Even In New Digs, Immelt Paints As Big a Picture As Ever for GE

BOSTON — For years, Jeff Immelt could sequester himself in his office at General Electric headquarters in Fairfield, Connecticut. He could dive into reports, he could call managers at any of the company’s 500 or so global locations, he could just stare past the Oriental art on the walls and right out the windows. “Nobody could see me work,” he said, “Which was great. I could just sit and watch TV all day if I wanted to.”

Not anymore. GE announced plans to move its headquarters 160 miles northeast to Boston last year, which Massachusetts governor Charlie Baker called “a generational decision,” and the chairman and CEO was among the first employees to pack up his old office and ship up to the Hub.

“Now I’m in this cubby with windows,” Immelt said. “I’m like an animal in the zoo. I sit there and everyone can see me.

“I actually have to work now.”

GE will celebrate its quasquicentennial next month — thanks to the April 15, 1892, merger of Edison General Electric and Thomson-Houston Electric — and the new digs are a perfect backdrop. “Being in a city filled with ideas keeps an old company younger,” Immelt said. “It gives us a little more edge.”

The same could be said for Immelt himself, who turned 61 last month and appears as lively as ever. He still delivers speeches, visits plants, dishes about everything with the press — often in three different cities all on the same day. He is high on digital and additive, high on the intelligence of GE workers (though not on robots replacing all of them any time soon), high on the potential effects President Donald Trump might have on the domestic and global economy, and high on … cable news? All that and more.

The company will turn 125 next month. There are p.r. pitches, and there are media storylines, but what, from your perspective is GE right now?

I hate to be so trite, but I would call us a digital industrial company. The only financial service we do today is around our investor assets, we’ve exited things like media, and our job right now is to get deeper, not broader. We want to do analytics on top of our assets, we want to go back into the supply chain through additive, and that’s what I would call a digital industrial company. When I became CEO in 2001, we did insurance, media, industrial, plastics, everything. We were a conglomerate, and now we’re a digital industrial company.

The key thing is to keep trying to stay ahead. You go through these periods of change and you keep trying to stay ahead.

You’ve driven incredible efficiency in automation, and if you look at manufacturing versus other sectors, there’s been a lot of growth. When you look big picture, are you at all concerned with what your workers need to learn?

From the mid-1980s to 2010, the productivity in the United States was about 3%. Productivity today is 0. The way to create high-value jobs is to create productivity. Those two tend to go together. So what we’re working on are, basically, tools to drive productivity, to make workers more valuable. Before we go to the phase where it’s only robots in every factory, we’re going to go through a phase of smarter workers. You’re going to have service people that can fix things right the first time, every time. We’re going to add workers, but probably not as many as we would have 20 years ago. They’re going to be more productive — smarter, more valuable, more productive — and that’s Phase 1. This notion of the War of Robots in the short term, that’s more of a Silicon Valley vision than it is the real world.

Beyond that, we’re big enough to train our workers to do that work for us. A small business — I was in Alabama the other day, where we have 180 suppliers — most of them can’t afford the training that it’s going to take to train their workers. That’s one place where the private sector is either going to have to invest more in training, or the public sector is going to have to do a better job of getting them ready.

Do you feel any responsibility to play that role?

We’re good at it.

So that’s Phase 1. What’s Phase 2?

I’m not that smart (laughs). In other words, I don’t know how many phases we’re going to go through. The pace of technology is amazing, but I’m still thinking we’re going to be in the phase of smart workers for a fair amount of time — and I think we’re better off as a country focusing on the smart worker phase than going right to robots for anything.

To what extent does that affect your ability to sell your solution down the supply chain?

When I look at our customers, I think we can work with our customers, helping them create their digital workforce. We can go to an Exxon, or a utility, and we can take some of our service solutions that we’re doing on Predix and things like that, and offer it to them. We allow the basic utility field worker to have the same tools that a GE field worker has. I think the bigger question is, How much do we backward integrate as a company, because we’re that much further than our suppliers, versus how much do we partner and train?

Now the other piece of this is, there’s a difference between outsourcing and globalization. Pure wage arbitrage, that was globalization for me in the 1990s. Globalization for me today is, how do I get 70% market share of jet engines in China? And I think the political media confuses the two. Everything in globalization is viewed as wage arbitrage. Go to Mexico, go to China, ship it back here, that’s not globalization to me. Maybe in other worlds, but that’s not how we see it today. Wages just aren’t that a big deal with a lot of stuff we do, because the workers are just so valuable.

Are you worried the public isn’t going to understand that?

