Software and Africa have never appeared together in a GE Annual Report. Yet today, they are both essential to GE’s future. “I recently returned from sub-Saharan Africa, a region that was ‘off the radar’ when I became a CEO,” writes GE Chairman and CEO Jeff Immelt in his Letter to Shareowners. “There are very few American companies in the region. But we could sell more gas turbines in Africa than in the U.S. in the next few years.”
Immelt’s letter opens GE’s 2012 Annual Report, which the company released today. The turbines that he is talking about could soon become part to the Industrial Internet, a global network connecting people, machines and data. “We know that industrial companies need to be in the software business,” Immelt writes. “We know that our services in the coming year depend on building smarter machines with the ability to extract and analyze data. We will be a leader in analytics. And that will make GE more valuable to our customers. This is the power of the Industrial Internet.”
GE estimates that the Industrial Internet could add up to $15 trillion to global GDP in productivity gains over the next 15 years. Norfolk Southern, for example, is using a GE data and analytics system to optimize train and cargo movement across its rail network. The railroad says every 1 mph increase in network speed could save $200 million in annual capital and operating expenses.
Immelt also points out that GE has been extending its lead in advanced manufacturing. The company has been testing turbine and jet engine parts produced by direct metal laser melting and 3-D printing, and protected by high-tech coatings. “Companies used to make investment decisions purely on labor cost,” Immelt said. “However, there are new materials that can revolutionize performance, and precision technologies and high-power computing are transforming how we manufacture.” For example, the new CFM LEAP jet engine, which GE is developing in a joint venture with Snecma, will include “printed” parts as well as next-generation materials called ceramic matrix composites. The advances could lead to a projected 15 percent reduction in fuel consumption compared to prior generation engines, saving billions for airlines.
Advanced manufacturing methods that can print parts from a computer file will also help GE speed up prototyping and reduce cycle times for complex systems and lower cost. Immelt said that GE has doubled its annual R&D investment by $2-$3 billion, to 5 percent to 6 percent of revenue. “Because of this investment, we have progressed from a company that can launch one new commercial engine each decade to a company that can launch one each year,” Immelt said. “We will launch 10 new gas turbines this decade, significantly more than in previous times.”
Many of these turbines will be powered by shale gas. Immelt writes that “access to shale gas is opening new possibilities for energy use and GE is involved in almost every aspect of this ‘Shale Revolution.’” GE Oil & Gas and Chesapeake Energy, for example, created a compact compressed natural gas refueling system called the CNG In A Box for large and small truck fleet operators. The system could help customers reduce fuel costs and emissions. “The volume of and access to shale gas and other unconventional resources in the U.S. (and other regions) will change the competitive balance in energy for a generation,” Immelt writes. “This gives the U.S. one of the lowest costs of electricity in the world and the chance to be an energy exporter.”
“Big industries — like rail — could convert from diesel to gas,” Immelt writes. “The option of becoming energy independent is now possible for North America.”
Immelt’s letter is available online.