Competing and Winning Around the World

“I’m an American. I run an American company,” said Immelt, “but I also know that in order for GE to be successful in the coming years, we need open markets. I’ve got to sell my products in every corner of the world.” He noted that for most of his career, the U.S. consumer was the engine for global growth. But that has changed, as more than 1 billion consumers will join the middle class in emerging markets over the next decade. “To win, we have to get out there and seize the opportunity,” Immelt said.

For example, GE’s exports have nearly tripled over the last ten years, from $7 billion to $20 billion. He pointed out that “GE runs a trade surplus to China” and that competing globally also means hiring here at home. Job creation, said Immelt, is not a “zero sum game.”

“We have a gas turbine plant that employs 3,000 people in South Carolina,” Immelt told his audience. “This year, all of the turbines they build will be sold outside of the United States.”

Immelt emphasized that winning globally requires fully committing to education, innovation and technology, harnessing what Thomas Edison described in 1915 as the “natural inventive genius of Americans.” He said that “the United States did not become an economic powerhouse by accident or luck. Instead, it was the byproduct of our innovative companies and entrepreneurs. Thomas Edison and Henry Ford, Bill Gates and Steve Jobs.”

Applying Innovation to Solving the Big Problems

Immelt called on the midshipmen to tackle with gusto “the three great challenges for your generation: healthcare, energy and infrastructure.” He said that that determined spirit of taking on the big problems drove GE, just last month, to announce a $1 billion R&D effort over the next five years to develop new cancer solutions and has helped make GE the world’s clean energy company. He noted that competitiveness of America’s infrastructure ranks 16th in the world and that, “there is probably not a single thing we could do to create more near-term jobs and increase long-term productivity and competitiveness than invest in our infrastructure.”

Leadership and Unity

Immelt stressed that business and government–and all of us as Americans–must find a way to work together if we are to compete and win around the world and solve the biggest problems. Noting that we’re celebrating the Reagan centennial, he praised President Reagan for being both “tough-minded and hopeful,” and also “willing to work with his detractors.” That approach, said Immelt, should also be a model of leadership in the 21st century, which “is about building bigger and diverse teams; teams that accomplish tough missions with a culture of respect.”

Thanking the midshipmen for their service “the choice you’ve made to lead” Immelt concluded with an optimistic call to the Brigade: “Let’s do it. Let’s build confidence. And let’s put that natural inventive genius of Americans to work. And let’s win.”

A visible example of the export theme can be seen in the steam turbines and components that Obama toured — part of a large power turbine deal announced last November during the President’s visit to India. The Schenectady plant is manufacturing steam turbines and generators for a $750 million deal with Reliance Power Ltd. — which will be the largest project in that country that uses combined-cycle technology, in which natural gas fuels the main generators and exhaust gas from those units is converted to steam to make additional power. GE’s export-centric turbine business helps to support more than 1,200 manufacturing jobs and more than 400 engineering jobs in Schenectady.

Exports were also top of mind as Obama used the visit to formally name GE Chairman and CEO Jeff Immelt as chair of his outside panel of economic advisors: the President’s Council on Jobs and Competitiveness. As The New York Times noted in its story today, “the changes in the panel signal what the White House describes as ‘a new phase of our recovery,’ a shift from crisis to job creation.”

During the tour, President Obama was briefed about GE’s recent technology investments and job creation in New York’s Capital Region, which include a new advanced battery plant, which will add 350 jobs at full capacity; the new renewable energy headquarters, which spurred the creation of more than 650 local jobs; the opening of a new, state-of-the-art digital mammography production facility, which has added 150 jobs; and the completion of a $150 million dollar renovation of the Global Research center in Niskayuna and the recent addition of 200 new jobs to the facility.

Regarding GE’s newest plant, the “green” batteries that will soon be made there will last at least 10 times longer than traditional lead acid back-up storage systems, are fully recyclable and do not require a controlled climate for operation. Overall, GE believes that advanced battery manufacturing could grow into a $1 billion business over the next decade.

GE’s facility is one the world’s largest steam turbine manufacturing plants.

More than 90 percent of the turbines and generators made there are exported around the world.

GE’s turbine business helps to support more than 1,200 manufacturing jobs

To date, GE has shipped 5,700 steam turbines and more than 10,000 generators for a wide variety of projects in the United States and worldwide.

GE’s renewable energy headquarters also houses a remote operations center, which is one of two global facilities that provides continuous monitoring and diagnostic services for GE’s installed base of 14,500 wind turbines and solar power plants.

GE has invested more than $150 million in R&D to develop advanced battery technologies.