It’s a great question, and it’s one of the big questions, because it is hard to explain. Globalization takes an hour to explain, not 10 minutes. It’s an easy thing to get arbitrage, but in other ways, it’s hard to do.

Smarter Workers, Smarter World

If we could backtrack to smarter workers for just a minute, is there a place for a lower-educated worker today?

I think it’s increasingly harder, and I don’t think it’s a GE phenomenon. I don’t think I’m necessarily the expert. If I could ask the question a little differently: After the election we just had, how do you create a highly-paid, middle-class worker? Let’s take our guys in Grove City (Pennsylvania). How do you create a job that’s $25 an hour? Or $30 an hour? You can’t do that without some form of training and education. You just can’t. You can do a $15 an hour job, or $13, or $12, or $10, or $8, and I think that’s more the line of delineation.

What you’ve seen in a lot of towns is if, for whatever reason, the market has declined and they have to lay people off, they don’t go from $25 an hour to $24.50. They go from $25 to $15 or $10, and that’s part of the angst that you see. You can’t blame people for being frustrated, you can’t blame people who see all globalization as wage arbitrage.

Do you believe the tax reform plan would lead to higher wages?

In general, we believe, eliminate deductions, lower their grades, territorial system, and there’s going to be a debate between adjusting the border or leaving things the way they were. As a net exporter, we’re in the border-adjustment camp, because we think it levels the playing field, and we really do think it will create more manufacturing jobs. But this is going to be a debate.

I think the export jobs in general, if you look at our people in Lafayette (Indiana), they’re going to make more than retailers. It’s not that retail jobs are bad, but there’s a higher value added. So export jobs are higher-paid jobs than domestic jobs. I guess my theory is, what’s wrong with leveling the playing field? What’s wrong with having a tax plan similar to Germany, or the U.K., or China? I don’t think border adjustment is the only way, but I just kind of ask the question: If 165 countries around the world do it, and if every country we compete with does it, how bad can it be? And if the finance minister of Germany is complaining, there’s a reason why he’s complaining, right? They have a good deal right now, and they don’t want to have a worse deal. If we only do this every 40 years, we ought to have a nice, robust debate about what the tax policy of the country should be.

What do you say to suppliers who are concerned that they would pay an import tax on the parts they bring in?

I think it will all wash out. How you transition from one to the other remains to be seen, but one of the economies around the world that’s done the best since the global financial crisis is Germany. Germany has an export bank, it has good worker training, its whole economy is focused on their exports. And guess what? If I sell a gas turbine in Germany, I pay taxes twice. If Siemens sells a gas turbine in the U.S., they don’t pay any taxes at all. All I want to do is kind of level it out, right? There’s nothing wrong with that.

All that being said, simplification, territoriality, there are lots of ways, and we understand it’s complicated. But this is what the election was basically about, and we’d like to see how it could work.

Are you more or less optimistic about the tax break after what we saw with health care?

Oh, this is Day (70). I became CEO on September 7, 2001. September 11 happened four days later, and I spent the next three months in pure chaos. By Day 90, I could barely breathe. So it’s not a lot of time. If we can just keep the government focused on tax reform, regulatory reform, and infrastructure — if President (Donald) Trump and the Republican Congress can deliver those three things — that would be amazing. That would be awesome. I’m cheering. ‘Don’t get discouraged! Let’s keep going! Don’t give up! It’s going to be OK!’

You should tweet that to @RealDonaldTrump.

‘Don’t give up! Don’t give up!’ Because, really, if we can get these three things — tax reform, regulatory reform, and infrastructure — every business guy in the country should shut up and just say, ‘OK.’ The way it’s been cast is that health care is part of tax reform. We’ll see. Health care reform is hard.

Do you think we get all of those in 2017?

I don’t think so, just because of the logistics. How do you build the right coalition? How do you get things going? I believe 2% GDP growth in the U.S. has really been driven only by the consumer — 0% interest rates, consumers buying things — and in order to get 3% or above, you have to get investment going back in the U.S. Tax reform, regulator reform, infrastructure, those are some of the ways you can do that.

I just want to tell people, ‘Don’t get discouraged. Keep trying. These are important for the country. Let’s go. Let’s go.’

If it doesn’t happen, does that derail tax reform?

These ought to be negotiated. Tax reform is hard. We have one point of view, other people have another point of view. I think a lower rate, territoriality, those things are important, too, but I would just say to people, step back and let the debate happen. Every other big economy in the world has a border tax protection. Every one. The ones that don’t are like South Sudan, North Korea. We’re not in a long list of countries that don’t have a border-adjustment tax and are real economic powerhouses.

