Global business managers who hunker down and stop investing during the current economic crisis will miss big opportunities for growth, General Electric Chairman and CEO Jeffrey R. Immelt said Oct. 24 in a teleconference that included Thunderbird School of Global Management in Glendale, Ariz.
“If you’re just playing defense right now in this environment, you’re ultimately going to lose,” Immelt told graduate students at six business schools around the world in a live question-and-answer session from New York University. “The trick is to choose selectively where you want to win.”
Immelt said General Electric’s first priority as the economy spirals downward is to keep the company safe. This means stockpiling cash, having ready assets and protecting General Electric’s triple-A bond rating.
At the same time, Immelt said, the company’s leadership team will focus on accountability and results through careful cost management and cash management. The company also will work to keep its employees motivated and focused on long-term goals.
But none of this will stop General Electric from investing in the future.
“Now is not a time for me or for you to give up on our dreams,” Immelt said. “There is going to be a future.”
He said global business managers who stay alert will find investment opportunities during the current financial crisis that might not come again for another generation.
“You’re going to live history, and it’s not all going to be pleasant,” he said. “But we’re going to see some of the best investing opportunities in this cycle that we’re going to see in the next 25 years.”
The key, he said, is to build processes around three things: globalization, new technology and customer service.
Regarding globalization, Immelt said the distinction between emerging markets and developed markets has blurred. Some countries are rich in raw materials, others are rich in labor, and others are rich in education.
He said large companies such as General Electric must seize opportunities to expand in all three types of countries.
“We believe that globalization is uniquely a big company game,” Immelt said. “We believe that companies with scale and breadth can globalize better than small companies.”
New technology and innovation represent another opportunity for growth. Immelt said General Electric will be “pouring it on” in research and development while more timid companies scale back their operations in anticipation of a new wave of market turbulence and possible recession.
“We are going to take a lot of cost out of the company to get ready for this second economic downturn,” he said. “But the last thing that gets hit in GE is technology.”
In the area of customer service, Immelt said many companies will shortchange their customers as they scramble to make ends meet. But General Electric will take the opposite approach.
“People are going to abandon customers right now,” he said. “But now is the time to be in front of customers building great operations.”
Immelt said he is unsure how bad things will get before they get better, but his hunch is that the U.S. economy will see two or three more quarters of negative growth and then a “slow pullout.”
“You’ve got this financial crisis going on, and behind it is a recession,” he said. “But if all we have to deal with is a recession, we know how to do that and come out the other side.”
He said the big question will be: Can the governments of the world solve the financial crisis before the real recession hits?
What’s for sure, Immelt said, is that the role of government in all aspects of business will increase.
“It’s just going to happen,” he said. “Business is going to have to re-earn the trust of the public and investors and a lot of other people.”
The question-and-answer session was emceed by Maria Bartiromo, anchor of CNBC’s “Closing Bell with Maria Bartiromo.” The cable channel is part of NBC Universal, a company predominantly owned by General Electric.
Stephen Roach, a 2006 Thunderbird graduate and General Electric manager, moderated the discussion at Thunderbird. Other participating schools included New York University, Emory University in Atlanta, University of North Carolina, University of Virginia, London Business School and University of Navarra in Barcelona and Madrid.
Immelt joined General Electric in corporate marketing in 1982 and became chairman and chief executive officer in 2001. He also works as director of the Federal Reserve Bank of New York.