GE’s new global renewable energy headquarters is seen above.

The Schenectady campus traces back to 1887 when Thomas Edison moved his Edison Machine Works there.

* Read today’s announcement
* Learn more about Immelt’s appointment to the Presidential panel
* See how past GE leaders have also gone into public service
* Read a fact sheet about GE’s work and history in Schenectady

In an op-ed published today in The Washington Post entitled “A Blueprint for Keeping America Competitive,” Immelt writes: “Business leaders should provide expertise in service of our country. My predecessors at GE have done so, as have leaders of many other great American companies. There is always a healthy tension between the public and private sectors. However, we all share a responsibility to drive national competitiveness, particularly during economic unrest. This is one of those times. My hope is that the council will be a sounding board for ideas and a catalyst for action on jobs and competitiveness.”

On the critical focus areas, he writes: “We need a coordinated commitment among business, labor and government to expand our manufacturing base and increase exports. The assumption made by many that the United States could transition from a technology-based, export-oriented economic powerhouse to a services-led, consumption-based economy without any serious loss of jobs, prosperity or prestige was fundamentally wrong. But there is nothing inevitable about America’s declining manufacturing competitiveness if we work together to reverse it. For example, we have returned many GE appliance manufacturing jobs to the States by collaborating with our unions and making our operations more efficient.”

“Working with Boeing CEO Jim McNerney, who leads the President’s Export Council, the Council on Jobs and Competitiveness will look for ways to harness the power of international markets — home to more than 95 percent of the world’s consumers. Currently, the United States ranks lowest among the world’s largest manufacturing nations in the ratio of domestically produced goods sold overseas, or export intensity. We must set as our highest economic priority not just increasing our exports, as the president has pledged, but also making the United States the world’s leading exporter in the 21st century.”

Free trade is also key, as the U.S. cannot “expand its manufacturing base without greatly increasing the volume of goods it sells overseas,” he says. And at the heart of all of those efforts will be the need for innovation. “Businesses should invest more of their cash and resources in advanced products and technologies that will create jobs in the United States, and government should incentivize this investment in innovation,” he writes. GE, he notes, is investing more than ever in research and development, committing a 6 percent of revenue — and producing more products in the U.S, with about 6,000 manufacturing jobs created in the U.S. over the last two years.

He concludes: “It is possible to be a competitive global enterprise and still care about your home. In fact, it is not just possible but imperative. There is no easy solution to “fix” the American economy. Persistent and high unemployment — and the pessimism it breeds — should not be accepted. We must work together to construct an economy that creates more opportunity for more people.”

In 2009, the President signed an Executive Order creating the President’s Economic Recovery Advisory Board (PERAB), which over the past two years under the leadership of Paul Volcker has provided outside advice and counsel to the administration. White House Photo.

* Read coverage on Bloomberg News

Learn more in these GE Reports stories:
* “GE Goes With What It Knows: Making Stuff”
* “GE’s New Plant Investments Now Top $1B; Create Over 1,300 Jobs”
* “In 1 Day: $128M for Manufacturing; 630 Jobs Created or Retained”
* “Re-inventing factories: The Kaizen/‘moonshine’ method”
* “American Renewal: Immelt addresses Detroit Econ Club”

* Read Jeff Immelt’s op-ed on the appointment in The Washington Post

Gerard Swope: President 1922-1940 and 1942-1945

Less than 20 years after the company’s founding, the United States suddenly found itself embroiled in World War I. GE’s vice president at the time, Gerard Swope, served on the general staff of the army as assistant director of purchase, storage and traffic and was recognized with the Distinguished Service Medal for his contributions, in addition to the Order of the Rising Sun from Japan and as a Chevalier of the French Legion of Honor. In addition to his national service, he also headed numerous humanitarian organizations. An associate once said of Swope, who started with GE just one year after the company’s incorporation in 1892 and rose through the ranks to become president nearly 40 years later: “Probably no man in his generation has been more ardently devoted to his country and its interests and more willing to devote his great energies and abilities unsparingly to this work.”

