IndustryWeek spoke with John Rice, a General Electric Co. vice chairman who serves as president and CEO of the company's Technology Infrastructure segment. IW interviewed Rice for a profile on GE that will appear in the upcoming July issue, which also will feature IW's annual list of the U.S. 500 largest publicly traded manufacturers. GE ranks No. 3 on this year's list based on revenue of $156.8 billion. Rice spoke about the company's renewed focus on manufacturing and its future growth plans.
IW: Jeff Immelt mentioned GE's financial services business became too big and GE must become an industrial company first. What does that mean to you?
JR: When he says that, it's measured by earnings, and financial services became about half of our earnings up through 2007 or so, and we are first and foremost an industrial or an infrastructure company. That's kind of our heritage and it's not that financial services won't play an important role in our company. We do important things around middle-market lending; we think we're very good at it, but we're going to make sure we continue to fund the right infrastructure investments in the future. We're quite proud of the fact that in the toughest recession we've seen, we continue to grow our investment in R&D and did that in 2009. I think R&D was up 7%, and it will be up double digits this year. So we will continue focus and accelerate our investments in R&D doing the kind of things that we've been doing for a number of years in our energy business, our aviation business and our transportation business.
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JR: I think the interesting part about what we do is these are long-cycle businesses where investments typically take many years to mature so for example the Evo locomotive (Evolution Series), which is the most efficient and environmentally friendly locomotive technology out there. It's a 10-year journey, so we've been investing in that for the better part of the decade. In the aviation business we're launching the GEnx engine that goes with the Boeing 787 Dreamliner and that's also a journey that takes about a decade, so in this world where companies sometimes get criticized for being too short-term focused most of what we do on the industrial side of our businesses requires multiyear thinking, multiyear investing and a real focus on the long term.
IW: What would you consider to be the fastest-growing business within your sector?
JR: Well right now that would be health care. The transportation and aviation business short term are seeing some modest declines due to the economy and the fact that you have more parked locomotives and you have declines in the last 12 months in terms of some aspects of air travel, although we're starting to see that come back. But their opportunities for growth over the next 12 months will be more limited than health care where we expect to see growth in the 5 to 10% range and higher in some product areas. Health care tends to be a shorter cycle business, so your longer cycle businesses take a little more time.
IW: What would you consider to be GE's fastest-growing emerging markets?
JR: No question you have to have China, India, Brazil on the list. We're also encouraged by things we're seeing in Russia, and I also just spent a week in Africa several weeks ago, and there are significant opportunities there for double-digit growth. If you think about the countries I just mentioned, there's 1.5 billion to 2 billion people in this world who lack adequate access to water, affordable power, decent health care. And the dynamic that's occurring is that people know what they don't have. When you go to countries, even the poorest cities, you see satellite dishes, you see people walking around with cell phones, and you see Internet cafes. So the flow of information and the ease with which people can figure out that the rest of the world is living a lot better than they are is much more significant today than it's ever been, and that's creating a tremendous amount of pressure on elected officials, appointed officials, kings, whatever kind of government structure you have. It's putting a tremendous amount of pressure on these leaders to fix the problems.
IW: Where does the U.S. manufacturing base fit into that equation?
JR: We've maintained for a long time that you can compete from a U.S. manufacturing base. Yes the wages are higher here than they are in some other countries, but if you've got the right well-trained workforce and the flexibility to adjust to seasonal demands and cycles and things like that and move people around, you can get it done here. And we think we demonstrate that every day, and we're not afraid to do more. We announced last year that we're opening an advanced manufacturing and technology software center in Michigan and we announced 1,100 jobs right outside of Detroit. I was up there two weeks ago (May 3) announcing that we're expanding that by another 200 because we found so many great people. Most of these jobs at this point are software engineers, but it's the kind of stuff that eight or 10 years ago would have automatically gone to India, and we're saying it doesn't have to go to India .
