Online Extra: Q&A with GE's Jeffrey Immelt
Jeffrey Immelt already knew it would be tough to succeed Jack Welch as General Electric Co.'s new chairman and CEO -- but now he must guide the $130 billion company through a shell-shocked economy in the wake of the terrorist assaults of Sept. 11. He recently spoke with Associate Editor Diane Brady about the challenges ahead. Here are edited excerpts of their conversation:
Q: What went through your mind when you saw the World Trade Center go down?
A: The first thing was just shock. Going through the issues and the impact it would have on the company came pretty quickly after that -- all the while, though, being mindful of what a terrible thing it was.
Q: Were you confident that GE would emerge largely unscathed?
A: In every environment, I think GE is positioned to do the best. But clearly it didn't take a genius to pick up what the issues and impact would be.
Q: How did you manage the crisis from Seattle?
A: I had to stay there until Thursday evening. Because of Boeing, we have a big presence in Seattle, so I went to the offices there and set up a command center. All you need is a computer and a phone these days.
Q: You've talked about the importance of globalization. Do the recent events affect your view of that in terms of the risks of setting up operations or doing business overseas?
A: You have to look at globalization in two ways. One is the market of globalization. This doesn't change the way I view places like Europe or China or Japan in terms of being desirable markets for the future. And, as we've set up what I would call intellectual manufacturing bases outside the U.S., we've always been pretty mindful of both security and having redundant systems. This has just made us even more mindful of the need to have redundant systems as we globalize. But it hasn't changed the way I feel about the need to globalize and get real diversity of talent.
Q: Beyond redundant systems, is there anything else you see in terms of security concerns?
A: What we're trying to do is follow what the government does and not try to precipitate undue crises. We do business in places like Saudi Arabia and other places in the Middle East. What we want to do is have the same constructive spirit that the government has, and follow their lead versus creating crises on our own.
Q: On Friday, you told investors you would deliver 11% earnings growth this year and dougle-digit growth in 2002 (see BW Online, 9/26/01, "Taking Jeffrey Immelt at His Word"). Can you give us a sense of the economic assumptions behind those projections? Some might consider them optimistic.
A: I thought we were in a recession before this happened. We saw things slip a year ago. All of our business plans were based on there being an economic slowdown through 2002. All this really means to me is that the projections we were making and the way we were planning our business will likely come true. I don't think it necessarily has to be deeper than what we were looking at. It's just a case of degree.
I don't think this tragedy will make things appreciably worse. This might make things slightly worse and make them last slightly longer. But I don't think it changes the direction.
Q: How much worse is slightly worse?
A: I don't want to be a prognosticator of the GDP [gross domestic product]. But what I would say is that we were already planning for an economic slowdown in '02. That's still our plan. The difference might be a point or two either way. It's different from going from good to bad. This is going from bad to very bad or bad to slightly worse.
Q: At what stage does double-digit growth become hard to deliver?
A: I really don't think that the shades of the economy will impact the double digits as much as some unexpected dislocation. If oil goes to $60 a barrel or is unavailable in some way, that's more what I'm thinking about. I don't think the difference between going down 0.2% in GDP or 1.2% in GDP is going to make a difference in terms of the double-digit focus.
Q: You came out very early after the attacks to promise good results. Do you worry that it might take longer to gauge the full fallout?
A: From the time of tragedy until last Friday, I had the chance to first review the insurance impact and then review all the other GE businesses in detail. I really do believe that we had a pretty good sense of what's going on, and we're able to gauge it fairly well. In a very short period of time, we were able to go to all of our business leaders, check all our current data and forecasts, and make an assessment from there.
Q: One thing that investors mentioned at the meeting is that they're not used to getting this level of detail from GE. Was this a one-time thing, or is this going to be a hallmark of your leadership?
A: To a certain extent, we've always tried to be open and up-front. I also really believe that, at a time like this, when there is a lot of uncertainty, it's important to bring people back to what's actually going on. They need the facts and the data. If anything, what I wanted to do was ground people in the present data, facts, and analysis to make that the guide instead of speculation.
Q: One thing people love about GE is its predictability. How do you maintain that in this climate? At the very least, there seems to be a greater range of possible outcomes for your earnings.
A: Anybody who is leading GE would be crazy to say they were isolated from the events. We're not isolated from what happens in the world. What we can create is better diversification and a great operating system. If you add good people and a good operating system with a pretty good diversification of businesses, it gives you better predictability than anybody else. The world as we sit here today is probably a bit tougher to predict. But the things that we do well haven't changed.
Q: Since Sept. 11, people have talked about the start of a new era for the country and for business. Has it changed anything for you?
A: It's brought to bear the notion of looking at security and making sure that you don't take anything for granted. But in terms of business, it didn't change the way I look at markets. It didn't change the way I look at customers. It didn't change the way I look at people. It just didn't.
Q: The flags are back at full mast. The markets have rallied in recent days. Are we back to business as usual?
A: I think that everybody has to seize the future at this point. We had a tough economy before Sept. 11. As we wake up today, we still have a tough economy. But I really do think that all the smart people are out there, focused on the future and what they need to do to be successful. Speculation doesn't do anybody any good. The orders in our short-cycle businesses are equal to what they were before Sept. 11.
Q: You joked last week about comparisons with Jack. He stepped down only a few days before the attacks. Have you spoken with him since then?
A: I have spoken to a lot of people, and Jack is one of them. His advice was "Go with your gut." That's all. Jack's just a friend.
Q: From a personal standpoint, do the recent events create new challenges for you?
A: What happens at a time like this is that people rise to the occasion. I've seen that throughout GE. In the last two weeks, I haven't spent a minute thinking about myself or thinking that the company is different. I have a profound sadness over what happened, but I'm very optimistic about our company and very optimistic about our team.