Thursday, October 02, 2008

Warren Buffett Bets $3 Billion on General Electric

Billionaire Warren Buffett, who warned of an "economic pearl harbor" if the bailout plan wasn't passed, is banking on an American classic, General Electric, to weather the financial storm. Despite GE's gloomy September, Buffett believes that GE provides the essential items to maintain America's industry. He told CNBC, which is owned by GE.

It's the backbone of American industry.I'm sure they've got some troubles,but they're going to be around 100 years from now.

With an estimated worth of $50 billion, Buffett  has plenty of cushion if the GE investment proves to be a poor decision, but I think he sees the writing on the wall.

When you're forced to cut your spending and rethink your budget, one of the first priorities is to separate "wants" from "needs". When I was growing up, my dad always emphasized that principle, and I think most Americans will be forced to adopt that mindset in the weeks,months and possibly even years to come.  In my humble opinion,Buffett's investment implies that  Americans will begin to pinch their pennies, and as a result, the corporations that provide essential products,in addition to innovative ones, are the most reliable places to turn to.

As a result, investors might consider the companies that have established a solid reputation in household essentials, I.E.,light bulbs,microwaves,refigirators,etc. There are certain items we can't live without, and those items will continue to sell,regardless of the economic conditions.

Yesterday, while I was driving to lunch, I was stuck behind somebody who may have taken the "Seperating wants from needs" philosophy a little TOO far. Apparently, the driver didn't see the need for the rear section of his car. Many local employees at NASA are anxious about the pending layoffs in Brevard County. I wonder if he's decided to auction-off his car, one piece at a time.

By Matt O'Hern at 10:29 AM | Comments (1)

(1) Thoughts on Warren Buffett Bets $3 Billion on General Electric

Warren Buffet to the rescue and GE's Secret to Past Success!

The last time that GE had to have a "white knight" come to their financial rescue was in 1897, when Edison GE and Thomson Houston had to merge and JP Morgan put in capital to save the company.

On October 1, 2008, it happened again... this time it was Warren Buffet, bought $3 billion of Preferred Stock... to help save the GE TRIPLE A rating.

Since I wrote my book, THE SECRET OF GE's SUCCESS, I have challenged IMMELT and team...GO BIG strategy. It was clear to me that promising to grow the company 8% organically seemed to be improbable, if not impossible. Unfortunately, I have been right and a change in strategy is required.

GE introduced strategic thinking, decision making and planning in the 1970's because Fred Borch had embarked on nine new, organically grown, ventures. Five of ventures failed, but Fred recognized and admitted his mistakes and focused on being selective and not growing for the sake of growth. This action enabled the company to focus on winners and contributed to the Welch's remarkable earnings and stock value growth. There are lessons to be learned from this period in GE's 126 year history.

I still have faith that GE leadership will rise to the occasion and replicate the company's past success and ability to adapt to change. However, it will require all five key success factors: Leadership, Adaptability, Talent, Influencing and Networks (LATIN).

If you wish to learn the reasons for GE's past success, take a look at my book: The Secret to GE's Success, now available on Amazon's Kindle and in six languages.



Bill Rothschild, author of Global best seller: The Secret to GE's Success, Risktaker, Caretaker, Surgeon, Undertaker- the four faces of strategic leadership, GEWatcher blog on Rothschild Strategies Unlimited LLC

Comments by Bill Rothschild : Thursday, October 02, 2008 at 01:41 PM

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