If that doesn’t happen, and then the tax rate goes down to, say, 25% …

I think territoriality, lower rate, those are great, but I don’t think there’s anything wrong for those of us who are manufacturers to say, ‘Level the playing field.’ There’s nothing wrong with that. I think we have been disadvantaged, and there’s nothing wrong with us saying, ‘Put us on a level playing field.’ I don’t see who argues against that. I know it’s complicated, I know a lot of people disagree, but level the playing field. It’s not a bad thing.

Operating Globally, and Preferably Not on an Island

Could you operate globally without any organized international trade agreements?

Outside the United States, I think we’re kind of on our way. If the President gives us tax reform, we can make our own connections outside the United States. We don’t need the Trans-Pacific Partnership or all those things. We can do those on our way. We have good local positions in a lot of countries, we do that on our own, our employees don’t know what things like the World Trade Organization are, so I don’t think we need  a lot outside the United States. I’m for it, I think it’s a good thing for the country, but I’m not going to sit around and cry about for a long period of time.

We see more economies expanding today than probably any time since the global financial crisis. It’s not that everything is super robust, but the U.S. continues to get a little bit better, Europe continues to get a little bit better, China is strong, so we see more things that are generally positive. As a company, we’re for tax reform, infrastructure, regulatory reform. If this government does those three things, we think it’s amazing. We think it’s incredibly powerful to driving growth.

You’re comfortable with where GE is globally?

Outside the U.S., we’re quite comfortable with our position. Since the beginning of this year, I’ve been in Africa, Latin America and China, and I see great prospects in each one of those. We have strong local teams. We’re kind of capable to globalize on our own. We don’t need trade deals. We’d like to have them, but we need ’em. We want the Ex-Im Bank, but we’re not counting on it, and we’re able to provide our own global framework that remains quite robust. I’m encouraged about it. I’ve been selling in China for 25 years. I was there two weeks ago, and I saw more good projects in China than I’ve ever seen. A lot of those are going to be exports from the U.S., which is positive, so we continue to see globalization as good for us.

What would you like to see from President Trump’s meeting next week with China president Xi Jinping?

Having done this a long time at a global company, when you think about NAFTA and Mexico, my own assessment is that we’re going to figure that out. We’re neighbors. I think NAFTA should be renegotiated, but not abandoned, we need trade with our neighbors. China’s different. China is important geopolitically and important economically. The two biggest economies in the world need a strong bilateral relationship where we don’t have to agree on everything but we should have good relationship. ‘You do this, we’ll do this. You do this, we’ll do this.’ My hope is that President Trump and President Xi set out on multiple sets of medias that establish a very strong bilateral discussion — not based on agreement, but on very strong, two-way dialogue.

I think they need a discussion about geopolitics, which I’m not qualified, and military. I would do trade, a two-way ability to purchase companies. They ought to have open discussion on currency and things like that they think are problems. But I don’t see a scenario in which the two biggest economies on Earth have a fight where the rest of the world ends up in a better place. I think President Trump can do this. I think he’s exactly the guy that can do this. Because he’s good at this. I think he can be constructive and not destructive, and that’s good economically for both sides. We are a net exporter to China. There’s a lot of opportunity to export more to China. This is not about rolling over. This about getting good access to the second-biggest  economy on Earth. I think we’ve got exactly the two right people at exactly the right moment in time, and I really am quite interested to see what happens.

Non sequitur: What does your media consumption look like now?

I get up and I read The (Wall Street) Journal. I’ll go Journal, (Financial Times), (New York) Times Business page, then I’ll do a Twitter feed of just everything about GE, and then about 7 a.m., the Top 10 rolls in, and then I’ll get a Washington Post feed later in the morning, and that’s pretty good.

I work out for an hour every morning, and I used to do 30 minutes of CNBC and 30 minutes of ESPN. Now, and it depends what’s going on, but now I’ll do 5 or 10 minutes of CNBC, maybe 5 minutes of ESPN, and then CNN for the rest of the time. Because it’s the best TV I’ve ever seen (laughs). If I’m in my office in the afternoon, I’ll say, ‘Don’t schedule anything between 1:30 and 2:30, because I want to see the press conference.’ And the ratings for MSNBC, CNN, Fox News …

So much less sports consumption than four or five months ago?

I thought we were going to talk about football.

We can. I’m from Cleveland. Is this the year the Browns get a quarterback?

I don’t know. So many holes to fill (laughs).