Owen D. Young: Chairman 1922-1939 and 1942-1945

During Swope’s tenure as president of GE, the company’s chairman, Owen D. Young, was equally as concerned with the larger issues of his time, extending his own vision beyond the company’s manufacturing plants and research laboratories. After the end of the First World War, he led the committee that drafted the settlement plan for German reparations, called the Young Plan, in 1929. Young was also deeply involved in education, serving on the governing board for New York’s educational system, and was appointed by Governor Thomas E. Dewey in 1946 to head the commission that eventually led to the New York state university system. At a GE 50^th anniversary celebration, Young’s commitment to public service, along with his unwavering optimism even in the face of the Great Depression, shone through in his remarks. “It is not what is today for which we plan; it is what will be tomorrow, and what tomorrow will bring depends upon our spirit of approach today,” he said. “We celebrate tonight more than what has been. We celebrate…what is to be. By so doing, we assure that a nation, like a man, recovers from depression by confident effort and not by hopeless surrender. If that be the lesson of this occasion, you will have rendered the greatest service to your countrymen.”

Philip D. Reed: Chairman 1940-1942 and 1945-1958

As the nation faced the Second World War, GE’s chairman Philip D. Reed was actively involved in the government’s wartime efforts, becoming head of the industries bureau of President Franklin D. Roosevelt’s War Production Board, created to oversee the production and allocation of materials and fuel during the war. He was also appointed to lead the United States Mission for Economic Affairs in London in 1943, which required him to leave his post at GE. Even after returning as chairman in 1945, however, Reed continued to serve on several national boards and influence economic policy both at home and abroad, including as a member of the U.S. delegation to the United Nations Conference on International Organization, chairman of the U.S. Associates of the International Chamber of Commerce, and chairman of the Research and Policy Committee of the Committee for Economic Development.

Charles E. Wilson: President 1940-1942 and 1945-1950

At the same time as Reed was contributing to America’s wartime efforts, GE’s president of the time, Charles E. Wilson (who went by the nickname “Electric Charlie” to distinguish him from General Motors’ CEO Charles E. Wilson, nicknamed “Engine Charlie”) also briefly left the company to serve as vice chairman of the War Production Board at President Roosevelt’s request in 1942. Once back at GE — where the country’s first jet engine had just been developed for the U.S. Army Air Corps — he also chaired President Harry Truman’s Committee on Civil Rights and, later, the Office of Defense Mobilization, which rationed raw materials to the U.S. economy. Under yet another president, Wilson later became head of the People-to-People Foundation, a nonpartisan organization conceived of by President Dwight D. Eisenhower to promote international friendship and understanding. In its obituary of him in 1972, The New York Times stated that Wilson “abounded in optimism about American productivity, which he expounded as he ran G.E.”

Ralph J. Cordiner: President 1950-1958; Chairman & CEO 1958-1963

In 1942, 20 years after joining GE as a recent college graduate, Ralph J. Cordiner accompanied Wilson to Washington to work alongside him on the War Production Board before returning to the company as his assistant the following year and later succeeding him as president. He also served as chairman of the Defense Advisory Committee on Professional and Technical Compensation in the Armed Forces, which revamped the military’s pay scale policy and became known as the Cordiner Committee. As GE and America enjoyed a period of post-war growth, Cordiner was at the helm of the Business Council, a group of business leaders who advised the government. He was awarded the first Gold Medal Award of the Economic Club of New York City for his contributions to “principles of management and to the strength and prosperity of the nation.”

Reginald H. Jones: Chairman & CEO 1972-1981

Known for his advocacy of world trade and the rejuvenation of the American competitive spirit, Reginald H. Jones advised four presidents, from Richard Nixon to Ronald Reagan, earning the respect of both Republican and Democratic leaders alike and influencing economic policies even while guiding GE through an era of international expansion. He was named the most influential person in business by U.S. News & World Report in 1980, having chaired the Business Council and the President’s Export Council and co-chaired the Business Roundtable, opening dialogue and strengthening ties between business and government. Beyond the economic sphere, he was also a spokesman on social issues ranging from unemployment to human rights. In a 1987 article in The New York Times, business editor Steve Prokesch lamented the new ethos of “ruthless management” in corporate America and the loss of Jones’ mix of corporate and civic leadership: “So much for the company town and the chief executive who sees himself not only as a business manager, but a civic leader and corporate statesman. Reginald H. Jones…was such a statesman, much admired among his peers for his concern over public policy, a role that kept him busy as a speaker and consultant to presidents.”

Jeffrey Immelt: Chairman & CEO, 2001-present

When Immelt came to GE a year after Jones left, in 1982, he joined a company with a 100-year-old tradition of public and national service. In keeping with that tradition, he has made his own contributions in tackling the nation’s new challenges, having served on the President’s Economic Recovery Advisory Board since February 2009, eight years after becoming GE’s ninth chairman and CEO, in addition to serving on the board of two nonprofits — the Robin Hood Foundation, which addresses poverty in New York City, and Catalyst, which promotes women in business. His new role chair of the President’s Council on Jobs and Competitiveness will ensure that GE’s legacy of service, which was established by Edison’s desire to help his fellow man at the time of the company’s founding, remains an essential part of GE’s vision.

