For the last three decades, General Electric has been considered the fount of wisdom in industrial America, although its fabled financial performance has been revealed as an insurance based scam, which allowed it to boost and smooth earnings. GE has also been a noted training ground for the top executives at other companies and a source of endless fascination for pundits and business professors.
People might not listen quite as attentively to Jeffrey Immelt as his fabled predecessor, Jack Welch, but when he showed up in Michigan to announce plans for a new research center near Detroit people did sit up and take notice.
This isn’t a run of the mill technical center staffed with a dozen engineers and couple of IT guys. GE plans to hire 1,100 right at the start for the $100 million project. The company thinks it can grow from there. Most of the new hires will be engineers and PhDs in technical fields, Immelt suggested. In fact, Michigan’s politicians couldn’t believe what they were hearing. “This could have gone anywhere they could have put this in Beijing or Bangalore,” noted Wayne County executive Robert Ficano.
Taxpayers of Michigan are are providing more than $60 million in incentives over the next 12 years to support the center.
Work at the center will focus on development of composites, machining, inspection, casting and coating technologies for GE’s Aviation and Energy businesses, said Immelt.
“The scientists, engineers and technologists that will work and learn at this center will help GE develop innovative new software, processes and technologies to make our manufacturing businesses even more productive and competitive,” Immelt said.
The center is expected to open later this year at Visteon Village in Van Buren Township, Wayne County, about 25 miles west of Detroit. Bankrupt Visteon is one of the world’s largest auto parts suppliers and a former subsidiary of Ford Motor Company. The center will also work on some automotive-related problems, but it won’t be the main focus of the center, according to Immelt, who learned about the automotive business when he called on General Motors, Ford and Chrysler on behalf of GE Plastics back in the early 1980s.
However, Immelt also presented the case for helping revive Michigan’s manufacturing-oriented economy during a speech to the Detroit Economic Club, and even seemed to repudiate part of the philosophy attributed to his mentor Jack Welch, who was always considered a major advocate of comparative advantage — the key economic theory behind the gradual de-industrialization of the United States.
“Throughout my career, American has seen so much economic growth that it was easy to take it as a given. We prospered from the productivity of the information age. But we started to forget the fundamentals and lost sight of the core competencies of a successful modern economy,” said Immelt.
“Many bought into the idea that America could go from a technology-based, export-oriented powerhouse to a services-led, consumption-based economy and somehow still expect to prosper,” he said.
“That idea was flat wrong. And what did we get in the bargain? We’ve seen a great vanishing of wealth. Our competitive edge has slipped away,” he said.
“As a nation, we’ve been consuming more than we earn, saved too little and taken on far too much debt. Growth in research and development has slowed,” said Immelt, adding the U.S. is making little progress in addressing key challenges such as clean energy and affordable health care.
“Our economy tilted instead toward quicker profits of financial services,” while manufacturing was throttled at the same time overseas competitors spent more on research and emphasized technology, added Immelt, who observed that GE was guilty of making the same kind of errors in its own strategic planning.
“Leaders missed many opportunities to add to the capabilities of America.” noting that as late as 2000, the U.S. still had positive trade balance in high-tech products. By 2007, the U.S. was running a $50 billion trade deficit in high-tech products.
“We have already lost our leadership in many growth industries and other new opportunities are at risk,” he said.
Immelt said the only way out of the current predicament is for the U.S. to invest more in research and development. Second, the U.S. needs to address the challenge of clean energy and affordable health care and third, make a serious commitment to manufacturing and exports. Manufacturing jobs should represent 20% of the U.S. employment base not the current 10% which is shrinking.
China is pushing manufacturing, he said. “America has got to get back in the game,” said Immelt.
Immelt also said U.S. business should welcome government intervention as a catalyst for change. “Over the last generation, America’s ‘Service strategy’ was too weak and our goals were too low,” he said.
|US Trade Deficit, in millions|