Welch Trashes Diamond Industry in Autobiography

General Electric top dog “Neutron” Jack Welch met his match in the diamond industry, according to his new autobiography, Jack: Straight from the Gut.

Recalling the controversy in 1998 when GE first introduced its whitened Pegasus (now Bellataire) stones with partner Lazare Kaplan, Welch writes: “Breaking into Fort Knox might be easier than getting into [the] centuries-old [diamond] trade. Afraid we might undermine the pricing of gem diamonds, the old Antwerp network of traders did everything to freeze us out of the business. They leveled false statements, making our diamonds appear artificial and less desirable. An Antwerp boycott forced us to go from a strategy of selling them at wholesale, 50 to 100 at a time, to selling them in ones and twos to high-end jewelers at retail.”

To Welch, this was a major defeat: “In our second full year, we’ll do about $30 million worth of business, less than a third of what we originally planned. For a breakthrough in a multibillion-dollar industry, that’s obviously not what we were looking for. Our team keeps reminding me to be patient.” He originally hoped to “completely transform” the industry with the heat-and-pressure technology, he writes.

While JCK does not recall any formal Antwerp boycott of Pegasus diamonds, some in the Antwerp industry say there was an informal movement to shun the stones and make it difficult for the company, especially after Antwerp dealers were dissatisfied with answers they received during a meeting with GE executive Bill Woodburn. And Welch does not mention the issues of detection and disclosure that dominated the debate.

Welch says the diamonds are now being offered at a discount to employees, who are buying them at a rate of $100,000 a month. “I even offered a similar deal to our board members, hoping the disclosure of the purchases in GE’s 2000 proxy statement would generate some publicity over this ‘perk.’ Several directors bought them at prices ranging from $26,000 to $41,000. Wouldn’t you know it? With all the media hype on pay and perks, the diamond purchases completely escaped notice.”