As The New York Times underscores in its in-depth story, ‘G.E. Goes With What It Knows: Making Stuff,’ a “big moat” manufacturing strategy is precisely what GE is successfully pursuing right now.

It centers on “heavyweight products that take patience and piles of cash to develop, weigh tons and last for years — next-generation jet engines, power turbines, locomotives, nuclear plants, water-treatment systems, medical-imaging equipment, solar panels and windmills. The costs and complexities of such businesses… make it hard for just any company to compete.” Essentially, these are markets, that have “big moats,’” GE Chairman and CEO Jeff Immelt told the paper. “They’re tough to get in.”

But the pay-off is that big-moat businesses can also be quite lucrative. “Mr. Immelt points to G.E.’s jet-engine business as an example, saying that it has higher profit margins and returns on capital than the leading banks. ‘It doesn’t happen every quarter or every year,’ he says. ‘But over a 10- or 20-year time period, the businesses that are hard to do had the best returns. So the arithmetic works over time.’”

That focus on “technology-based manufacturing” is also turning into jobs, with the Times noting that more than 4,000 have been created by GE over the last 18 months, including “new factory jobs in Kentucky, Ohio, New York, Alabama and Mississippi, for making products including energy-thrifty washers and dryers, fluorescent light bulbs, sodium batteries, environmental coatings and jet engines. And the company is opening a research center in Michigan for advanced manufacturing technologies.”

As Immelt explained, the key is focusing on what he calls “large-scale entrepreneurship” by “identifying long-term market shifts — ‘what’s next,’ he says — and then marshaling the company’s research, manufacturing and marketing resources to capitalize on the opportunity. “It’s about using the scale of G.E., the majesty of the company, to drive growth and change,” he says.

Even with the financial crisis and recession, “research and development spending increased last year to $3.3 billion, and will be still higher this year.”

“The underlying DNA of GE, going back a century, has been to invest for growth in its technology base,” Noel Tichy, a professor at the University of Michigan business school who once ran GE’s management school in Crotonville, N.Y. told the paper. “So by increasing R.& D. spending and with investments in manufacturing, Jeff Immelt is going ‘back to the future’ at G.E.”

Learn more in these GE Reports stories:
* “GE’s New Plant Investments Now Top $1B; Create Over 1,300 Jobs”
* “In 1 Day: $128M for Manufacturing; 630 Jobs Created or Retained”
* “GE’s plan to add 830 jobs to Louisville draws VP Biden”
* “Re-inventing factories: The Kaizen/‘moonshine’ method”
* “GE’s new KY deal marks a great time to be in hot water”
* “American Renewal: Immelt addresses Detroit Econ Club” here

Using advanced metering technology, they create a two-way communication between the grid and appliances and are able to smoothly bring more renewable energy into the system . The net result is a more efficient flow and consumption of electricity — reducing costs for consumers and providers, lowering waste, and making power distribution more scalable to meet growing demand.Smart grids are the future of energy distribution and represent a significant front in the effort to lower global emissions.

Using advanced metering technology, they create a two-way communication between the grid and appliances and are able to smoothly bring more renewable energy into the system . The net result is a more efficient flow and consumption of electricity — reducing costs for consumers and providers, lowering waste, and making power distribution more scalable to meet growing demand.

In 2010, China is the worldwide leader, having designated $7.32 billion for smart grid investment, based on data from Zpryme Research & Consulting, an Austin, Texas research and consulting firm that draws on stated federal spending figures.

The U.S. was second at $7.09 billion; Japan was a distant third at $849 million and South Korea was fourth at $824 million. The first European nation was Spain, which finished fifth at $807 million.

The below graphic shows the full top ten, with countries’ sized relative to smart grid investment amount.

The smart grid race: Click to enlarge.

* Learn about today’s $2 billion investment that GE is making in China, including two joint ventures on smart grid technologies
* Take a look under the microscopes in our Shanghai lab

As part of the center’s recent TECHfest celebration, in which GE scientists gather and share their latest research, the Shanghai team decided to try something new this year: a photo contest. Researchers photographed some of their most vivid ongoing work — or in the case of the first place winner, they took a look at something that’s intriguing on its own. The winners are also featured on GE’s new Chinese language blog.

GE’s China Technology Center opened in 2003 and has more than 60 labs focusing on areas such as clean energy, water, materials and chemicals research, advanced manufacturing technologies, LED lighting, and transportation technologies.

