As a legacy Alstom employee that joined GE at the acquisition, I would to offer an Alstom perspective. First off, there were many of us in Alstom who thought GE was what we needed. We weren't perfect but it was a chance to merge the technical know how of Alstom with a more disciplined GE. After all it was Steve Bolze or Mark Hutchinson that said they were going to take the best of Alstom and the best of GE to produce a world class GE. My further reply is below.
As someone currently in the middle of this Alstom mess, I can verify this is a true possibility that Alstom may bankrupt GE power and maybe even GE whole.
[REPLY]: Alstom may be a contributing factor but GE has its shares of fault with built out factories in China and India along with eliminating their vertical manufacturing capabilities. I'm still not sure the value of Atlanta when you had very good capabilities in Schenectady and Greenville. Further, the industry is moving from traditional energy to renewables. GE Power will need a radical transformation - that is for sure. GE as a whole will not go bankrupt.
Alstom had 5x the headcount they needed to support their level of sales/work with dozens of factory rooftops, most less than 25% utilized. A bloated, out-of-control organization that looks like 30 year old corporate structures with redundancy throughout.
[REPLY] Yes, Alstom was people heavy - no doubt. What Alstom also had was massive technical knowledge that GE seemed to eliminate over the years. How many GE technical employees and subject matter experts were laid off so that the various leadership program employees could become executives? The brain drain must be immense. As to headcount, at legacy Alstom, I had 5 layers to the CEO (including the CEO himself). When I came over to GE, I had 6 layers to Jeff Immelt (including the CEO himself and had an EB reporting to another EB).
Alstom corporate culture is diametrically opposed to the lean, efficient “GE way”. I am now convinced that Alstom never made money, they just used accounting games to make projects look profitable while hiding hundreds of millions in costs in “in-efficient workforce” and “quality” accounts.
[REPLY] Agreed. Legacy Alstom was always people heavy and didn't value automation. The cost of people's time or automation was never valued. They didn't understand the true cost of inputs into a project. As to "accounting games" I would like to point out that GE's published financial metrics are not exactly black and white either. The SEC recently wrote GE a comment letter about their 10-K filing as being potentially misleading to investors, with half the items mentioning the reporting of numbers that were inconsistent with Generally Accepted Accounting Principles (GAAP). Also it was Capital that helped GE make their quarterly numbers when there could be a potential miss in that quarter.
It has been >2 years since the Alstom acquisition and we STILL don’t know what an Alstom Steam Turbine costs to manufacture. The tangled web of factories and confusing accounting principles make it impossible…the conclusion is that Alstom did not know the costs of their products/services, therefore his not know their margins or profitability…no surprise Alstom was weeks away from bankruptcy when purchased by GE.
[REPLY] Alstom took the most favorable tax treatment in all of the countries it operated in and balanced it against French and IFRS reporting standards. Right or wrong, that is what they did. As to the costs, one major fault of GE was the following. GE folks did not want to listen; it was the arrogance of being the acquirer. They didn't take the time to understand what we did and how we did it. You assumed you knew us and when the deal closed, it was simply remove, remove, remove or this is out of scope so we won't deal with it. I can't tell you how many times we heard that GE does acquisitions all of the time so we know what we are doing. You would get rid of the people that knew how things operated and then complain that there was no one left. Did you take the time to learn PMx?
Alstom was a government backed corporate social program to keep Europeans employed….and GE is now the host. It can’t go-on this way..the question is 12,000 enough?
[REPLY] Yes, Alstom was people heavy and GE made the Faustian deal with the French government that will undoubtedly blow up very soon. 12,000 people are not enough not just because of Alstom. The power business is moving away from traditional sources to renewables. There will be serious displacement of traditional power employees not just at GE (look at Siemens). What was valuable under GE was Power Services - the maintenance and servicing of turbines, etc. Even this, GE is apparently screwing up with Granite and Power Services moving to FieldCore and removing OT, etc. This is your bread and butter. You need these people to fix and maintain the turbines. Are your leadership program employees going to get their hands dirty and do all of this work?
So..the questions is…why in the world would GE adopt any Alstom products or processes going forward?
[REPLY] Great question. Your question asks "why...would GE adopt any." It would behoove you to try and look at what positives, strengths of benefits that could come from the Alstom side. What the acquisition showed me was that GE had all of these processes whittled down to a silo or granular level but it was hard to see the full picture. It took so many meetings to align because everyone had their little part of the process. Also everyone assumed the process worked but there were so many times when GE wouldn't believe Alstom folks until they talked it amongst themselves and then begrudgingly agreed.
[CLOSING REPLY] I had a great GE manager and loved the people at GE. I left GE a year ago after seeing how badly the acquisition was going. I feel so bad that such great employees have to go through the current challenges. The executives at GE are in their ivory tower and stuck. While you don't cut your way to greatness, I would say that cutting all of the SEBs and VPs would flatten the organization immensely and positively.