Back to basics: GE recommits to U.S. research
In what may mark a manifesto for his managerial legacy, General Electric Co. CEO Jeff Immelt exhorted his U.S. peers to reinvest in high-tech research within the country”™s borders and committed GE to doing the same at the expense of easy profits from finance and other services.
Fairfield-based GE is adding a fifth research center in Michigan with a focus on advanced manufacturing technology for aviation and energy; software for applications like “smart” energy grids and health care technology; and IT training.
The center is expected to open later this year at the Visteon Village site in Van Buren Township, located almost midway between Detroit and Ann Arbor. At a cost of $100 million, GE plans to build a 100,000-square-foot building to house the lab. Michigan is providing $60 million in incentives over the next 12 years to support the center, trying to rebound from the devastating collapse of the auto industry.
GE plans to staff the center with about 1,200 employees, more than half the size of GE”™s anchor research lab in Niskayuna, N.Y. Immelt said the location made sense given incentives offered by the state; the fact that the University of Michigan is already one of GE”™s top 10 feeders of young talent; and much of the work is a fit with Michigan”™s existing network of suppliers accustomed to working within the demanding specifications of the automotive industry.
It was one more example of GE”™s opportunistic slant that has resulted in slow-starting technical ventures that accelerated into big businesses ”“ like GE”™s $200 million purchase in 2001 of Enron”™s wind turbine business that generates $8 billion in revenue today ”“ and in services such as commercial lending that have rocketed out of the gate only to bog down in the recession.
In this case, however, Immelt signaled a perhaps seismic shift for GE in an address late last month before the Detroit Economic Club, stating his renewed commitment to funding within the country”™s borders ”“ and blaming himself and other U.S. companies for sipping the cocktail of assigning research overseas in a bid to lower costs, and chasing easy, predictable profits from services rather than rolling up the sleeves in search of the next big technical breakthrough.
“Many bought into the idea that America could go from a technology-based, export-oriented powerhouse to a services-led, consumption-based economy and still expect to prosper,” Immelt said, counting his own company among the culprits. “That idea is just flat wrong ”¦ You know something is wrong when a mortgage broker is pulling down $5 million a year and a Ph.D. chemist is making $100,000.”
For its part, GE did not significantly increase research and development last year, holding R&D spending steady at about $3 billion after several successive years of increases.
While GE maintains a formidable research operation in upstate New York, the company has also created similar research centers in Munich, Shanghai and Bangalore, India.
The latter facility bears the name of Jack Welch, Immelt”™s predecessor who earned the sobriquet “Neutron Jack” for his quest to maximize shareholder returns by vaporizing U.S. jobs through efficiency initiatives or seeking out lower-cost talent overseas.
That trend continued under Immelt ”“ in 2006 for the first time, more than half of GE”™s work force was based outside of the United States, and that labor “deficit” continued to widen last year. Immelt said sometimes those decisions are necessary in order to help the company crack open the markets of countries looking for U.S. help in developing their own technology expertise. He added, however, that the company”™s record on U.S.-based research rivals most.
“We are one of the last companies in the U.S. that still does basic research ”“ you can go to ”¦ Niskayuna and you can see a global research center that has 2,000 Ph.D.s, and these guys are working on things that are five years, 10 years, 15 years out,” Immelt said. “We take big swings ”¦ and we”™re willing to fail.”