Friday, October 11, 2013
'Made In U.S.A.' Coming Back For Real: GE Chief
NEW YORK (Nikkei)--America's manufacturing sector is experiencing a genuine recovery, General Electric Co. Chairman and Chief Executive Officer Jeff Immelt says.
- Jeff Immelt
GE is positioning a stronger focus on manufacturing as a pillar of its growth strategy. Ford Motor Co., Caterpillar Inc. and Dow Chemical Co. are among other U.S. corporations expanding domestic production. Immelt talked with The Nikkei about the reasons for this shift as well as the future of GE.
Excerpts from the interview follow.
Q: Is the revival of U.S. manufacturing real?
A: Yes. One reason is relative manufacturing competitiveness has changed dramatically in the past 30 years, and that's because labor content, as a percentage of the product, has gone down, so materials are much more important. (The second reason is) the impact of new technologies ... additive manufacturing, novel processing, things like that. And then, I think the third is the need to be close to your market, so you can innovate faster and better.
The days of the big bomber factory, where you would make all your products and ship them around the world, are over. You need to be more nimble. I think all those things mean that you can manufacture in the U.S. quite competitively, particularly when your customers are in the U.S.
Q: Will jobs that were lost in the past come back?
A: I would say, incrementally, there will be more manufacturing jobs, but the manufacturing sector is so productive -- the automation is so productive.
I was touring one of our aviation factories earlier this week in Vermont, and this is a highly-competitive factory ... Two people are running, like, four stations, and the plant has grown so much that we've been able to grow our employment ... Employment has grown by 30%; the output has doubled.
Q: What about the impact of the shale gas revolution?
A: Between Canada, Mexico and the U.S., the region itself has massive energy flexibility and sustainability. I've had conversations with my friends in Japan -- you know, if gas is 3 dollars per MBTU here and 18 dollars per MBTU in Japan, the cost of electricity here might be 5 cents a kilowatt-hour for a big steel mill. In Japan, it might be three times that or something like that. That has a massive impact on competitiveness as well.
Q: In the past 10 years, GE has increasingly shifted its focus to industrial operations, including heavy electrical machinery. How far are you in remaking GE?
A: From an industrial standpoint, I very much like the company the way it is today ... We've kind of traded NBC Universal for oil and gas, so we think that oil and gas is a better inherent infrastructure fit. So, we very much have, I'd say, probably the world's most technically sufficient infrastructure company today.
I'd say we're pretty close to where I see us going, in financial services (having trimmed GE Capital, which used to generate more than 50% of GE's profit). We'll continue to refine that. And this notion of having 70% of our earnings being industrial earnings (by 2015), that's a principle that we want to adhere to.
Q: The nuclear power business has faced head winds ever since the 2011 accident at the Fukushima Daiichi nuclear plant, which used GE-designed reactors.
A: In the short term, the nuclear business is really what I call a "sovereign business." In other words, it doesn't stand on its own commercially. But we keep it -- you know, we're going to launch new technologies. We continue to invest in the future. I think it's hard to say that nuclear won't have a substantial fit in the future.
Q: Some argue that the use of "big data" will change the manufacturing sector.
A: I think we have this huge backlog of long-term service agreements and a big installed base, and increasingly, as we think about customer outcomes, we do more science around what creates downtime for products, how do you best optimize the enterprise of products. And we've found, increasingly, that this is based on data, that basically there's a materials piece of what we do, but there's a data piece of what we do.
I think, to a certain extent, all industrial companies are going to have to make these advancements, as time goes on, just because that's the way to make industrial assets operate better.
We're still in the early days, but I think this is a very big wave that we're going to be able to lead in as time goes on.
--Based on an interview conducted by Nikkei staff writer Joshua Ogawa
(The Nikkei, Oct. 10 morning edition)