Taking over as head of General Electric Co. from Jack Welch, its iconic former chairman and CEO, is hard enough. But Jeffrey Immelt took the reins of one of the world's largest companieswith more than 320,000 employees worldwidejust days before the Sept. 11 terrorist attacks four years ago. To make matters worse, the stock of the US$350-billion company (NYSE: GE) has struggled since 2001a slide Immelt has tried to reverse by introducing environmentally friendly GE products and recreating business models to promote creativity and innovation. During a recent visit to Toronto, Immelt sat down with Canadian Business senior writer John Gray to discuss GE and the business environment in North America.
Canadian Business: Is Jack Welch a tough act to follow?
Jeffrey Immelt: I never felt a minute of resistance. But GE people like change, they expect it. They expected the company to be run in a different way and would have been disappointed if I tried to do the same things Jack had done.
CB: Has anything a customer said about your company surprised you?
JI: Any time you try to get a more external focus, you find out that you knew less than you thought.
CB: How do you bridge that gap?
JI: You try to reinvent the way you do market research. We are introducing a product called Care Station, used for [patient] monitoring and anesthesia in operating rooms. We did a ton of focus groups on how people would use this product. And then we did something interesting: we filmed in operating rooms in a dozen hospitals. What [customers] would say about the product wasn't what they were actually doing with it. We saw a whole other set of things that were important to customers that we could address.
CB: Does the state of the U.S. economy scare you?
JI: Energy prices make things more volatile. Managing volatility is a big thing now. But the underpinnings of the broader capital markets are fairly strong. You look back to 9-11 and you think, “Holy cow, what is going to happen next?” But the economy is pretty resilient through all that. We have had a couple of big hurricanes, a war in Iraq and energy prices that have tripled in the last two or three years. But consumers are still spending. It seems to still work.
CB: Do high gas prices make green initiatives an easier sell?
JI: Our new green products are all seeing good markets right now, partly because the cost of energy has nurtured some of them to be more relevant. But businesses today see the need for greenhouse-gas emissions reduction as a reality. A couple of years ago we bought Enron's wind power business out of bankruptcy for less than US$200 million. That business will have US$4 billion in revenue this year. Our Ecoimagination initiative is not a public policy statement, it's a marketing campaign. This is not a hobby or a personal statement. This is our work. We are also reducing our own greenhouse-gas emissions by 30% by 2012.
CB: Will green technology thrive without government legislation?
JI: Green technology has to be designed so that it can ultimately stand on its own two feet. But government encouragement can accelerate that.
CB: Is the Sarbanes-Oxley corporate governance legislation a positive development ?
JI: When Sarbanes-Oxley came out, we stood up and saluted. I always thought I would go to jail if I lied about my financial statements. I didn't need Sarbanes-Oxley to tell me that was going to be the case.
CB: But are such laws making it harder to do business?
JI: I think that's rubbish. Our board still spends most of its time thinking about how to grow the company and where we should take risks. If Sarbanes-Oxley helps investors become more trusting, it's a good thing. [But] when I read some outside group says “Don't vote for Warren Buffett as a director,” I see the Mad Hatter run through the room. That is where governance aficionados lose credibility. The pendulum will find its right balance. Ultimately, the [financial] markets do work.