By Claire Ferris-Lay
The boss of General Electric is facing a rough ride but he insists that he won't change course.
Who would want to be Jeff Immelt? His predecessor was the legendary Jack Welch, arguably the greatest CEO in history, his company's share price is an all-time low, and he has cut dividend payments for the first time since 1939. Do shareholders want his head? You bet. Claire Ferris-Lay talks downturns and dramas with the General Electric boss.
Jeff Immelt is only in town for 12 hours before he heads off to Qatar. And he has a lot on his mind: his company's share price is down 82 percent, profits have plunged 22 percent, and he's been forced to conduct a strategic retreat from the media business. Surely he must wish we were back in the heady days of 2007? "I don't fundamentally care, I really don't care," he says. "I think we live in a world where the emerging markets are growing quickly."
It is rare but unsurprising Immelt can only afford to spend a few hours in each country. When he isn't hurtling around the globe speaking to various world leaders he's back at the GE headquarters in Connecticut running the world's largest company.
And it's no cake walk for Immelt, who has been CEO of the American conglomerate since 2001. The group's financial services division, GE Capital, was hit particularly hard by bad loans, and its share price last year hit a low of $6.66. Immelt was also forced to make some unpopular choices to limit the damage from the downturn, slashing shareholders' dividend pay for the first time since 1939, resulting in shareholder calls for his resignation. The firm has also been forced to retreat from its media activities, selling a controlling stake in NBD Universal to Comcast.
Throughout all of this the GE boss has remained upbeat and today, despite waking up early to watch president Obama's State of the Union address, proves to be no different. "I say don't think back, try not to say wasn't ‘97 a great year. Maybe what we are seeing, maybe this is normal," he says. "1980 to basically the end of the tech bubble was a period of great tranquillity, the US was the dominant economy of the world, the world was at peace, oil was cheap.
"Since then its more volatility, the dynamics of globalisation have changed so in some sense I think business people have to rewire the software of their own companies into a world where we don't wait for things to "get back to normal" but we find ways to capitalise on this level of change and volatility which I think has become the new normal," he says.
Despite the downturn, GE - which has operations spanning everything from energy to aviation, financial services and media - still managed to grab the top spot on Forbes' annual list of biggest companies with a market value of $89.87bn.
Towards the end of last year, the firm also started to benefit from an improved US economy; stabilising GE Capital, with all units other than real estate reporting a profit in the last quarter. In January, the firm announced that profits from continuing operations fell 22 percent to $3.03bn compared to $3.87bn a year earlier, beating Bloomberg analysts' expectations by 2 cents a share.
Immelt now sees GE's biggest growth in emerging economies. In January, the International Monetary Fund (IMF) forecast 2010 economic growth of 9.7 percent and 7.8 percent in China and India, respectively, compared to 1.6 percent in the euro zone and 1.3 percent in the UK. "Almost all of our businesses have some operation here or some opportunities here, and lots of partnerships and things like that so it's (the Middle East) a very vibrant region for us and a very important one," he says.GE currently generates 60 percent of its revenues from outside the US but expects these to grow as emerging economies start to pick up. Last year, GE's Middle East operations (it has had a presence in the region since the 1930s) posted record profits of $6.6bn. And Immelt plans to increase that by 10-15 percent per year as he capitalises on the region's growing investments in infrastructure, healthcare and renewable energy.
"We're disappointed if we're not growing 10-15 percent in this region. We feel like we're not keeping up," he says. "The US will always be [an] important market for us but our revenue is bigger outside and if you think about our infrastructure business which is really the heart [of GE] - we're about $100bn infrastructure company - 60 percent of those revenues are outside of the US and that's where a lot of the growth will be."
In 2008, GE signed a multi-million dollar joint venture with Mubadala, the Abu Dhabi government's strategic investment arm. As well as an $8bn commercial finance venture, GE will also conduct research on clean water and energy at Masdar City. "I think they'll be more [projects] in the future, I think we're like minded, we've had a very strong relationship, which is just in the beginning stages," he says.
"I don't look at Mudabala as a sovereign wealth fund. I look at them as a GE parallel in the region. I think that's always been what their aspiration has been, so in many ways for us it's like partnering with a big industrial player like we've done in the past. I think it's got great potential - things move and change very quickly and I think it's good that you can have a partner that you can take and continue to move and change with."
This partnership, along with others in emerging markets, he hopes, will lead to reserve innovation - or developing products in emerging countries - a term he helped coin.
"Our early forays in that have come out of China and India - mainly that's because its where we had the most experience and capability - but when we think about what could potentially happen here there is no reason why reverse innovation couldn't come out of this region as well," he explains.
"Healthcare has really moved up to the top of the list in terms of what's on people's mind, [it's] where capital is going to go, where investment is going to go and you have this paradox between the emerging world where new capitals being put into healthcare and the developed world where we are struggling to find new business models to improve access and improve quality. So personally I think reverse innovation is going to be very fertile in healthcare in this region - it could be an interesting region to drive change."
He also sees huge potential in nuclear energy. In January, GE lost out on a $20.4bn bid to build four nuclear plants in Abu Dhabi to the Korea Electric Power Corp but Immelt says he still wants to do a nuclear project in the Middle East. "We didn't win it but we would love to do a nuclear project in the Middle East as more of them come open and commercially available," he says.
"One of the comments I always make in the US... is why do you think it is there is going to be a nuclear power plant in Abu Dhabi before there is one in the US? How can you explain that in any logical flow?"In the middle of a sea of oil they are going to build a nuclear power plant because they believe in energy diversity yet we can't get a nuclear power plant permanently built and online ahead of Abu Dhabi.
"I find it quite interesting that the people have the foresight, vision to want to move forward in that sense even when they don't have to."
A stabilising US economy coupled with opportunities in emerging markets means the firm may also look at prospects for acquisitions. "We will do acquisitions this year. I think with the Comcast merger and with our own internal cash flow we'll have an immense amount of cash on the GE parent balance sheet... We don't shy away from big acquisitions but we think $500m bolt on acquisitions in businesses we know best is the best way to generate shareholder returns over a long period of time now," he says.
Although Immelt adds that he hopes some of these mergers will be in the region, he thinks the majority of growth will be through joint ventures as well as organically.
"I think joint ventures are really what we think make the biggest difference because people want to retain - and we want to retain - some of the local face and presence. But we will definitely be investing more in this region, both from an M&A standpoint but also from an organic growth standpoint."
On that note, he's already boarding the plane to Qatar.