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General Electric CEO Jeff Immelt predicted this morning that the shift in the financial services sector and government’s role in business “will be with us for the rest of our careers.” While Immelt said that state aid, tax incentives and infrastructure spending are good ways to create jobs right now, he expressed concern about the long-term impact of massive public spending. “Great countries don’t have a trillion-dollar trade deficit,” he argued at a breakfast hosted by The Wall Street Journal. “The notion that the U.S. could go from a manufacturing-oriented economy to a service-oriented economy wasn’t sustainable … The best jobs we have in this country are export jobs.”
The GE chief gave President Barack Obama a “B+/A-” for his performance so far on the job, but argued against new provisions to cap pay at $500,000 in firms accepting bailout funds. “What’s in the best interest of citizens right now is having Jamie Dimon running JPMorgan,” said Immelt, “and he’s worth more than $500,000.” Immelt added that if government is going to be a shareholder, it should be selfish in seeking a high return on its investment. “Some of these angry declarations are not in their selfish best interest.” In GE’s case, he said, taxpayers would earn $400 million to $500 million this year from the government move to insure its debt.
Immelt acknowledged that business leaders have to respond to public anger, both in the U.S. and abroad. “If you’ve worked your whole life, nose to the grindstone, you look up and say ‘what the hell is going on?’ The role of people like me is to be accountable.” When going to Washington, he now takes the train, though he joked that they had to show him how to get a ticket and he did travel first-class on Amtrak.
Given massive stimulus worldwide, Immelt said that the downturn could “very well be arrested” this year. “Governments around the world are firing as many bullets into this thing as they can,” he said. “My own view is that the government always wins.” The key is whether the initiatives in the U.S., at least, help to create “some sense of destiny of what this country can be.” Immelt argued that much of the effort should be focused on energy where “all you have to do is commercialize the technology we already have” in areas ranging from electric cars to nuclear energy. “Solving healthcare in the next two decades will be hard,” he said. “Energy is doable.”
As for the perennial question over GE’s high dividend and pressure on the AAA rating amid the turmoil, Immelt pointed to the company’s continue cash flow and acknowledged that “debt and equity markets have already priced us down” as far as the rating is concerned. “We run this company to be AAA and we’ll continue to do so,” he said, affirming that maintaining the dividend is “the decision we’ve made for 2009.”
Immelt refused to speculate on whether he would have a 20-year run on the job, as his predecessor Jack Welch had predicted. “You need to do this job like it’s a 20-minute job,” he said. “The second you lose your edge, you should step away … Everything we used to do weekly, we’re now doing daily; everything we used to do monthly, we’re now doing weekly.”
And where would he put his money right now? Infrastructure and emerging markets. “I still believe in the power of demographics,” he said. “Our global business should grow substantially faster than our business in the U.S.” Americans may be depressed, he notes, but in areas like India, the Middle East and South America, business is still going on. “There’s some business out there. You just have to go find it.”
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