: China.

"I think we are going to see in the next 20 years a Chinese threat that's going to dwarf what the Japanese threat looked like when I took over the company," Welch said in an interview last week at GE's Rockefeller Center office complex.

To be a chief executive today, you have to "engage everyone in the (global competition) game," he said. U.S. corporations will have to be smarter, quicker, lead in the development of new technology.

Stepping down after 20 years as chief, one of the premiere corporate executives of the 20th century sees China as concern

It is perhaps predictable that Welch would pick the international arena as the one where GE, under the leadership of his successor, Jeffrey Immelt, will face its greatest challenges. Welch's biggest miscalculation and biggest defeat as chairman was the EU's rejection this year of GE's proposed merger with Honeywell Corp.

As Welch sketched out the future he sees for GE and for himself, he was quick, impatient, animated, funny and intensely competitive. Welch, one of the premier corporate executives of the 20th century, acknowledged that the massive restructuring and layoffs he engineered at GE upset many. But he made no apologies for moves he thought were necessary.

His harshest salvos were aimed at the EU, which ruined what was to have been his final triumph, the acquisition of Honeywell.

"There are no rules," he said of the EU. "They're making them up as they go along."

The Europeans have to impose some discipline and not let EU antitrust administrators be both judge and jury, Welch said.

But Welch insisted that he isn't bitter about the Honeywell deal. In fact, he said he is leaving GE with no regrets.

"You've got to look and ask: Is this company a lot better off than it was 20 years ago? I think so," he said.

For Welch, his exit interview was something of a preview of his next career: consulting.

Welch said he plans to serve as an adviser to the chief executives of half a dozen other corporations. "I've got a whole new life," he said.

Before he starts consulting, Welch will spend 10 weeks on tour to promote his new book, "Straight From the Gut," for which he received a $7 million advance. He plans to give the proceeds to charity.

Welch said he also plans to write from time to time on important business issues of the day.

After the book tour is finished, Welch intends to become a "coach" to a number of chief executives. But don't expect him to dive into the minutiae of XYZ Co.

"No, no, no," he said, recoiling at the thought. "I'll be working totally at the discretion of the CEO." He said he will make recommendations on issues such as personnel.

If Welch comes to a company to take a look at personnel matters, watch out.

Welch is not big on corporate bureaucracy. When he became chairman of GE, the company had 405,000 employees worldwide. Today it has 315,000. But that masks the extent of the carnage. At one point, GE's employment was down to 220,000 people.

During his early days as chairman, Welch revolutionized GE's corporate structure by removing layers of middle management and other workers, a strategy that won him the nickname "Neutron Jack." After Welch visited, went the gallows humor of the day, the building was still standing but the people were gone.

"You can make the case I was either Neutron Jack or GE had too many people," Welch said.

Welch also noted that as GE evolved from a products company to a services company in the last 20 years, many new jobs were created. During that period, GE's revenue rose from $26 billion, with $1.5 billion in profits, to $140 billion, with $15 billion in profits.

Welch emphasized, however, that he does not believe in across-the-board pay cuts or wage freezes. The way he sees it, you have to keep rewarding your best people, even in hard times, while cutting the pay of the people who perform the least.

Welch said the chief executive's major job today is to quickly drive change throughout a company.

"Look how fast the world went from dot-coms taking over the world to no more dot-coms," Welch said, to illustrate the speed with which the global business world changes.

After a party Thursday night at GE's Management Development Institute in Grotonville, N.Y., with the board of directors and 200 friends and family members, Welch walked out the door, never to return unless invited.

"I don't know how I would feel if I were leaving and had doubts about my successor. I think that might be a horrible feeling. But I'm so confident this guy's terrific," Welch said, referring to Immelt, whom Welch picked to be the next chief executive.