...FT: Can we talk about GE’s different industrial divisions, starting with your biggest - infrastructure?
MR IMMELT: Let’s begin with energy. In this field, the next five years are going to be phenomenally exciting. With oil at $90 a barrel, energy is going to be very sexy for some time. We’re going to see an incredible period of growth. We have to consider the multi-dimensional aspects to the technology. GE has got some great strengths in different fields, taking in, for instance, not just the areas where GE has been traditionally strong, such as gas turbines, but in the sectors that look like expanding considerably in the next few years, such as wind and nuclear.
In all these areas, the companies which will win are the ones with superior technology, which can organise their supply chain most effectively ,and can demonstrate they are reliable partners. Taking one example, we’ve had a lot of success in wind energy. We entered this business only in 2002 [through the purchase of Enron’s wind turbine operations]. We paid about $200m for the assets and this year we’ll have sales in this field of about $5bn.
Nuclear is another area where we have a strong business and which is likely to see a lot of growth. Nuclear is going to be somewhere between big and really big. We’re spending a lot of money - $400m-$500m - on new nuclear technologies, such as the Economic Simplified Boiling Water Reactor (a modified form of nuclear reactor). If you look at our nuclear business now it gives us annual sales of about $1bn and this is likely to expand fivefold in the next 5-10 years.
FT: What‘s your view of the solar business, a field in which you are quite small?
MR IMMELT: We have annual sales of about $120m in solar energy [much of this arising from GE’s 2004 purchase of Astropower, a US company that had previously filed for bankruptcy]. It’s an industry with a lot of potential. In September 2007, GE took a minority stake in PrimeStar Solar, another US company exploring ways to build up solar systems through thin-film technology [depositing thin layers of silicon and other materials on a substrate in a technologically complex but potentially low-cost process].
If you look ahead, it does seem as if the thin-film techniques [in contrast to other methods such as making solar cells through a crystalline process] have the greatest promise in bringing down production costs and making solar energy economically viable. We’d be interested either in making other acquisitions [in the solar field] or taking a strategic stake in promising companies, maybe in Germany where there are a lot of interesting businesses in this field with considerable technical strengths. If you look at where the patents are [in solar technology], the leader is Japan, followed by the US and Germany. That means it would be good to be represented in each of these countries [in solar technology]. A problem with acquisitions in solar, of course, is that right now everything is overvalued.
FT: What other parts of the infrastructure business would you like to pick out as an example of a growth field?
MR IMMELT: Water treatment is a big and expanding area for us. We get about $2.5bn a year in sales from this sector now. I’d be very disappointed if it is not $5bn-$10bn in the next 5-10 years. We‘ve made a number of acquisitions in this field and would be interested to look at more, such as in membrane technology [for cleaning up water supplies through filtering or osmosis technologies]. We are setting up a new research centre in Singapore - where there is a lot of expertise in this field - to examine new applications in these disciplines. Water is just the kind of business that suits GE to be in. It’s a global field with a lot of potential in the emerging economies. There’s a great deal of commercial and government focus to improve countries’ capability to provide a safer and more cost-effective water supply....
...FT: Which parts of the world offer the biggest growth opportunities for GE as you look ahead?
MR IMMELT: In general our business opportunities outside North America are going to be greater than those inside. [Last year, GE gained slightly more than half its sales of $163bn from outside the US. Of the 319,000 employees in the company at the end of 2006, 164,000 were outside the US.] Of course it would be easier for us if we could get $170bn a year of sales just by selling in Chicago. But of course we cannot. We have to chase the business where it is. That’s why we are much more a global company than we used to be. The fastest growing countries for us are the emerging economies including China, India, Russia and Latin America. In these regions we have annual revenues of about $32bn and the figure is growing at around 20 per cent a year. In Germany, we are also seeing a similar level of growth, but of course it is starting from a lower base. Taking into account the emerging economies and also the more mature markets outside the US, I can see our sales expanding outside North America for the next few years by 10-15 per cent a year. In the US , sales growth will inevitably be lower. This year we’ll probably expand our revenues in the US by 6-7 per cent.
FT: What’s your view of the sales prospects in China and India?
MR IMMELT: China is a centrally planned economy where there’s the prospect of large contracts, sold often through government organisations. We’re getting sales of $5bn-6bn a year in China and this is expanding fast. What we need to do in the next few years in China is go in a direction that you might label “downmarket”. By this I mean that at present we get a lot of sales in China by selling large projects such as big medical scanners. In healthcare, we probably sell $800m-$900m of systems such as these in China, along with related healthcare services. But we could probably double the total sales [in healthcare in China] if we had a bigger range of smaller, cheaper products that we could sell more widely. In India, GE’s sales are about half those in China. The economy here is driven by a buoyant entrepreneurial culture. The government doesn’t really add anything, apart from bureaucracy. So in approaching the business of selling there you have to use a different style to doing the same thing in China....MORE