Jeffrey Immelt has spent his career riding the great wave of globalization. Now, he warns, the time of unbridled trade is over.
It’s not merely the rise of President Donald Trump, said Immelt, the long-time head of General Electric Co. A confluence of forces, both economic and political, has chipped away at the postwar order, presenting new challenges — and opportunities — for big business around the world.
In a wide-ranging interview with Bloomberg Editor-in-Chief John Micklethwait, Immelt laid out his vision for navigating today’s realities of global commerce — as well as a new American president who has no compunctions about telling executives how they should run their businesses. Trump has been in office less than two weeks, and already he has prompted worldwide outcries with plans to wall off the border with Mexico and crack down on immigration.
“Inherently, we don’t think things like walls are good ideas,” Immelt said during the interview in Boston, GE’s new base. A member of the president’s manufacturing council, Immelt defended Trump’s efforts to boost factory jobs while suggesting that business leaders could emphasize the importance of global ties. “It’s up to me to speak about how important it is that the U.S. has good relations with our potential customers around the world.’’
With a line to the president — and a worldwide market for GE’s gas turbines, jet engines, locomotives and ultrasound machines — Immelt said he would place a particular emphasis on the importance of strong ties between the U.S. and China.
The stakes are high for GE as it relies on international markets for more than half its sales, which totaled about $120 billion last year. On Wednesday, India announced it would spend 3.96 trillion rupees ($58.71 billion) to build and modernize its railways, airports and roads, potentially adding to the billions of dollars in orders GE has won recently in Asia’s third-largest economy.
Still, Immelt said Trump’s election underscored a broad shift toward protectionist pressures that has been playing out for some time. Another example: the U.K. vote for Brexit — the decision to leave the European Union. Business leaders, he said, will play a crucial role in steering Trump away from potentially damaging policies, even if globalization as the world has known it has begun to reverse itself.
“What’s up to us is to navigate the system as it exists today but at the same time communicating to the people that voted for Brexit or the people that elected President Trump to say, ‘Look, at the end of the day, if we want to create more jobs, we shouldn’t alienate everybody around the world,’” he said.
Trump may have a beneficial impact on U.S. companies by simplifying regulations — “I’m all for that,’’ Immelt said — and changing tax codes. The CEO acknowledged potential obstacles to tax reform, including opposition from retailers and other industries that rely largely on imports, contrary to export-heavy GE.
And he defended Trump’s Twitter habits, while suggesting his motives aren’t particularly unique.
“There’s nothing wrong with President Trump wanting to add manufacturing jobs,’’ Immelt said. “The president of China wants to add manufacturing jobs, the president of Mexico wants to add manufacturing jobs, the chancellor of Germany wants to add manufacturing jobs.’’
Following a divisive election and under a president sometimes lacking in tact, CEOs have to work harder to soothe employees’ anxieties. At least twice since the election, Immelt has stressed in messages to employees that GE depends on people from all backgrounds.
The latest instance was Jan. 29, when he took to an internal company blog to express “concern’’ over Trump’s executive order temporarily banning travel to the U.S. by citizens of seven predominantly Muslim nations, as well as blocking refugees. Immelt stopped short of directly criticizing the president, saying instead that GE would work with the government “to find the balance between the need for security and the movement of law-abiding people.’’
GE has employees from the areas affected by Trump’s order, which applies to Iraq, Iran, Libya, Somalia, Sudan, Syria and Yemen. Immelt said he isn’t worried about deals in the region, such as $1.4 billion of orders from Iraq’s ministry of electricity announced in January.
Immelt has transformed GE since taking over as CEO in 2001, most recently selling consumer and finance businesses, and adding multibillion-dollar industrial acquisitions in Europe and the U.S. He’s also building a software division to complement the equipment manufacturing operations, an effort bolstered by the relocation last year of GE’s headquarters to Boston from Fairfield, Connecticut.
Investor enthusiasm has stalled amid sluggish growth and an oil slump that’s cooled demand for GE’s drilling equipment and other oilfield products. The shares climbed just 2.1% during the 12 months ending Tuesday, compared with the 17% gain in the S&P 500 Index.
GE has built local manufacturing outposts across the world, making the company less dependent on trade agreements. While the company still maintains that globalization is preferable, a shift to more isolationist policies will disproportionately hurt smaller companies that can’t adapt as easily, Immelt said.
“Now, we don’t really count on trade deals. We don’t need trade deals to be effective globally,” Immelt said. “Today, it’s country by country, deal by deal.”
By Richard Clough