* Read more Global Research stories on GE Reports
* See our cell analyzer art contest winners in our stories: “Broadway Boogie” and “Magical Mystery Tour” on GE Reports

The plans, announced Tuesday morning in Beijing by GE Chairman and CEO Jeff Immelt, call for GE to commit $500 million to establish new Customer Innovation Centers that will be closely tied to GE’s current research hub in Shanghai. The centers, located in six cities, will be designed to better serve the west, north, central and south China markets.

At the same time, more than $1.5 billion will be invested in key high-technology sectors. Currently, China is experiencing one of the largest rural to urban migrations in history and is expected to become an urban society within five years, with urbanization rate reaching at least 50 percent. To help China meet the challenge in a sustainable manner, two of the deals center on smart grid technologies as China’s energy needs are expected to double in the next 10 years.

One is a 50/50 joint venture with Wuhan Nari to make and market grid monitoring and diagnostics products. The other is a partnership with Shanghai Electric Power Co. to buy a controlling stake in Shanghai Tianling Switchgear Co., a green power distribution equipments maker.

The other deals are a 50/50 joint venture with China South Locomotive and Rolling Stock Corporation to technologies for diesel locomotives and a 50/50 joint venture with Beijing National Railway Research & Design Institute of Signal & Communication to supply railway and urban transit signaling systems.

The announcement today follows yesterday’s news that GE was reorganizing its international operations to focus on global growth, with the goal of doubling U.S. exports and making global sales increase to 60 percent of revenue from the 54 percent it is currently.

* Read today’s announcement
* Read the details on GE’s two smart grid joint ventures
* Read more about GE’s reorganization of international operations
* Take a look in our Shanghai lab
* See our infographic on China’s march toward smart grid modernization

Learn more in these GE Reports stories:
* “China deals span coal, high-speed rail & locomotives “
* “GE jet engine joint venture to power China’s new plane”
* “Joint aviation venture with China to create 200 US jobs”
* “China’s new C919 jet picks GE partnership for avionics“

In a speech earlier in the day, Cameron told business leaders: “We need thousands of offshore turbines in the next decade and beyond … and manufacturing these needs large factories which have to be on the coast. Yet neither the factories nor these large port sites currently exist.” He added that the port investments that the UK is undertaking “will help secure our energy supplies, protect our planet — and the Carbon Trust says it could create 70,000 jobs.”

“I want us to be a world leader in offshore wind energy,” Cameron said in a statement. His meeting with Jeff Immelt, above, took place in Cameron’s office at Number 10.

“The UK has ample offshore wind resources that can provide clean energy for the UK as well as providing new, high-skill jobs for both GE and our suppliers in the UK,” Jeff Immelt said. “GE is ready to invest in the UK and hire the engineers, technologists and other skilled workers needed to make this a reality.” Pictured at No. 10 Downing, from left: Mark Elborne, National Executive for North Europe; Jeff Immelt; and Nani Beccalli-Falco, President and CEO of GE International.

At the core of GE’s European expansion plans is the development of GE’s next generation wind turbine, a 4-megawatt machine specifically designed for offshore deployment.

* Read our initial story on the turbines

• GE Healthcare: As the company’s healthymagination business strategy tackles big health issues from the perspective of access, quality and cost, GE’s core medical equipment business is delivering a pounding pulse on the business side. Orders in the key markets of China and India were up over 20 percent and the unit’s total backlog of equipment orders grew 18 percent.

• Emerging and growth markets: Industrial revenues in India, where GE recently combined all of its businesses into one P&L as part of a new move to rapidly grow in the country, were up 54 percent vs. a year-ago. And in the key, resource-rich market of Australia, Industrial revenue was up 74 percent year-over-year.

• Services: Orders for services, a key area of focus for GE that allows the company’s industrial and technological expertise to be put to work for our customers, grew 4 percent in the quarter with particular strength in Transportation and Oil & Gas.

• GE Capital: Net income was more than five times greater vs. the same period last year, increasing to $871 million as the smaller, more focused financial unit continues to press into areas that play to its deep domain strengths — middle-market industrial and select consumer financing.

• Operating Margins: GE’s Industrial operating margins (excluding NBCU) improved even as the company increased R&D investment 21 percent year-to-date over same nine-month period in 2009. Robust spending on technology and innovation is a hallmark of GE’s business historically.

* Read today’s earnings announcement
* View materials from the October 15, 2010 earnings webcast

Healthy outlook: Imaging units are being tested at GE Healthcare’s facility in China.