07/08/96 GE'S WELCH: 'FIGHTING LIKE HELL TO BE NO.1' (int'l edition)

GE'S WELCH: 'FIGHTING LIKE HELL TO BE NO.1' (int'l edition)

Soon after he won the top spot at General Electric Co. in 1981, Chairman and CEO John F. Welch began talking of turning the American industrial giant into the ``most globally competitive'' company in the world.
Now, on the basis of how investors value companies, GE has jumped to No.1 in the world with a market capitalization of $137.3 billion. Under Welch, the corporate giant has put together a portfolio of products ranging from power-generating equipment and jet engines to financial services that seem to fit the needs of emerging-market nations investing heavily in infrastructure.
``RAZOR'S EDGE.'' But any gain like this is fragile. It depends on investors and unpredictable markets. So despite undergoing open-heart surgery last summer, the 60-year-old Welch remains intensely competitive. While pleased with GE's record profits of $6.6 billion last year, Welch regularly warns his workers against complacency. ``Our output per worker is growing, American business across the board is doing a good job,'' Welch told BUSINESS WEEK in an interview on returning from a trip to Europe. But he believes things could easily reverse. ``Don't make too much of the moment is all I am saying,'' Welch says.
Welch closely watches such multinational competitors as Siemens, ABB, Toshiba, and Mitsubishi. He sees these rivals as viable long-term foes, even though they may suffer from temporary inequalities in their currencies or political and social upheavals at home. ``We've just got to be faster,'' says Welch. ``We come to work every day on the razor's edge of a competitive battle.''
Indeed, in many of GE's key businesses overseas, deals are won with thin bids and political favoritism. Siemens and ABB have aggressively chased power-generation projects in China, while Rolls-Royce has undercut GE for jet-engine orders in Singapore. Still, many foreign chief executives look to GE as a market weather vane. Says Siemens CEO Heinrich von Pierer: ``Jack Welch is our benchmark.''
It's easy to see why. The GE Welch took over in 1981 was a lumbering giant heavily dependent on industrial businesses, tied to unionized manufacturing and big-ticket orders that rode the waves of the U.S. economy. Layers of bureaucracy separated managers from their businesses, so Welch moved to simplify management. He bought RCA and its National Broadcasting Co. unit, sold off the consumer electronics operations, and dramatically expanded into financial services. And he directed a serious push into overseas markets. The company's international sales now equal 40% of GE's total revenues of $70 billion--up from less than 30% eight years ago--and will probably reach parity with its U.S. sales soon.
Today, Welch is less acquisitive but no less performance-driven. A continuing productivity campaign has allowed GE to slash debt to 11% of capital and generate $6 billion a year in cash flow. Welch is putting much of that horde into fast-growing markets such as India and China, as well as buying back stock. ``GE is now well-positioned to outmaneuver its less flexible and more entrenched global competitors,'' says NatWest Securities Corp. analyst Nicholas P. Heymann.
``We're sitting here fighting like hell to be No.1 next year,'' says Welch. Proof, after all, that he didn't get there by coasting.
By Tim Smart in Fairfield, Conn.