USA TODAY CEO Forum: GE sees growth opportunities

PITTSBURGH -- Many executives would find it hard to be cheery as they enter a new year marked by a wobbly economy, uncertain political trends and new technologies that pose profound challenges to old business models.

He says GE revenue will grow as much as 15% next year. And he bases his confidence, at least in part, on some of his initiatives since he replaced his legendary predecessor, Jack Welch, just days before the Sept. 11 terrorist attacks.

Immelt, 51, has pushed the company to expand in growth markets overseas. He also has made GE a leader in manufacturing a new generation of environmentally friendly technologies.

Many investors remain skeptical. The stock has underperformed the market during Immelt's tenure and is flat in 2007.

Investors seem to find it hard to make sense of a company poised to end this year generating about $172 billion in revenue from interests that span jet engines, energy production, commercial and consumer finance, health care equipment, home appliances and entertainment.

Further complicating matters have been a huge write-down in 2007 from a lending subsidiary dealing in subprime mortgages and a strike by TV and movie script writers that could lead to dramatic changes for NBC Universal.

Immelt discussed his company's challenges and opportunities with USA TODAY's David Lieberman at the seventh USA TODAY CEO Forum, in conjunction with the Tepper School of Business at Carnegie Mellon University.

The interview took place in front of an audience. These are edited transcripts.

On GE's outlook

Q: You've spoken to Wall Street analysts. Next month, GE has its annual retreat in Boca Raton, Fla., for executives. What's your message?

A: We have always positioned the company to be a safe and reliable growth company. So if you think about what's going in the world, there's really kind of three big themes.

One is that the U.S. housing market is in retreat and the U.S. consumer is under real stress because of that.

Theme No. 2 is that global growth has never been healthier. I've never seen a time in my career where the global economy is less related to the U.S. economy than it is today, which is, I think, a good thing, not a bad thing.

And then the third thing is that there is a whole series of what I would call synthetic debt vehicles that just didn't work. Collateralized debt obligations, structured investment vehicles. They're ugly when they end.

So what we try to tell investors is that this is a company that can still grow earnings 10% and still generate high returns because of the diversity of what we have, because of the strength of our businesses and the quality of the risk management we have as a company.

In 2007, for the first time in the history of GE, we'll have more revenue outside the United States than we'll have inside the United States. Our business outside the United States will grow between 15% and 20% next year. We're a $172 billion company. In 2008, with the U.S. economy growing at 1.5%, we'll grow revenue by 15% because we're in the right places with the right products at the right time.

Q: Domestically, you're not projecting a recession?

A: CEOs are lousy economists. I take what the world thinks. The world basically pegs the U.S. GNP (growth) next year at somewhere between 1.5% and 2.5%. Basically, the U.S. is in full employment. Interest rates are coming down rapidly.

There doesn't have to be a recession in the U.S. if everybody keeps their wits and if the Fed does what it can do and things like that. I just think there will be a real slowdown because (of) housing. In 50 years, the median house in the United States has never declined. It will decline in '07, it will probably decline in '08 and might decline in '09.

On China

Q: You want to expand into China. Does it help GE to have the 2008 Summer Olympics in Beijing on NBC?

A: The Olympics are just a fantastic global brand. For those 17 nights, you really captivate the world. And if you're a global company like ours, you get a natural positive spin by being a part of the Olympics. It helps the totality of the company.

We also signed up in 2003 to be an Olympic sponsor. So at the Beijing Olympics, we'll do about $600 million of other GE business — health care, electrical equipment, things like that.

One of the things we were able to negotiate with the Olympic committee is that all of the events are going to be televised live, which probably means that the swimming that you're going to watch at maybe 10 o'clock at night is actually going to be 9 o'clock in the morning in Beijing. The athletes weren't so thrilled about it, but we think it's going to be great viewing for most Americans.

Q: You've hung your hat on the environment, but China doesn't seem to care.

A: Young Chinese want money. They want clothes. They want freedom. They want to have access to the Internet. They want everything you want. And they don't want to live in squalor.

Their point of view is that at the time in which this country had great economic expansion, we could have cared less about the environment. We used coal. We did whatever it took to grow this economy.

But I'm a firm believer that the environment in China and India has to be cleaned up, will be cleaned up, mainly because the population won't tolerate it any other way. And companies like GE will be big benefactors of those investments.