Immelt's Big Cheer for Globalization
What's on the chairman of General Electric's mind these days? The heated political debate over globalization, if Jeffrey R. Immelt's presentation to Fidelity Investments clients in Los Angeles on Feb. 26 is any barometer. Immelt's talk was supposed to be your standard pitch for GE (GE ) stock, but the charming 48-year-old couldn't keep himself from expounding on jobs and trade in the question-and-answer session that followed. No globo-phobic protestors or Presidential candidates were anywhere in sight, just curious investors. But Immelt clearly wanted to weigh in.
"Globalization has a bad name," Immelt said. "But the world is inextricably global. We win by exporting, and we win by sourcing, and in some of these countries there are no competitors that can beat me. As the energy grid is rebuilt in China, it will be built by GE. We haven't lost a single jet-engine order in China in three years. Every turbine is built in Schenectady, every jet engine in Cincinnati. You have to be rooting for someone to win. That someone should be us."
Immelt acknowledged that the 2004 Presidential campaign is driving much of the controversy, with issues such as job growth at home and outsourcing overseas becoming hot-button topics on the stump for Democrats John Kerry and John Edwards, and hot potatoes for President George Bush (see BW, 3/1/04, "Outsource This: The Dems Smell Blood"). "The economy is rebounding, but job creation is not as robust as everyone would like," he allowed.
Still, "this is a wedge issue," Immelt said, and he suggested that America should look within for the source of some of its troubles. "It shocked everyone how rapidly technology went to China and India. China graduates 450,000 engineers a year, India 350,000. In the U.S. it's more like 60,000 to 70,000. We graduate more people with degrees in sports therapy."
Immelt revealed that he has declined offers to debate the subject in public forums. "I don't want to be the poster child for this," he said, adding that he believes the U.S. continues to enjoy great advantages as a global competitor. "In health care, energy, and nanotechnology, America will be the world leader," he said. "This is the most innovative and creative country in the world. I hope there is not some 22-year-old listening to what the people who are running for President are saying, because that's not the way it's going to be."
The GE chieftain also contrasted his management initiatives with those of legendary predecessor Jack Welch (see "Jack's Back" for a Video View interview and BW, 3/8/04, "Life After GE? And How"). During an era of strong economic growth, Welch focused on how to cut costs and improve quality through initiatives such as Six Sigma. Now, with growth slower, Immelt told investors he's concentrating on ways to improve sales, expand overseas, and develop innovative technology that will give GE a pricing edge over its competitors.
Among the markets GE is targeting are industrial water treatment, liquefied natural gas, and health-care technology. He says his goal is to increase revenues at twice the rate of gross domestic product growth, which he estimates will be 2% to 3%.
His venue being Los Angeles, Immelt couldn't leave without a question on the Walt Disney (DIS ) and Comcast (CMCSA ) merger battle and whether or not GE needed to invest in cable-TV or satellite distribution for its newly expanded NBC/Universal combo. "We took a long, hard look at this whole issue of content and distribution," Immelt said. "We decided that we don't need to be in distribution. What we need is really good content. Putting NBC and Universal together will open up a lot of new opportunities for us. Distribution companies have to put a lot of money into capital investment. If we determined at some point that we had to be in the distribution business, then I think we'd probably exit the entertainment business."
The Disney-Comcast battle has had some unintended benefits for at least one of GE's units. "It's good for CNBC because it's a juicy story, and it's good for our ratings," Immelt smiled. Clearly, he's a guy who tries to look on the bright side.
By Christopher Palmeri in Los Angeles
Edited by Douglas Harbrecht